RFP RIP – that’s how Andrew Menkes, senior vice president-global client solutions at BCD Travel, recently characterized the traditional hotel negotiating platform during a talk at an Association of Corporate Travel Executives event. It’s a sentiment that has been expressed or at least hoped for by many travel managers for years.

However, there is no question that technology, market changes and other forces are slowly transforming the traditional RFP process – that months-long back and forth with individual properties dreaded by many travel buyers. And that was only the beginning of the process as managers sought to learn whether these negotiated rates were loaded and – more importantly, available – often with limited success.

Some, like Tyler Morse, CEO of MCR Development, a hotel operator who recently opened the much-ballyhooed TWA Hotel at John F. Kennedy International Airport in New York, think the RFP process will remain because “the strongest force in business is inertia.” He says as long as the economy is strong and hotels are “fat and happy,” change will be difficult.

For now, RFP’s remain the “beating heart” of a hotel program, as Suzanne Neufang, senior vice president-Americas for HRS, the hotel solutions company, puts it. To not negotiate them, she says, “leaves a lot of money on the table.”

That’s not to say there isn’t room for great improvement. In fact, says Neufang, HRS has begun moving clients to an eight-week negotiation period – eliminating much of the annual back and forth between buyers and hotels. This compression, she says, will be the “new normal” this year.

According to Virginie Pouget, head of global consulting at Expedia, many clients default to requesting broad coverage for their program, “asking us to source a large number of hotels.” From an ROI perspective, she says, it’s often not worth the extra work it creates for travel managers. That’s why, she says, the Egencia Preferred Rates program was created where customers enjoy discounted rates and value-added perks.

Technology disruptors like Steve Reynolds, CEO of TripBAM, see more rapid changes. “The end of the RFP as we know it is approaching fairly quickly,” he says, partly because of technologies such as the one offered by his company. TripBAM is a solution which monitors changes in hotel rates and rebooks automatically when more attractive rates appear at the booked hotel or a comparable one nearby.

Reynolds is skeptical about the status quo, summing it up this way: “The RFP process today is, a buyer pretends to provide room nights to a supplier which pretends to provide a discount.” In reality, he says, most companies have very little ability to shift share and very few hotels will honor last room availability (LRA) as promised. TripBAM’s job as a technology provider, he says, “is to enable companies to truly deliver share and to grade hotel performance that identifies hotels performing well.”

Another technology innovator, James Filsinger, CEO of Yapta, says sophisticated data solutions have become increasingly available and provide transparency throughout the process. Yapta’s RoomIQ monitors rates and rebooks when better rates become available. He says this evolution is already unfolding in two ways: 1) focusing negotiations on targeted sourcing of properties and rate performance, and 2) the timing of the process – moving from point-in-time RFPs to continuous optimization.

Not Just About Rate
RFP’s have moved well beyond rates to issues like amenities, late check-in and checkout, club floor membership, just to mention a few. Menkes calls the formula for finding the right mix of rate, amenities and perks “grandma’s recipe.” He says it is possible to impute a dollar value to free WiFi or breakfast but a bit tougher to figure the value of early check-in and late checkout because those are so dependent on the individual situation.

It is critical for hotels to understand what travelers from the company value, says Eric Jongeling, director of the hotel solutions group-Americas at CWT. On the spectrum of price sensitivity vs. traveler experience, hotels need to recognize the corporate culture and travel goals in order to provide an experience designed to meet both the traveler’s and travel program’s objectives. A hotel program may include a hotel that has the best possible value, says Jongeling, but if travelers don’t stay at the property, there is no benefit to the hotel or the company.

Knowing the company beyond just its travel patterns has become key, agrees Gabe Rizzi, president of Travel Leaders Corporate. He says his TMC prefers not to work with “blind” RFPs. To really give a potential client the best idea of how to serve them, he says, “we need to know their needs, which a blind RFP doesn’t offer. We also like to strongly suggest that travelers need to be closely involved in the RFP process. Without travelers, how can a client even know what to ask?”

Fewer Hotels – Better Deals
The key word in any hotel program, says Menkes, is “optimize” – using as few hotels as is practical, which allows buyers to get the best deal. While that is a challenge in cities like New York and San Francisco where inventory is an issue, the fewer the hotels the better, a strategy which can yield a higher hotel attachment rate.

As Menkes puts it, if a travel manager can get an attachment rate from 60 percent up into the 70’s and 80’s, “they can go to the hotel reps and say ‘Look what I’ve done in managing employee behavior. I now qualify for better rates.’”

Consolidation is a good idea, agrees Jennifer Dzialo, vice president of land product-Americas for Flight Centre Travel Group. Rather than focusing on choice, she says, buyers should focus on benefits like upgrades, spa discounts, loyalty bonuses, etc. This both increases compliance and strengthens rate negotiations.

Of course, the issue is complex. Consolidation may be necessary to drive value, notes Cara Banasch, vice president of sales for Omni Hotels and Resorts, but there is still plenty of room in the equation for multiple hotel brands as companies have different travelers with different needs. Plus the client still wants to have some leverage with multiple brands.

When buyers spread travel spend across more than three suppliers, they lessen their buying power and impact their ability to get the best rate possible, explains Tamara Laster, head of corporate transient sales for IHG, which operates Holiday Inn and other brands. She says IHG has implemented a strategic pricing program based on consolidating spend in certain markets that have performance-based dynamic rates which have the ability to change based upon the delivery of revenue.

For years, says Laster, IHG has operated under the assumption that the only way to execute the RFP process is to negotiate individually with hotels through an account manager. However, the company will be implementing a program that allows negotiations to occur at the negotiation table and not in the system. Negotiating with “One IHG,” she says will give customers the ability to negotiate bundles with hotels and hotels will still have a say in the rates and amenities offered.

Getting Dynamic
The traditional process of negotiating deals annually, says Reynolds, is moving toward a much more dynamic, “always on” solution. In these scenarios deals are done year-round and poor performing hotels are replaced by better performing suppliers as needed.

The idea of a year-long static rate has long faced resistance and now verges on the extinct, according to some. Menkes explains he always views a corporate negotiated rate as “a ceiling.” If a travel manager gets a rate of $160 a night, that guarantees the traveler doesn’t pay more than $160. It’s incumbent on the manager, says Menkes, to audit the program through the year to ensure the rates are available and there is not a better alternative for a specific date.

Ideally a quarterly revisit should be scheduled but that is a difficult standard to maintain, Dzialo says. “In general, I would say it’s important to keep a watchful eye on your top markets because that is where you will find easy wins.”

Continually looking at such questions as “Are your contract rates performing for you?” and “How do your booked and contract rates compare to industry benchmarks?” throughout the year allows travel managers to make adjustments in any problem areas as soon as they arise, says Filsinger. This enables travel buyers to have more informed, real-time “partner” engagement with supplier partners rather than the annual “vendor” approach associated with the traditional RFP process.

In the course of a booked year destinations emerge that were not on the horizon during negotiations, says Neufang, so a constant refresher is called for. And a quarterly audit can identify more “white spots.” HRS continuously monitors all this, says Neufang, guaranteeing that companies get the volume discounts they deserve.

New Tech – For Better or Worse?
Clearly the debate will continue over issues like dynamic pricing and the use of technology. On the one hand, Banasch says while continuous sourcing is not optimal, seasonality and market demand can be addressed in RFPs. She cautions continuously revisiting terms within the year “will ultimately just push our industry towards more technology-based booking and pricing tools that may ultimately erode the individual client relationships and partnerships that we have had with our business travel and transient volume clientele.”

However, says Filsinger, imagine not having to set city caps, but instead using machine learning and vast data sets to automatically provide booking guidance based on relevant information at the point in time the traveler is making the reservation. Artificial intelligence, he says, “has the ability to take much of the manual work out of today’s process.”

The debate continues – as does the evolution of RFP’s.

BTE INSIGHT
A View from the C-Suite
Mark Hoplamazian, CEO of Hyatt Hotels & Resorts, speaking at the NYU Hospitality Investment Conference in June, said even with all the technology available and data being accumulated, personal relationships between hotel companies and corporate travel planners “have never been more important.”At the same conference, Keith Barr, CEO of InterContinental Hospitality Group, which operates Holiday Inns, InterContinental and 15 other brands, said the partnership with travel buyers was evolving. For instance, he said, many companies are asking about IHG’s approach toward sustainability as they sought partners with the same approach to that goal as they have.