When you want to travel, accommodation is key: you can either book directly with the hotel or through a travel agent. You would probably wonder if it's cheaper to book hotels directly or with a travel agent... The answer is below.
What Happens when you book Directly?
You will most likely go online, google and try to find the hotel contacts or website to inquire. This is what happens;
Hotels have two types of rates;
1. Rack Rates
2. Contract Rates.
Rack Rates is the "published rate," or "the maximum a property charges for a room; It is usually quoted to potential customers over the phone, email and it may be displayed at the hotel's reception or common areas. You may find these rates on the website as well.
The rack rates are usually higher than the agent Contract rates.
Contract rates are negotiated rates for travel agents. These rates are usually lower than Rack Rates because as an agent, you do not want to quote X amount for a client only for them to go to the hotel to find cheaper published rates hanging all over; you will be seen as "stealing" from the clients. Therefore, Agents will negotiate with the hotel and get a "special selling rate" to be able to do business. Sometimes the agent rates will be the same with the hotel rates you may find online or call to inquire.
SO HOW DO TRAVEL AGENTS MAKE MONEY?
By the virtue of being in the travel business, Hotels will provide lower rates to the travel agents and in addition offer a percentage commission for their profit. This is because, hotels in perspective of the travel agents, trades or expects to trade for a long term duration and for big numbers of clients.