Differentiation through distribution when connectivity is commonplace

It’s relatively straightforward for travel sellers to connect to a bedbank. The bedbanks do the heavy lifting, investing in the teams and technology that allow them to contract with hotels, load rates into their system and make these rates available, giving sellers easy access to tens of thousands of hotel rooms at the click of a button.

At the same time, it’s relatively straightforward for hotels to connect with bedbanks and make their inventory available via a bedbank. Hotels and other accommodation providers can broaden their reach by increasing the points of sale courtesy of the bedbanks’ network of clients.

But the relative straightforwardness of this scenario breaks down when it comes to selling this inventory. If anything, the ease of connectivity is clouding the picture when it comes to distribution, and it’s time to start thinking about these two processes in terms of the business models rather than the tech set-up. Step one is to accept that the cost of connectivity needs to be ringfenced from the cost of distribution.

Recently we’ve come across examples of where a lack of understanding of the business of connectivity and the business of distribution is causing major financial headaches.

We heard of a seller that connected some of its own directly contracted inventory – a dozen or so hotels in a popular United States destination – to a bedbank. The bedbank then passed this inventory on to another bedbank, which works with the big global metasearch engines. When the bill came through to the original seller, there were about a million searches, only two bookings. All of this happened within the terms and conditions agreed by the seller who had overlooked, or underestimated, the cost of traffic.

We even heard about a seller who listed directly contracted inventory with a bedbank and ended up buying the same inventory from the bedbank, incurring the costs of an indirect booking when the option to book direct was there. Again, this fell within what was allowed and what had been agreed as part of the contract.

So how can a seller avoid these abominations? One suggestion is for sellers to consider the full route of the inventory and how the room about to be booked ended up in their system and, importantly, the terms associated with a booking.

Access to bedbank inventory underpins the distribution strategies of many sellers, but even businesses doing well out of their bedbank partnerships should consider alternative ways of accessing content, especially as there remains a large slice of the accommodation market that operates outside of the bedbanks for commercial or strategic reasons.

The idea of a “marketplace” for sellers is well established and bedbanks are part of most if not all marketplaces. But as with the bedbanks themselves, there are variations on the theme and different models of marketplace exist, each with their own terms and conditions, capable of satisfying a variety of business cases.

These and any other alternative source of content for distribution – such as direct connection with the hotel chains, or to an extranet of off-the-beaten track options contracted by a destination management company – are best used in conjunction with and not instead of bedbanks. But again, our advice is clear – consider carefully the terms and conditions of the marketplace and decide whether participation has a net benefit for your business in terms of the cost of distribution relative to the cost of connectivity.