8/5/2016
Are rate strategies in no-man’s land? - South African Tourism Update
Are rate strategies in no-man’s land?
By: Martin Wiest
Comments | 14 Aug 2016 15:56 PM
After many a discussion, especially at the recent
Satsa conference in White River, I thought it
opportune to somehow put my thoughts on paper.
As a supplier to the tourism industry with its
myriad of segments, one has an ever-increasing
amount of channels available to get the product to
the end consumer. Let’s just name a few: Own
portals, GDSs, online travel agents, online tour
operators, retail travel agents (both local as well
as overseas), inbound leisure wholesalers,
outbound leisure wholesalers, corporate travel
agents, PCOs and MICE DMCs.
Over the last few years, largely driven by technology, rates have become
increasingly transparent and globally visible. This has made historic
strategies around geo-fencing and segment-fencing rate levels in order to
achieve yield improvements increasingly archaic and vastly more difficult to
manage, especially in the context of dynamic rate principles called by
many different names… and I always thought a bar was a good thing.
Strategies increasingly hinge on getting rates to the consumer at similar
levels, regardless of the channel, which is exactly where the no-man’s land
starts. Looking at the above distribution channels, the corresponding costs
range from 0% in supplier-owned portals to 35%-40% in an inbound
wholesale defined channel. However, the commercial model of discounting
dynamic rates – and the protection of static contract rates for that matter –
does not take this into consideration, resulting in material rate disparities
in the hand of the consumer. This can’t possibly benefit anybody.
Logically, yielding would then become a function of closing out certain
channels once high occupancies in high-cost channels have been arrived at.
This is not ideal for the inbound wholesale leisure industry or any other
high cost distribution channel. This is still better than the current status
quo of inbound leisure wholesalers consistently being out-priced by the
automated, low-cost, low-value-add, global spider network, which is
increasingly complex to understand and, by its nature, takes away the
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8/5/2016
Are rate strategies in no-man’s land? - South African Tourism Update
ability of the supplier to be the master of its destiny.
You may find yourself lost in all of the above. Core to the above argument
is that the channel cost does not change in a dynamic rate environment nor
should the relevance of static contract rates be wiped out. Therefore, a new
rate strategy in this new world of ours is critical if multi-channel
distribution is part of the philosophy.
Upwards and onwards, Martin.
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