QL2 Logo

Loyalty on the Line: How Dynamic OTA Booking Rates Threaten Your CUG Agreements

Quote with Connor Schneider Headshot: Quote words "..obtaining the public rate offered by CUG suppliers is well worth the extra data connection. The public rate is the most critical rate since that’s the price that club members compare to when they book their vacations. "

Do you have a Costco membership? A time-share at a beach-dotted destination? A large insurance network through your workplace? Chances are that a side perk of having access to these groups is the availability of an online travel agency (OTA) that is able to provide discounts on travel. These OTAs promise hotel and rental car discounts, exclusively for closed groups (think Costco or your workplace), for a membership fee. Because these private OTAs only offer discounted rates to groups that they have business agreements with, their suppliers are willing to provide travel prices below market rates. The suppliers logic? Closed User Group (CUG) OTAs aren’t truly cannibalizing sales by offering cheaper rates to customers since they can only access those rates by logging into their membership platforms. So, closed-group OTAs can confidently boast unbeatable travel deals… or can they? 

In my experience analyzing both private rates and public rates, I’ve determined that it is no longer a safe gamble for agencies servicing clubs or membership groups to assume that the “cheapest” rate that their suppliers are giving them is their actual best rate. I’m hearing more cases of hotel distributors keeping the cheapest room type for their website, or using frequent flash sales that discount that room rate below what the CUG provider is promoting. 

Why should that be a big concern for the private travel agencies? Since their entire value proposition to their club partners is that they can provide discounted travel deals below market rates, even a few isolated examples of that purported value-add being untrue could have severely damaging effects on their customer trust. Once users lose trust in the CUG agency, they will check prices first on the public market to book a hotel or car rather than checking through their membership perk. A series of such incidents can snowball until the group in charge of club partnerships decides to invest in a new private agency.

The mismatch between the rates supplier OTAs offer to their private partners and the rates posted on their own websites is not a purposeful, nefarious action, but rather their best effort to make sales, which is usually independent of the group managing private agreements. The best way for CUG agencies to ensure their value proposition remains rock-solid is to monitor the public rates offered by their suppliers, not just relying on the API or GDS rates they receive from said partners. Successful private agencies monitor public prices from their suppliers and compare them to the room rates for those hotels and check-in dates that the OTAs pass to them. When they detect any variation between the two rates that puts them on the losing end of the comparison, they just have to call up a colleague at the relevant agency and request a new price. This check and alert process leads to stronger relationships with OTAs and increased trust from their member customers. 

Image of desk with a calculator sitting on top of it

While it requires the services of a web crawling provider, obtaining the public rate offered by CUG suppliers is well worth the extra data connection. The public rate is the most critical rate since that’s the price that club members compare to when they book their vacations. The travel pricing landscape is dynamic, and staying on top of fluctuating market prices can be challenging. It’s important to partner with a reliable data monitoring solution to track public rates and ensure the member groups that you provide travel deals to are consistently offered the best deals. This will not only strengthen member loyalty but also showcase commitment to delivering exceptional value. By proactively monitoring public rates and ensuring their offerings are truly competitive, CUG OTAs can solidify trust and boost member retention, leading to a significant increase in revenue.

Any closed user group agency that doesn’t have consistent access to the cheapest travel price available on the public market is leaving their value proposition, and therefore their customer contracts, up to chance.

Want to learn more about monitoring travel market prices? Email at Connor Schneider to start a conversation!

Connor Schneider
Connor Schneider
Helping product & merchandising teams identify pricing gaps to maximize sales and profitability with QL2. 

Image credit: Photo by Z on Unsplash | (pins) | Photo by Cytonn Photography on Unsplash (handshake) | Photo by Jakub Żerdzicki on Unsplash (calculator)