In the grand opera of revenue management, managing rates across different segments isn’t just about numbers—it’s about people. Navigating these relationships can feel like a constant tug-of-war, but when done right, it becomes a captivating performance.
We have the travel agents, the steadfast providers of guaranteed business and access to diverse markets, often demanding lower net rates so revenue managers struggle to balance profitability, orchestrating the delicate balance between rates and relationships. Sales teams are eager to sign deals with guaranteed room blocks for corporate clients or wholesalers, locking up inventory that could otherwise be used for dynamic pricing strategies. Meanwhile, finance is pushing hard to reduce OTA commissions, adding tension to the plot. To add another layer of complexity, there’s the occasional wildcard: a GM offering discounted rates, throwing a twist into the narrative.
In this post, we’ll dive into these common pain points of the revenue opera and its actors—internal miscommunication, external pressures, and those unexpected surprises—and share practical solutions to help hotels strike a balance between profitability, collaboration, and guest satisfaction. Let’s get started!
Act I: Travel Agents and OTAs
Blocking Your Peak Periods and Undercutting Your Channels
As hoteliers, you know that distribution partners are key to driving business and visibility for your hotel. They make money when you make money, taking a cut for their services. But sometimes, their demands can feel overwhelming, and they often have the upper hand in deciding what, when, and how to sell your hotel, which isn’t always in your best interest.
Here are a couple of examples of why communication is important and why setting boundaries in your strategy is crucial:
Wholesalers will push you for lower rates over a peak time to maximize gains, increasing both your and their production. This tactic often blocks inventory for peak dates (if poorly negotiated), limiting your ability to make the most of high-demand periods.
OTAs will propose exclusive deals on big discounted promotions to drive high numbers. This is often a great way to push sales on their channel, but it creates a major disparity between partners, as others, like wholesalers, will be undercut from the negotiated rates you gave them. A short-term good promotional deal can lead to weeks, if not months, of tough renegotiations with your other “now angry” distribution partners.
Foster open communication with your distribution partners about your hotel’s goals and strategy. Explain the reasons behind your strategy to achieve win-win terms that benefit everyone. Trust is key—when partners feel valued and understood, they’re more likely to support your property strategy in both good and tough times. By ensuring all stakeholders are “in the same boat,” you can create long-term partnerships that fit smoothly into your hotel vision. This way, your partners will come to you with better-fit tactics that align with your goals.
Remember, it’s also important to set boundaries and know when to say no. Sometimes, protecting your hotel’s interests means standing firm on your strategy and say “no” to every demand.
Act II: The Trojan Horse
Signed Agreements and Inventory Blocking
Guaranteed deals are a blessing for many hotel stakeholders, particularly when it comes to both production and cash flow, but here’s the catch.
Sales teams often prioritize deals with guaranteed room blocks for wholesalers or corporate clients to secure predictable revenue, known as “base business.” While these agreements are great during low-demand periods, they can act as a Trojan horse during high-demand periods, locking up inventory crucial for dynamic pricing when demand spikes—especially during peak dates. This misalignment can lead to missed opportunities and internal friction, with teams pointing fingers when budgets or goals aren’t met.
The solution? Create flexible agreements that release unused room blocks back into inventory if not utilized by a certain deadline. Good communication between sales and revenue management during contract negotiations ensures deals align with broader pricing strategies while protecting base business from wholesalers. Tiered pricing models based on booking volume can also help balance profitability with occupancy goals while keeping inventory adaptable.
Ultimately, a team in sync is key.
Act III: Rate Leaks
Show Love to Your Travel Agents
Revenue managers often face the challenge of balancing rate integrity with the need to maintain strong relationships with wholesalers—the base business we discussed earlier that fills rooms when dynamic demand isn’t there, especially in destinations heavily driven by transient non-negotiated segments.
While rate leakage across channels happens (wholesaler promotional rates being used as B2B rates) and is usually a real headache for revenue managers to spot, it’s still important for revenue managers to recognize the value of having a proactive approach to wholesalers by providing new deal elements occasionally—such as favourable terms or access to peak dates—to strengthen partnerships. Yes, it’s about business, but creating a framework of collaboration is essential; otherwise, opportunities will not flourish.
To navigate this balance effectively, revenue managers and sales teams should focus on building trust with wholesalers through transparent communication about rate decisions and long-term strategies. As mentioned before, regular alignment meetings with internal sales teams and other hotel stakeholders can ensure everyone understands why certain concessions—such as special rates, benefits, or tactical promotions—are made to strengthen the base business while still protecting overall profitability.
Act IV: Bargain Bazaar
Stay Vigilant to Discounted Rates
It’s not uncommon for hotel executives to occasionally step into the sales realm, driven by the need to generate business, and offer discounted rates without considering their impact on the hotel’s overall pricing strategy—whether as part of a special request or an effort to secure goodwill with certain guests or groups.
While these decisions may seem harmless in isolation, they can disrupt the hotel’s pricing structure and create inconsistencies across segments. Revenue managers are often left scrambling to adjust rates and maintain consistency across channels, much like launching a promotion without securing the runway for take-off.
To prevent this issue, hotel revenue teams, including management, need to implement clear policies requiring approval from revenue management before discounts are granted. These policies ensure special rates don’t conflict with existing promotions or segment-specific pricing structures. Educating leadership on the importance of maintaining rate integrity can also help align decisions with long-term revenue goals.
Act V: OTA Fees
Blame Your Website and Booking Engine
Hotels with a high volume of OTA business often face end-of-month commission bills that make accountants gasp. Here’s the bitter truth: OTAs rake in business thanks to their colossal marketing budgets, and they often prey on hotels with shabby websites and clunky booking engines that scare off guests.
When the commission bill arrives, the first thought is always about how these fees eat into hotel profits. Finance teams often feel frustrated watching OTA commissions while pushing hard for more direct bookings to save costs. However, OTAs have extensive marketing budgets that allow them to unlock new markets than most hotels could achieve alone making them an essential part of any distribution strategy despite their costs.
To play smart with OTA partnerships, target the right audience and let OTAs bring broader markets that align with your property’s strengths. Create engaging content that connects guests directly to your hotel’s unique story—whether it’s through showcasing local charm, distinctive design, or memorable experiences. Ensure your booking experience is as seamless as an OTA’s by investing in user-friendly technology for your website and booking engine. Finally, differentiate your brand by offering perks OTAs cannot match, such as personalized experiences or exclusive packages that make guests feel valued and inspired to book directly.
Meet the author:
Jacobo Priegue, co-founder of SODÅ, excelled in implementing data-driven strategies to optimise pricing and enhance operational efficiency. At SODÅ, Jacobo is dedicated to empowering independent hotels by integrating world-class revenue management and expertise traditionally available only to large establishments. Jacobo’s vision is integral to SODÅ’s mission of transforming hotel management in Vietnam through innovative solutions tailored to the industry’s evolving needs.
Access the original article on LinkedIn: https://www.linkedin.com/pulse/hotel-distribution-grand-opera-sodapowered-hb6xc
Australian Hospitality Alumni Network Vietnam 