World Panel
Viewpoint23 September 2020

What does the future hold for bed banks?

Digital Marketing in Hospitality

— 5 experts shared their view

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This viewpoint was created by
Max Starkov, Adjunct Professor NYU Tisch Center for Hospitality and Hospitality & Online Travel Tech Consultant
Peter O’Connor
Professor of Strategy at University of South Australia Business School

In the non-US marketplace, bed banks continue to play an essential role, providing both offline and online intermediaries with a long tail of hotel inventory that would be impossible to source otherwise.  Assuming historical bad behaviour regarding abuse of net rates can be controlled, newly consolidated and professionalised bed bank companies can have a long and happy future.  But if they fail to clean up their act...

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Erik Muñozsupplier view
Chief Commercial Officer (CCO) at Lybra.tech

Bedbanks business may contract over time, however, they will remain a significant player in the online travel marketplace due to the large number of consumers who prefer to have their local travel agent make their travel arrangements. Whilst consumers are more than capable of researching and booking their own flights, car rental, and hotels - that doesn't mean it's something everyone wants to do. Particularly with family reunions or group travel.

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Simone Puorto
Founder | CEO | Futurist

According to a HotelBeds whitepaper, "bedbanks are focused on assisting hoteliers develop under-served markets and those they do not contract with directly." At least, in theory, therefore, the bedbank model should compete neither with OTAs nor with direct booking initiatives, and it should (always in theory) produce incremental revenue for hotels. But does it? see more

Over the years, bedbanks started wrestling fiercely with OTAs and brand.com, principally on metasearch engines, undercutting rates online, mainly by taking advantage of their merchant model. This creates a downward spiral of rate leakage (causing, amongst other things, hotel de-ranking on OTAs), lost profits, higher marketing costs, and lack of transparency for the final user. 

Many of my clients already stopped working (or drastically reduced their inventory) with bedbanks, and no major changes occurred, other than better control over their rates and inventory. 

Of course, there's no black and white answer here, but I doubt bedbanks still have the power to produce that incremental revenue they used to, while they tend to cannibalize other B2C distribution channels with lower cost-per-acquisitions.

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Max Starkov
Adjunct Professor NYU Tisch Center for Hospitality and Hospitality & Online Travel Tech Consultant

There are several major developments working against the bed banks sector: 1) Shrinkage of the brick-and-mortar distribution marketplace due to consumers shifting to online travel planning and booking. There are less than 7,500 travel agencies in the U.S. today vs 35,000 back in 1995; 3,500 in the U.K. vs 7,500 only 15 years ago. COVID-19 has accelerated this shift from offline to online and the demise of brick-and-mortar travel agencies, small and midsize tour operators, which constitute almost 100% of bed banks' customers. see more

2) “Branditization” of the hotel industry worldwide. There has been a significant increase in the share of branded vs independent hotels for a number of years now, a process been accelerated by the current crisis. Already 70% of hotel rooms in the U.S. belong to branded hotels; 50% in the U.K., 40% plus in Europe and APAC. Major hotel chains “hate” wholesalers and B2B intermediaries, reach directly to traditional travel agencies via the GDS and simply do not need the bed banks.

3) International and long-haul travel, which is the main source of revenues for the bed banks, is not rebounding anytime soon. Both hotels and traditional distribution systems - travel agencies, small and midsize tour operators - do not need bed banks for their domestic, short-haul, and drive-in customers. 

The consolidation in the bed banks industry is inevitable due to shrinkage in the brick-and-mortar distribution marketplace and the viability of the bed banks sector is highly questionable. 

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Fabian Bartnicksupplier view
Founder at Infinito

The best way to describe whats around the corner for bed banks is: Evolve or became a slave of distribution.  see more

Slave scenario: Bed banks have a very strategic value for OTA's as we have seen with Expedia becoming a middle man between brands and bed banks / wholesale system. The strategic part is that you (OTA's) can start brick-walling hotels as well as become a "pool of rates" that can be used where there was previously no access or at least no control of that access.

Evolve scenario: Bed banks take on OTA's with a dual value proposition by becoming an OTA themselves. A) give us the ability to go B2C for you (the hotel) and B) we will not provide rate leakage to the OTA's. 

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