By Tessa Reed and Kim Emmanuel
Protea Hotels by Marriott has restructured its rates system in a move that some operators claim will likely consolidate buying power among the dominant tour operators, making it nearly impossible for smaller operators to compete on price.
Tourism Update has spoken to a few small operators who say they no longer receive static STO rates from Protea Marriott, although they have been offered 8% commission on dynamic, best available rates. The group has also notified the trade that it will be phasing out static rates.
Danny Bryer, Protea Hotels' Director of Sales, Marketing and Revenue, told Tourism Update static STO rates would be available widely until the end of 2018 to operators that are contracted to Protea Hotels by Marriott.
Bryer said that Protea Hotels by Marriott would not be stopping static STO rates until wholesalers were comfortable with connectivity to access dynamic rates.
However Tourism Update has seen an email, circulated to a number of operators, that states:
“You may be aware that Marriott International acquired Protea Hotels almost three years ago now and as a result of this acquisition there have been some significant changes with regards to how we service the Wholesale market. The most noteworthy is our move to phase out static rates completely and offering only dynamic rates by next year. In order to achieve this goal we have reduced our static rate offering to only a handful of hotels and to a very limited number of operators.”
Jan Jenkins, MD of Umvuselelo Tours and Travel, enquired about STO rates for a group of 20 passengers from an African Pride property and was offered 8% commission on the room portion of the accommodation rates, based on the best available rate.
It’s impossible for operators to work with an 8% margin, says Onne Vegter, CEO of Wild Wings Safaris. “A 30% or 40% margin in the retail industry is considered normal. Why do suppliers complain about margins in the travel industry and then refuse to offer wholesale rates to smaller operators, and only offer 8% commission?” he asks. “How can anyone work with 8% commission?”
Jenkins says Legacy and Peermont are among the hotel groups that she has come across who continue to look after smaller operators. “They go out of their way to assist you to get the business – if you have 10 bed nights or you have 10 000 bed nights,” says Jenkins. “It seems the little guys are being swallowed up.”
She suggests, to counteract this move, that smaller operators should compile a list of hotels and groups that continue to offer STO rates. She says specifically independent boutique hotels could benefit from this.
Vegter says the move is short-sighted. “Combined, small operators can generate huge volumes of potential business, but by marginalising them with poor commission you lose both their support and goodwill. We have previously seen that when the market turns against us, tough times arrive and occupancy drops, these suppliers suddenly want support from the local trade again and start offering better STO rates to small operators to try and improve their occupancy.”
Likewise, another industry member, who asked not to be named, commented: “It is usually the company closest to ‘owning’ the customer that puts the squeeze on others in the chain. The business model in FMCG retail is for retailers like PicknPay, Shoprite and Woolworths to get to such a size that they are in a position to squeeze the supplier to accept very small margins.
“It could be argued that when the current shortage of accommodation is over for whatever reason, accommodation suppliers will rue the day they helped consolidate buyers into super powerful buyers that dictate the tems.”
