Expedia CEO to Hotel Owners: Stamp Out Rogue Wholesale Rates

Expedia CEO Peter Kern pled his case to hotel owners Monday: Take seriously the billion-dollar issue of wholesale rates being misused online.

“It’s a growing problem,” Kern said Monday. “There is a massive amount of rates leaking out.”

Kern spoke on-stage at the Americas Lodging Investment Summit (ALIS) in Los Angeles. It was the first time the head of a major online travel agency was invited to speak at the conference — arguably the largest one for hotel owners and developers.

Some backstory: Hotels have long set aside some rooms at discounted wholesale rates for contracted partners to offer to specific, coveted travelers. A hotel might offer wholesale rates to a tour operator to bundle with a flight in a discounted vacation package, for example.

Kern complains that some agencies are breaking the rules.

“Wholesale rates get out in the world where they’re unintended, and ‘unintended’ means they are available at the retail marketplace on other OTAs [online travel agencies] and comparison sites,” Kern said. “All of a sudden, people are showing up at your front desk with a rate that your desk doesn’t know how the hell it got there.”

Kern’s team at Expedia has worked with Marriott and other major hotel chains to curb the distribution of rates. However, the “wholesale leakage” problem continues to plague independent and regional hotel groups.

Difficult Problem

Why don’t more hotels care, given that they’re the ones who are being undercut on price? A few reasons: It’s filling rooms with guests, and that’s what general managers are judged on for performance. It also takes some time and money to tighten one’s distribution.

The rogue rates are also hard to track.

“You may not even see the rates because they’re gated to geography,” Kern said.

If you’re based in the U.S. and you search for rates at your company’s hotel in Vietnam, it may look fine on the price-comparison sites you use, Kern said. But travelers searching sites in Asia Pacific may see other, cheaper rates.

Kern conceded that some hotels just aren’t that concerned. But he found that puzzling.

“If you end up filling your room at 30% off and killing your direct-to-consumer rates, I don’t know where that gets you long-term,” Kern said.