Bed Bank

While traditional travel and hospitality wholesalers are often destination specific or may only have manual contracts, bed banks are characterized by scale and automation. They are technological-first companies. Major players such as Hotelbeds or WebBeds manage hundreds of thousands of hotel properties.

Their business model resolves a problem of fragmentation:

• For hotels: It is not possible to contract with each and every travel agency in the world. Connecting to one bed bank instantly puts the hotel’s inventory on the shelves of thousands of sellers globally.
• For sellers (OTAs/agents): It is impossible to make direct deals with each and every hotel. A single connection to a bed bank offers instant global coverage.

The most important asset of a bed bank is not only the hotel contracts, but also its tech stack.

• XML/API Integration: Bed banks handle huge amounts of data. They are processing billions of searches on a daily basis (high look-to-book ratios) as OTAs are constantly pinging their systems for availability.
• Inventory Mapping: This is the important tech challenge. Different suppliers may list the same hotel as “The Hilton NY,” “Hilton New York” or “Hilton Hotel NYC.” Bed banks use sophisticated mapping software to reduce the effect of deduplication so that the seller is presented with one neat listing, not 3 confusing duplicates.

Commercial Model: Net Rates

A bed bank works mostly on the Merchant Model.

• Sourcing: They obtain a net rate from the hotel ($100, for example). This is a non-commissionable and confidential rate.
• Markup: The bed bank takes a little bit of markup ($5, for example) and sells it to the OTA for $105.
• Retailing: The OTA puts their own markup ($15) on it and sells to the consumer for $120.