World Panel
Viewpoint20 May 2019

Is Rate Leakage a problem for hotels?

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Wholesalers who have negotiated discounted rates with the hotel under the pretext of needing wholesale rates to bundle with air or local activities, etc. into packages, and then leak the discounted rates "naked" online-primarily via the OTAs or their initiatives like Booking.basic. This is a huge problem in Europe and APAC, not so much in the U.S. See this article by HotelBeds, trying to present itself as anti-rate leaker, while a lot of hotels accuse this wholesaler to be one of the rate leakage offenders. What's your take?

This viewpoint was created by
Max Starkov, Adjunct Professor NYU Tisch Center for Hospitality, Founder & Director at NextGuest Digital
Charlie Osmond
Co-Founder & Chief Tease at Triptease
Supplier View

The awesome rise of Google's meta and the launch of Booking.basic, make rate leakage the #1 challenge for hoteliers in 2019 and 2020 - and certainly the most requested topic at the Direct Booking Summit this year.

There is no escaping the cost of undercutting today - our data suggests direct bookings drop 30% when hotels are undercut. The sad news is that the future looks worse not better. Rate leakage is a growing problem for most hotels (by volume and % discount) and the impact of each leak is also getting worse.

What to do? Dynamic rates are a start but not a full solution. Test bookings fight the symptom and not the cause. Contracting and closeouts can be highly effective, but as with everything, it's the focus, intensity and energy that a hotelier brings to the problem that determines success or failure. 

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