Making sure your lodging program is getting everything you’ve negotiated is arduous work
Travel buyers frequently compare negotiating hotel rates to visiting the dentist. Sometimes the time spent in the chair is worth it. But often you end up going back for a root canal.
That may be an exaggeration, but despite the best efforts by travel managers, negotiated rates are not booked consistently – some reports put compliance as low as about 60 percent. Such results can be both frustrating and costly.
Even getting a true handle on compliance rates can pose challenges. In fact the 60 percent figure can actually be a bit misleading depending on how you define compliance, says Eric Jongeling, director, CWT Solutions Group.
When including chain-wide deals in the calculation, Jongeling reports that his company often sees 80 to 85 percent compliance. By comparison hotel coverage (meaning that a traveler had an option to book a preferred hotel in a given city) falls between 90 and 95 percent.
"That means five to ten percent of non-compliant bookings are likely because there wasn’t an available company-preferred hotel, most often due to limited company room nights in that particular city," he says. The remaining 10 to 20 percent can be attributed to a variety of factors, including lack of availability or proximity to the office being visited, local deals that aren’t part of the global program and traveler choice of a preferred chain or specific property.
Whatever the more accurate rate, business travelers sometimes fail to book the negotiated rate even though it has been presented to them during the booking process.
“This can potentially occur for a number of reasons, including a particular desired room type that isn’t under the negotiated program, loyalty components, and a lack of awareness of the myriad of rates made available at the time of booking,” says James Filsinger, CEO of Yapta.
Employees may also book outside the approved corporate booking process to earn loyalty points or under the thinking – likely mistaken – that they can get better rates directly.
More controversial, and perhaps most problematic, are decisions made at individual properties that run counter to previously agreed-upon terms. “Hotels often turn off discounts at the property level,” says Steve Reynolds, CEO of Tripbam. “That’s not the way it’s supposed to happen, but it’s a reality.”
Even though travel managers may spend months negotiating the RFP and last room availability for contracted rates, Filsinger explains, not everything always goes according to plan. “The hoteliers can modify their definition of general inventory to reduce the availability of those while still operating with the buyer/supplier contract.”
Other factors include errors in rate loading, both into GDS and online booking channels. When this unfortunate scenario happens travelers and agents sometimes are not even shopping the correct rate options.
Rate availability issues may also enter into in the mix. “There’s no point in negotiating a great hotel program if rates happen to be unavailable beyond reasonable levels,” advises Lukasz Dabrowski, senior vice president of HRS. “This is when the yield tactics of hotels can be careless, potentially affecting long-term corporate relationships in the name of a short-term revenue win.”
He adds that even though rate auditing tools have progressed in recent years, far too many programs aren’t taking advantage of newer automation to check the accuracy of their rates more frequently.
At the same time, the set-up of the technology that a corporation uses to book negotiated hotel rates can also affect compliance in a classic “Catch-22” scenario. “There are some critical factors there, mainly around how a program’s preferred hotels are ranked and displayed,” Dabrowski says. “It’s another reason to think of the process more holistically.”Boosting Compliance
How can travel buyers get better results from the agreements reached with hotels? The number one priority should be auditing the rate loading to make sure rates are available, says Veronique Lescaut, VP sales for APAC at RoomIt by CWT.
Other steps Lescaut advises include making random checks of rates on a continuous basis, evaluating whether it’s really necessary to negotiate last room availability (LRA) on the rate, and supplementing your negotiated rates with other rate types.
"We also recommend,” Jongeling says, “rate availability audits to ensure rates are available for future dates. Further, we track and compare actual bookings and measure against the negotiated rate to ensure missed savings remain low.”
Occasional monitoring is not enough to be effective, according to Dabrowski. He suggests leveraging automated rate auditing tools on a more frequent basis. “Once or twice a year is no longer adequate,” he says. “Travel managers should push their TMC or other lodging supplier to conduct audits monthly at the least.”
More programs are utilizing dynamic or continuous sourcing across the year, he adds, updating their own volume and projections and cross-referencing that with benchmarking in key markets. His company’s clients, for example, now increasingly use eight-week sourcing cycles that leverage automation and on-the-ground intelligence to ensure programs can take advantage of local rate fluctuation, new inventory coming online and other factors.
Reynolds agrees that close monitoring is key to a successful program, as are insights into rate variances. Tripbam’s system searches for rate changes and captures the lowest rate a traveler would have paid for the same room and amenities. With this rate as a benchmark, strong or weak negotiated discounts are identified, and overall hotel program savings and ROI are determined.
Tripbam also measures how often negotiated discounts aren't available and how often LRA rates are not being honored. And traveler behavior is also identified through automatic notification whenever a traveler receives a booking confirmation from a hotel.
Many Sources, One TruthFrom the hotel perspective, a flexible approach may offer advantages. “Travel programs have traditionally relied on one model, but we believe a one-size-fits-all does not provide the most value,” says Gus Vonderheide, vice president, global sales at Hyatt.
To that end, Vonderheide says Hyatt works closely with key accounts to implement a dynamic pricing model in which hotel rates are based on relevant factors rather than a static price. For example, if a customer’s employees are traveling during a slower season, rates will adjust to reflect that factor.
Fortunately, travel buyers have access to increasingly sophisticated tools for dealing with rate compliance. “Data aggregation and reporting tools have become more important than ever,” says Matthew Patterson, vice president of client relationship management for Advito.
As the industry increases in complexity, having “one source of truth” is now more a necessity, Patterson says, not just a “nice to have.” That means integrating multiple data sources – TMC, credit card, supplier, expense, and other third-party data – and securing access to clear and concise reporting.
The information must be tied back to corporate objectives and key performance indicators such as true cost of trip, preferred supplier compliance and preferred rate availability. “This will allow program managers to have deeper visibility into corporate travel spend,” Patterson explains. “It can also guide sourcing strategy and supplier relationship management activities.”
Jongeling notes that CWT Solutions Group offers hotel compliance reporting down to a traveler level. Reports can easily identify cities or hotels with significant room nights that may warrant inclusion in the preferred hotel program, identify hotels that are not being utilized by travelers, and also identify travelers that are consistently non-compliant. "The most important part of this effort is taking action on the insights, whether that means adding or removing properties or communicating and/or educating travelers on the benefits of using preferred hotels."
Despite the importance of effective reporting tools, ensuring their availability is only the beginning toward achieving program goals, according to Dabrowski. “Having access to the best reporting tools can far too often result in nothing but frustration,” he says. “It’s about the ability to act upon what the reporting details that makes the real difference.”Fostering Trust
Along with making full use of technology, travel programs should be supported by people on the ground in key cities. Beyond that, the importance of solid working relationships on both sides of the negotiating table is another critical element in program success.
Both parties should commit to a transparent approach to buyer-supplier collaboration, Dabrowski says. Buyers should make better use of their booked data to make more accurate projections on room-night usage, and hotel suppliers need to run their own rate auditing processes to drive 100 percent rate fidelity. Preferred corporate clients should always have the rates and amenities they negotiated available to them, including last room availability.
As Jongeling advises, "Look for win/win opportunities such as adding new properties that hotel chains are trying to fill, and keep the lines of communication open."
In the process, Jongeling adds, use your own data in conjunction with market expectations and comparative customer benchmarks. That way, you can track if you expect a significant increase in room nights at a property, a rate reduction may be warranted. But you also need to deliver on your commitments.
Similarly, part of the process should regularly address supplier non-performance around rate availability or sharing traveler feedback with hotel partners. “Transparency and sharing long term strategies with one another go a long way,” Lescaut says. “That way you can work on solutions together and share end user feedback for learnings.”
Patterson also emphasizes openness. “Trust is built through transparency,” he says. “Having a full view of spend is the baseline for building and monitoring a successful buyer/supplier relationship.”
The reality is that the onus is not just on the supplier. Buyers must also be proactive in delivering on their the market share or revenue commitments. “If suppliers see that buyers are actively monitoring and influencing their travel program to support preferred partners, those suppliers are typically more aggressive in their pricing offer,” Patterson says.Facing Off
In any rate negotiations or follow-up discussion, the value of face-to-face communication should not be taken lightly or underestimated. “Even in today’s tech-heavy environment, there’s nothing better to develop a trusting relationship than to meet in person,” Filsinger says. “Relying solely on data, phone calls, or e-mail exchanges can lead to misunderstandings and unexpected divisions of trust.”
The personal touch might mean anything from an informal conversation to giving the travel partner the benefit of the doubt when a questionable issue arises. “Remember, you’re both working toward the same goal: Successful business endeavors that are driven by happy, healthy and safe travelers.”
Knowing what travelers want is also a necessity. Monitoring your traveler’s hotel reviews is a great way to understand the amenities and locations they seek, according to Lescaut.
In addition a commitment to choice can go a long way. “Understand the value of offering choice in your program,” she says. “Give your travelers ample rooms and rates to choose from so they don’t have to worry about availability, and so they can easily comply by booking in-channel without shopping around.”
The same goes for keeping employees informed. “Don’t worry about over-communication,” Lescaut says. She also suggests offering loyalty promotions within your booking channels so travelers don’t feel the need to book direct in order to earn their points.
Hotel compliance can bring substantial benefits in savings, security and traveler experience, Jongeling says. Yet most travelers are unaware of all of the terms negotiated with preferred hotels such as included amenities, security vetting or beneficial cancellation policies that can directly affect not only savings but also traveler experience. "Helping your frequent travelers understand these benefits is imperative to creating a successful hotel program."