Recent agreements by the bed bank wholesaler Hotelbeds to acquire smaller competitors GTA and Tourico Holidays reflects a hotel wholesaler sector that continues to grow slowly but could be getting squeezed by both OTA growth and the largest hotel companies' increased efforts to sell direct.
Spain-based Hotelbeds Group, whose bed bank affiliates include Bedsonline, is acquiring GTA and its TravelCube and TravelBound brands, giving the company access to Asia-Pacific and Middle East inventory, according to a Hotelbeds spokesperson. The Tourico acquisition will give it a greater foothold in the U.S.
Hotelbeds last year was acquired from German travel and tourism giant TUI Group for about $1.3 billion by U.K.-based Cinven Capital Management and the Canada Pension Plan Investment Board. The company sold some 26 million room nights, about 5% of Priceline Group's annual total, valued at 3.8 billion euros ($4.3 billion), during the year ended Sept. 30.
For the previous year, Hotelbeds' revenue jumped 23%, to 1.23 billion euros ($1.4 billion), though the spokesman classified the company's growth as "modest."
The agreements, which are slated to close by year's end, cast a light on a travel sector that buys rooms in bulk and sells them to travel agencies, tour operators and secondary OTAs. It has been less visible than hotels and OTAs that sell directly to guests.
Bed banks typically acquire rooms at a 30% to 45% discount from hotels' rack rates, then resell them to tour operators and travel agencies at rates that are still 15% to 20% below published rates. Bed banks may account for 2% to 5% of hotel room inventory, depending on the market.
Still, some bed bank operators have run afoul of hotel companies in the past by arranging for discounted rooms to make their way to the public through entities like Google or Kayak, undercutting hotels in the process, according to a travel industry analyst who asked not to be identified.
"It's constant global hand-to-hand combat," the analyst said.
Bed banks have faced additional pressure from Priceline Group and Expedia as those OTAs snap up smaller competitors, while large hotel companies like Marriott International and Hilton are trying to take matters into their own hands by investing in direct-booking initiatives.
Douglas Quinby, vice president of research at Phocuswright, said the wholesale industry "has contracted over the past decade with the growth of the OTAs, and, in particular, [Priceline's] Booking.com and Expedia."
Regardless, Hotelbeds, which could grow as much as 50% with the GTA and Tourico acquisitions, also continues to expand organically by offering transfers and other in-destination services.
Additionally, some analysts expect hotel-room demand to plateau after years of growth. For that reason, bed banks, which along with OTAs grew substantially in the early 2000s as hotels sought to unload inventory in the wake of 9/11 and ensuing economic downturn, may be poised for another boost in demand.
Following the GTA acquisition announcement, Phocuswright research analyst Dirk Rogl wrote, "Hotelbeds is expanding with business units for both transfers and activities and destination management in an effort to make them indispensable within the holiday destinations sector."
According to Henry Harteveldt, travel-industry analyst at Atmosphere Research Group, the bed banks sector "reflects the cycle."
"When demand is strong and hotels have more demand for rooms at higher price points, the tour operators and GTAs of the world are probably going to get less inventory than when times are soft."