Hotelier Middle East -

TMCs demand clarity on hotel rate strategies

Posted by: S
17 Dec 2012
Posted by: Romain - Profit Therapy
17 Dec 2012
The discipline of revenue management has been forced to evolve very quickly because of changes over the past few years in online distribution. Unfortunately, until recently the educational efforts of the industry had not kept pace with advances in technology. As a result, hoteliers were not prepared for a transparent pricing environment. Managers did not fully appreciate the impact of seamless connectivity or understand its implications regarding strategic pricing. Rate integrity became a major concern with many segments feeling that they had not been treated fairly in the past. Additionally, this lack of rate integrity led to significant past price reference and eventual commoditization of hotel inventory. At the same time that this was happening, the consumer was becoming more sophisticated and computer literate. They became more comfortable with booking online. Intermediaries leveraged this opportunity and reservation bookings started to shift away from the hotel company to Online Travel Agencies (OTA). The regional market has seen a very large increase of the model over the past 4 years for both corporate and leisure clients. As hoteliers started to feel that they had less control over their own inventory, they recognized a need to practice better revenue management. In this regional market, the concept of Dynamic Pricing is becoming more prevalent in today?s hospitality industry. Whether it is welcomed, tolerated or rejected, varies by organization. There appears to be differences of opinion on everything from the definition of Last Room Availability to the applications of the various elements of dynamic pricing. The main TMC companies (Travel Management Companies) are American Express (Amex), Hogg Robinson Group (HRG), Carlson Wagon Lit Travel (CWT). Those companies are appointed by large corporate or government to manage their travel and hotels bookings and save expenses. Traditionally for the region, these TMC bookings comes from UK, Germany, USA and not regional market, unless you have an implant booking from Dubai. TMCs bookings are mainly attributed for corporate clients, so there are booking either a a commission or fix rate(corporate agreement) or else they should have a variable dynamic best available rate (10% Commission). First point, their statement in the article are not entirely justified, because during the RFP process, TMC companies along with Corporate Head Buyer will decide on a selection of preferred hotels (per location, per category). As a hotel, if you have been rejected, you need to balance your market segmentation with DMC, OTA, BAR bookings. So hoteliers are doing the right thing. Second point, the large bookings coming from DMC are not coming from multinational but from local/regional corporate and government companies in Kuwait, Qatar, Lebanon, Saudi Arabia, that are not necessarily covered by TMC groups. And this is the main point, because appointing a TMC is great to reduce your expenses all over the world and treat your clients associates with special advantages, but Dubai, Cairo, Riyadh have a strong regional corporate markets, so will TMC implants willing to extend their business coverage in the region with GCC companies is the real question?
Posted by: Romain - Profit Therapy
17 Dec 2012
Dear S, in my mind there are no problems if corporate rates are cheaper than DMC rates, it all depends on the room nights production of each accounts. With the markup on rate practiced by DMC companies over the recent years, which is largely that the 20-25% agreed by the hotel contract, it is all about how demand and offer occur in the market. In my mind, only top producing DMC companies should get a hotel contracted rates, while all the other ones should be on Best Available Rate thus integrating the dynamic pricing evolution of the market in the world. DMC as per their definition should contract leisure clients while they have been contracted many corporate clients at a leisure rate, so it's big debate that i would be happy to discuss with many more agents on the market.

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