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Need Advise in Hotel Industry…..online booking !

By Manish Golchha on 9 Comments / 3327 views

Hi

We like to know how hotel booking system works.

How consolidators like GTA, GDS, EXPEDIA bargain with hotel people for rates.

Do they sign contract with hotel for not providing same rates to their competitors.

Do they work on commission model or nett rate model ?

Do they pre purchase rooms for them for entire year or x no of booking guarantee.

Example: Let say we approach few hotels which are not online till now. we tell them to promote their hotel and provide them exposure online but we need guarantee that they will not provide same rates to others ? is this possible.

Will be thankful if someone can give light on above question ?

Cheers

Manish Golchha

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9 Comments

  1. Manish – I think while you do sign a contract with the hotels for a GOOD rate, but these days, not many hotels would give you an EXCLUSIVE rate. And even if it is EXCLUSIVE, it may not be the LOWEST. If you are not able to sell the inventory, hotel will try on its own to sell it.

    I think you can contact Hotelogix (Aditya Sanghi) to know more about GDS and hotel distribution systems work.If you are in Mumbai, go to the offices of “Discover the World Marketing” – https://bit.ly/15MIHnU

    I hope this helps

    Regards,

    Puneet Aggarwal

  2. Hi Manish,

    So essentially there are 2 approaches, Agency Model & Merchant Model.

    Agency Model – This is followed primarily by Booking.com and Venere.com. They don’t get into ‘best rate contracts’ with hotels or negotiate commissions and room allocation. They have a self-service extranet that allows a hotel to set up their inventory on Booking.com, manage rates, allocations etc. Now, here is the genius part. Unlike most other websites, you don’t actually pay Booking.com. The payment is made directly to the hotel and then the hotels remit the nett commission to the agency on a monthly basis. The hotels have complete control over the various parameters that determine their display ranking and can manage the same using the same extranet. This method typically is more scalable and in favor of the hotels, hence the incentive for them to participate.

    Merchant Model – Used primarily by all major hotel consolidators like GTA, Travco, Tourico, DOTW, JAC, eBookers, Hotelbeds, Miki, HotelsPro, AOT and a gazillion others. Plus Expedia, Agoda and other online players. Here there are fixed rates (might or might not be best rate guarantee – depends on case-to-case basis) and perhaps certain allocations. The payment fulfillment is handled by the consolidator and the nett amount (total minus commissions) is settled with the hotel on a monthly basis. Advantage here is better chances of getting the lowest rate possible and ensuring availability. Though the earlier model has proved to be equally good at these things.

    This is the gist of it. Most of consolidators need floating/fixed deposits to work with them. That’s in case you intend to take their inventory and not build yours, or perhaps a combination of the two.

    Write to me at varun <at> tourlandish.com if you would like some more info. An exact idea of your venture might help. 

    Cheers!

  3. Thanks Punit to share info about Hotelogix.

  4. Good Insight Varun, thank you. I only thought that the merchant model existed. Didn’t know about the agency model.
    Regards, Puneet

  5. Hi Varun

    Thanks for giving better understanding now. We are thinking from B2B point of view targeting corporates and agents. 

    Model is bit different from above given consolidators but system work in the same way.

    I like to know, in agency model its very easy for any other player to drop in as there is no entry barrier from booking.com, what i believe.

    How they differentiate themselves if tomorrow expedia think to apply same model from their side.

    Also in merchant model how do they differentiate themselves ahead of competitors knowing so many players are there in market.

    If u can highlight on above 2 points, will really helpful to me.

    Cheers

    Manish Golchha

  6. Hi Manish,

    Whether it is B2B or B2C, the procurement strategy might not differ. Can you give me some idea as to how will your model work?

    Whether agency or merchant, there is no entry barrier. None, whatsoever.

    I don’t think Booking.com frets too much about Expedia or anyone else adopting their model. Expedia does in fact owns Venere.com which works in the exact same manner. There are many competitors irrespective of the model that one chooses.

    Differentiation is a tricky business. Technically, there is no differentiation between Booking.com/Agoda.com/Expedia.com as far as customers are concerned. Both are going after the same target market. It lies a lot in the finer things like SEO, internet marketing strategy, expansion plans and sheer EXECUTION.

    Long story short, differentiation is only in the execution of your strategy, not the strategy itself. There are only so many ways to procure and distribute hotel room inventory.

  7. My pleasure, Puneet. Hope you are doing great.

  8. Hi Varun, doing good. How have you been ? I am trying to arrange a meetup of Travel Trade b2b professionals somewhere in Jayanagar this Thursday around 6 PM. Would you be free to attend ? 

    Regards, Puneet

  9. Thank you very much Varun for explaining about online hotel booking models. I’m also aspirant of online hotel booking biz.

    Regards,

    Richard Macwan

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