HBX Group: Wholesaler Margins & Pre-Buys

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I completely understand and agree that agents might evolve in their roles. There's room in the market for distribution partners, especially agents, as people like face-to-face contact and having someone book an entire trip for them. My question is more about whether competition among these providers leads to a race to the bottom on take rates. Do hotels direct their inventory towards the channel, whether it's HBX or WebBeds, that offers a lower take rate? Is that the right way to think about it?

Technology now allows hotels to sell to distributors more easily, and consumers can find hotels without needing a middleman. This should have led to more consolidation. However, new players emerged because the business is so large. The model is to buy from everyone and sell to everyone, leading to many smaller players. Even those below Hotelbeds and WebBeds have started to grow, with turnovers of 500 million or 250 million in gross booking value, albeit with a small margin of 2% or 3%. They're technology-driven and make enough money to continue. Two other players worth noting are TBO and Go Global. TBO is listed on the Indian stock market, so details are available. Go Global is owned by a large Korean B2C company called Yanolja. The Koreans have entered the market, aiming to create a bigger player with Go Global. This poses a threat to Hotelbeds and WebBeds, challenging their ability to grow. The market is there, but as it continues to expand, the smaller players will realize there's not enough for everyone, potentially impacting the larger players' growth.

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Yes, and I guess what I'd like to understand a bit more is from the hotel side - and you've obviously worked in hotels, so you're well-placed to answer this - why use, let's say, HBX? EPS provides a solution that sells all of my inventory. They can control pricing if I want them to, and they won't undercut my own website. Why not just partner with a single provider like them for full coverage? Why use multiple providers? Why even bother with HBX Group or WebBeds?

The reason some still use middlemen is due to laziness and necessity, depending on the size of the hotel chain and the reach middlemen provide. Companies like Hotelbeds and WebBeds offer extensive reach. For all intents and purposes, if you give it to Expedia, it also goes everywhere, including on the Expedia Partner Solutions platform. People choose these options because, as we discussed earlier with Hotelbeds' pre-buys, directors of sales have budgets, targets, and objectives to meet. The easiest way to grow their portfolio is to guarantee some base business through pre-buys. But by doing so, they give away their weekend and high season at a low price. If they can't sell that, it means they shouldn't have a hotel. They might know this, but they don't fully grasp it.

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From a hotel perspective, aside from the big chains with exclusive agreements, do most hotels connect to all of them? How do they decide which inventory to allocate to which middleman? Is it just an automated computer system?

Yes, exactly. They don't typically allocate specific rooms to specific channels. It's usually a free sale margin agreement. Sales depend on the rate you have, and you get last room availability based on that rate. If you have a cheaper rate, they might cut you off if occupancy goes over 50%. They open it to all, and whoever sells it gets it. Technology has enabled this. In the past, when I started at GTA, a contractor would physically visit a hotel, have a conversation, and secure a set number of rooms per day with a 6-week release clause. Those rooms were at a static rate and belonged to that distributor.

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