Many “old-school” hoteliers still firmly believe in the efficacy of the tour operator business model. and rightly so. Although it should no longer be the only tactic that hoteliers used to bring in bookings, it still is a very important part of a successful revenue management strategy.
The important part of that sentence is “no longer [should tour operators] be the only tactic that hoteliers use”. Should I repeat it again? “NO LONGER. ONLY TACTIC.”
Traditionally, the average hotel would base a large percentage of their business on tour operator bookings. As you know, tour operator agreements are negotiated years in advance, guaranteeing a fixed rate for the contract period (often 1-2 years), guaranteed allotment and very short cut-off dates. Before the Internet, this was a recipe for success. but how about now?
Today, the hotel industry moves at the speed of light. Rates are updated on the online travel agencies (OTAs) on a regular basis (though for most hotels, they should be updated more often – but that’s another story), the market changes from one minute to the next and the only consistency is how inconsistent it really is. In short, contracts negotiated two years, one year, six months, even last week, are all going to be out-of-date very quickly.
I know, you’re probably sitting there thinking: “there is no way that I’m getting rid of my tour operator business”. Again, I’m not telling you to. Diversify your market segmentation so that you gain by selling wholesale to the tour operators, while ensuring that you aren’t cutting off other sources of business. Your hotel should be allocating rooms to various channels including tour operators, corporate accounts, consortium, online travel agencies, etc.
Rates across all channels – including corporate, online and through tour operators – should be dynamic, always being updated based on market fluctuations, inventory, pricing of the competition, etc.
Yup, you heard right… even your tour operator rates should fluctuate based on the market. By working with a tour operator company that offers both traditional and flexible, online rates through an extranet, you will be able to make more money through this channel. Fixed rates programs do not reflect true market conditions; on the other hand dynamic rates will allow you to capitalize on yielded rates to improve your overall business mix. An added bonus – these systems are compatible with sophisticated revenue management technology that will automatically update your rates across the online channel in real-time, greatly increasing your property’s money-making potential.
Renegotiate your tour operator contracts to ensure that they are making your property money. Some ideas:
* Rather than short three-day cut-offs, which makes it unlikely a
property can fill that room if the tour operator isn’t able to,
negotiate for longer cut-off dates (i.e. three weeks).
* When negotiating for rates, consider adding a surcharge for tour
operator bookings during the high season or peak dates to account
for the fact that consumers will be willing to pay higher rates for
* Do not base your whole pricing structure on the tour operator rate,
because you will be undercutting the profits that your hotel should
So to recap, here are today’s tour operator lessons: 1 – use a mixture of online, tour operator and corporate bookings to earn the most revenue for your property, 2 – renegotiate your contracts to make sure that your tour operator company is working for you (not the other way around), and finally, 3 – choose a tour operator that will enable you to use traditional and flexible, online pricing through an extranet.
Now, go out there and be a hero. Take back control!