Thanks to technology, suppliers are now able to use revenue management systems to recalculate rates hundreds of times in only one day. This provides a challenge to tour operators that sign contracts with suppliers in excess of 16 months in advance. Will dynamic rates replace static rates and render printed brochures with pricing absolute? Suppliers seem to suggest this will happen, but tour operators are unlikely to accept this without some resistance.

Opening a debate on rates, facilitator by Otto De Vries, CEO of the Association of Southern African Travel Agents, discussed how the advancement of technology has disrupted the wholesale model, where tour operators contract suppliers at nett wholesale rates that are often significantly lower than the combined retail prices of the individual products. Technology allows for suppliers to change pricing instantly, creating dynamic pricing where the bedroom rate can be re-calculated hundreds of times is one day.

Danny Bryer, Sales & Marketing Director at Protea Hotels, said that the industry globally was undergoing a transition. “Globally at the moment – and Protea now being part of a Marriott – we are seeing a change in technology from static into a dynamic world,” said Bryer. He explained that this means dynamic rates are becoming available through channels at a discounted price in an environment where static price processes still exist.

Bryer said no one has presented a solution of where wholesalers and static rates will fit in the dynamic pricing model. He added that most hotels can be expected to move to a dynamic pricing model in the next few years. According to Bryer, the question that remains to be answered is whether static rates will become part of the dynamic environment.

Martin Wiest, CEO at Tourvest Destination Management, believes the challenge is more complex. “The inbound wholesaler in this country has to give the customer that he has in terms of the overseas wholesaler the ability to translate dynamic into a market place,” says Wiest. “While some of our customers can do that, many of them can’t,” said Wiest.

Wiest pointed out that operators rely on printed brochures with pricing. “I think they will be there for years and decades to stay because consumers like those,” he said. “We have tried to not have pricing to facilitate dynamic rates in the market,” said Wiest, adding that these attempts had failed. He said consumers want to see a pretty picture and they want to have a price.

According to Wiest, the future will be one with a parallel market, where the inbound wholesaler will have to have the ability to translate dynamic rates into the market where applicable while there will also be static rates for markets that are not in a position to do so.

Johann Nortje, Group Revenue Manager Group at Tsogo Sun also suggests that the industry is in a transition phase, moving into a dynamic pricing environment. He added that in an environment where exchange rates fluctuated it was difficult to fix rates 18 month in advance. “How do we now already determine an 18 month rate base, where right now we can’t even predict what the currency is going to be next week,” Nortje said.

Peter John Mitrovich, MD at Grosvenor Tours, suggested that in an environment where travellers can choose to transact online or purchase travel from the traditional channel, it was important for wholesalers to reinvent themselves and make sure they have a value add for the end customer. Wiest agreed, adding that the two channels should have the same price so that the decision by the consumer was not based on price. Both Wiest and Mitrovich pointed out there is no price parity in the current environment.

How can tour operators stay relevant in a dynamic pricing environment? Share your thoughts in the comment section below.