GDS or wholesalers? Find your way to the guest

GDS or wholesalers? Find your way to the guest

20 December 2019Olga Gajewska

Wondering how to reach more guests but the available distribution options overwhelm you? Or maybe you are just looking for the best additional channel suitable for your business? If so, this article is a must read. You will learn from it not only how all the options work, but also which integration is worth investing in.

The goal of each facility is to maximize profit. It can be achieved by the right presentation and online presence of its offer. Direct sales through your own site and via OTA will not always allow you to reach every potential guest. That is why many hotels use GDS and Wholesalers. Find out why. 

What are GDS and wholesalers?

GDS – global distribution systems – are used to share rates and availability of hotel rooms with tourist and corporate agencies. It is important that prices and availability are shared in real time, which allows facility to react quickly to the changing market situation and to quickly modify the prices accordingly. GDS examples are Saber, Amadeus, Travelport.

Wholesalers buy rooms from facilities, usually at negotiated rates, and distribute them further to other intermediaries (travel agencies and OTA). The prices and availability are determined during  contract negotiations and are usually unchanged throughout the contract’s duration (which is usually a year or season from April to the end of March of the following year). As a rule, the prices are made available offline and the rooms are not for sale online.

The latter model has been changing towards the sale of dynamic rates instead of fixed rates, but can be set at different levels and changed in accordance with the hotel price policy.

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Which guest will I reach via GDS and wholesalers?

First of all, more doesn’t always mean better. Having a very large number of distribution channels does not guarantee a large number of guests in the facility. On the other hand, having distribution channels tailored to the guest segment can ensure an optimal number of reservations. So let’s think about which guest you want to reach.

Corporate guests will benefit from the prices and availability that you send via GDS

It is an agency that will be looking for accommodation for the guests. Through GDS you will provide standard rates and negotiated corporate rates, thanks to which your facility will be visible around the world through the channel.

If you have negotiated rates with an international company, a guest making the reservation will first look for such rates in GDS (no agent will check availability in OTA). So find out whether foreign corporations are your guest segment and if so, go for GDS offer.

Individual tourist travelers (so-called leisure) will be able to take advantage of the rates offered by wholesalers.

These rates are seen by agencies around the world booking travel trips which can, for example, combine accommodation services with flights. Wholesalers negotiating rates with you will expect a very favorable price, which can be sold further by them. Redistributing prices often results in lack of control over rates – the distribution chain can be quite long and prices can be published on pages that you have not heard of before or on which you do not want to offer them, e.g. on OTAs and others, so you have to be prepared for it. The benefit though is that you get the price you negotiated no matter if a room is sold by wholesaler or not.  

Are any of these channels suitable for my site?

If you are an urban facility operating in the corporate segment, there is an airport in your city or nearby, then the distribution of prices by GDS is worth considering. It is assumed that for facilities with min. 50 rooms GDS are a match. 

In the case of wholesalers, the size or location of the object is not so important, both large chains and independent hotels as well as boutique facilities can be hooked up. What matters is the target, which is leisure guests. 

The smallest facilities or apartments should rather focus on expanding the offer in channels designed for this type of facilities, such as AirBnB (commission of 3-5%), mainly due to the cost of booking.

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The cost of both solutions

The cost of cooperation with GDS

In the case of GDS, you will encounter a one-time setup cost, then transaction fees and a provider’s commission of several Euro/$/other which will be added to each booking – it all depends on the channel through which the booking is made.

In addition, you pay a commission to the agency that made the reservation. It’s usually around 10% of the booking value, unless it is a negotiated corporate rate with no commission for the agency (depends on the conditions under which the contract was negotiated).

Costs of cooperation with wholesalers

In the case of wholesalers, we usually deal with the so-called merchant model. This type of distribution is based on negotiated rates, called FIT (foreign individual / independent traveler), which are net, i.e. commission-free rates.

Hotel provides a certain number of rooms (allotment) for the duration of the contract at prices reduced by approx. 25-30% from standard prices. Wholesaler sells those rooms to other agents, you don’t pay any commission for your booking.

Good to know: more and more wholesalers are switching to the agency model, in which hotel offers standard rates, on which a commission is paid for the booking obtained (the commission is often higher than in case of OTA, within 18-25%).

Both distribution channels have undoubted benefits resulting from their coverage.

Your facility is not able to reach a broad global customer on its own, and both GDSs and wholesalers reach international markets. The presentation of the facility in these channels is also the marketing activities of intermediaries giving high conversion rates.

Before you start …

It is worth first considering what type of customer you want to address your offer to and what size your facility is. Then, think about how many rooms do you want to offer under GDS / wholesaler activities, and which countries you’d like to target. Choose the integrations that are the most popular in given countries and negotiate the prices. 

Last but not least, you need to remember about reliable integrations with your service providers. Make sure your Channel Manager supports the channels and providers you want to work with.

If you already use the Profitroom Channel Manager, then you are guaranteed a certified connection with, among others, Classic International Hotels, Saber / Synxis, Travelclick (GDS’y) and Hotelbeds, Travco, GTA (wholesalers). If not:

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