Hotel ConsolidatorsBack to Forum
- This topic has 5 replies, 5 voices, and was last updated 19 Mar 2023
at 07:25 by MartinJ.
- Skip to last reply Create Topic
There is something that intrigues me but I don’t know the answer so perhaps someone could satisfy my intrigue!
If I understand correctly, there are some huge companies that block book hotel rooms months, perhaps years in advance and hold them as stock. So a hotel may seem booked out on their own website but not say on Expedia as they have block booked rooms. Do these companies literally buy stock of hotel rooms from thousands of hotels and wait for the public or smaller travel agents to come along and book them? If they don’t get booked they get binned, like. a greengrocer would bin apples they can’t sell?
This is exactly the business model of bedbanks and most tour operators. They will contract a certain amount of rooms for the season at a greatly reduced rate, and then sell them on B2C, or often the bedbanks on a B2B basis. Many contracts will be sale or return, so they can give back the allocation if they cant sell everything and the hotel then has to try and resell the inventory. Most agreements with hotels, especially chains will specify that they cannot sell the rooms cheaper than they do directly so for that reason Tour Op contracts are a bit different, as they can swallow the price of the hotel in the overall package and even if they make a loss on the hotel part they should make it up in the rest of the package without the price being shown as cheaper than buying the room rate directly.
2 users thanked author for this post.
This is exactly the business model of bedbanks and most tour operators. They will contract a certain amount of rooms for the season at a greatly reduced rate, and then sell them on B2C, or often the bedbanks on a B2B basis. Many contracts will be sale or return, so they can give back the allocation if they cant sell everything and the hotel then has to try and resell the inventory.
Until 2005, for 20 years I spent an average of 2 nights a week at the same hotel in the West End (of London) near to the BBC. I was told that the BBC block booked 6 rooms for 365 nights a year, at a special rate.
If unused, they were released back to the hotel by the BBC at 1800 each day. The hotel liked that as they could resell the rooms at the much higher “rack rate” for last minute callers most nights, although they refunded the BBC their contracted payment when the released room was resold.
They will contract a certain amount of rooms for the season at a greatly reduced rate
Again, several years ago, I went to book one night at a hotel near Gatwick, a couple of weeks before I needed it, by contacting them directly. I was quoted £159.95 (Bed only), which was more than I would be reimbursed by the organisation paying me. I declined and booked through one of the then hotel bookers. I was quoted £89.95 (which included breakfast), which I accepted.
When I went to check out and pay for extras, the receptionist mixed up the bills and handed me the bill to the booking organisation by mistake: this was for £49.95.
Following this, I invested heavily in Intercontinental Hotels, which has proved to be my most profitable investment by far.
In addition to the informed comments above …
It’s the same with airlines who block book crew rooms at certain hotels around the world. Booking a certain number of rooms every night over, say, an entire year would mean they are granted a hefty discount.
For trade fairs in Germany large companies will block rooms maybe one or more years in advance. They may not get much of a discount but they get the availability.
When I used to write the Ask Alex column there was a case where a UK reader had booked a top hotel for a Hanover trade fair and had actually paid both the costly ‘event’ rate and accepted 100% cancellation penalty if he didn’t show.
Despite all that he found the hotel overbooked. When he arrived the hotel could not offer him a room and he ended up being ‘walked’ to another lesser property.