Getting an effective hotel program requires short-term planning, long-term vision and robust program auditing
Travel managers have been through the ringer over the past several years. Economic turmoil, technology advances, new hotel products and an explosion of communication channels, among other things, have kept the business travel eco-system swirling at full speed.
In a perfect world, you choose the right hotels that meet your traveler’s needs, skillfully negotiate the lowest rate with the most value adds and voilà, fait accompli!
Too bad the words ‘perfect’ and ‘hotel program’ don’t belong in the same sentence.
In 2015, with hotel rates climbing faster than budgets, success will be harder to define but critically important to achieve in order to demonstrate the benefits of a managed travel program.
“The value of a managed hotel program is dependent upon travelers utilizing the hotels in the hotel program at the rates negotiated. This begins with making sure that the travel manager understands the needs of the traveler and which hotels are being utilized,” explains Robert Peper, Jr. president of Lodging Logistics. “Presumably, by this time of the year, the hotels have been solicited, terms solidified, agreements set and the rates have been loaded for sale. For the short-term, procurement’s job is done.”
However, Peper says at that point the work really has only begun. “Once the negotiations are complete and rates have been loaded and verified, it’s important to continually monitor the bookings to ensure the travelers are booking the preferred hotels, that the hotels have rooms available and that the negotiated rates are available. Patterns should be analyzed and follow-up done on a regular basis with the travelers and/or hotels when issues are identified. It’s not good enough to just negotiate rates with hotels,” he adds. “Travel managers need sophisticated systems to analyze their traveler and hotel behavior throughout the year.”
Robert Langsfeld, partner with The Corporate Solutions Group agrees: “The travel manager needs to take a multi-faceted, 360-degree approach to ensure that their negotiated hotel program is completed, properly loaded into the various systems, has corporate oversight and is independently audited for compliance throughout the year. Hotels and travel management companies may conduct their own internal audits. However they’re not independent since they are providing the services and bookings in the first place.”
Hitting the Audit Trail
The auditing process is as simple or as complicated as your hotel program. Some variables to consider in determining the extent of your auditing efforts include the number of hotels in the program, the number of hotel brands included, the rate types, what value-adds were agreed upon and how many steps, either automated or manual, it takes to get the negotiated rate to the end user.
Once you determine how much and what type of auditing is necessary, consider what resources, both human and technological, are available and at what cost. If your program includes primarily major chains in large cities with clean rates, no value-adds, an online booking tool, well trained travelers and an effective expense reporting system, the process can be pretty simple. No surprise, the more complicated the program, the more complicated the auditing process.
If your staff is stretched to the limits, there are companies that offer a variety of auditing tools and solutions to fit any size program. If outsourcing the auditing process isn’t in the budget this year, start tracking potential savings so you can make the case next year.
No matter what, if you haven’t done so already, get educated on loading rates and the technology involved so you can identify vulnerable areas and direct resources appropriately. Ask your hotel representative to describe exactly how the loading is done for their specific property or chain.
Pay particular attention to the number of steps involved. Each step presents an opportunity for human error or, in some cases, rate manipulation. Do the same with your travel management company, if you have one, to make sure they are selling the right hotels at the right rates which were negotiated.
According to Langsfeld, “Our audits have found that occasionally TMC agents, either with or without management knowledge, bias their selection or actual property based on incentives, rewards, such as money, travel, bonds, direct checks paid to them and so on.”
If the hotel’s loading process is manual and done at the property level, conduct frequent audits both on the booking and back end to ensure rate integrity. The more human touch points, the more chance for error. Training issues, staff turnover, antiquated systems, Murphy’s Law – you get the picture.
Although the exception and not the rule, dishonest business practices, fraud and cheating are unfortunate realities in business at every level; from hotel staff to travel agents to the corporate travelers themselves. The auditing process catches honest mistakes and dishonest mistakes equally well.
No matter the size or management of the hotel, if the rate doesn’t show up in the GDS, the rate can’t be booked. “To ensure proper viewership, the hotel must open up the agency pseudo city code, PCC, for the company’s rate access code,” Peper explains. “Until this step is done, agents and the online booking tool if applicable; will not have access to the company rates.” He suggests making a test booking in each GDS to verify the correct rates are viewable.
The auditors at Lodging Logistics regularly find easily correctable errors in rate loading, he notes. “The most common error we see in conducting audits is not opening up rate viewership for each agency that needs access to the rates. Sometimes the wrong rate code is used. In Sabre, the rate description used by the chain in referencing the negotiated rate might make it difficult for the agent to recognize the rate.”
The Devil’s in the Details
Most major hotel chains offer state-of-the-art technology and accountability in the rate loading process. For example, at Marriott International, the process of loading corporate negotiated rates is automatic and seamless from RFP to live booking. This automation is actually a selling tool since the opportunity for error is significantly reduced, an important benefit to travel managers. For Marriott, the RFP is completed, agreed to, locked down and fed directly into the appropriate GDS systems. Once locked down, no unauthorized changes can be made to the rate.
That said, CSG’s Langsfeld points out a key issue to keep in mind, “I have seen evidence that sometimes DOS folks may change or drop rates for performance, either perceived or real.”
If your hotel rates are tied to a quarterly volume commitment, you may or may not get a courtesy call from the hotel informing you of a rate change. If your travelers are out of compliance, your volume gets diluted, you don’t meet your volume commitment and rates go up. Don’t just file your hotel’s monthly production reports, study them so you can identify trends and make adjustments proactively.
“The devil’s in the details” must have originated in the travel industry. Different rates for different room types and locally negotiated value-adds like parking or Internet are some of the curve balls your auditing program must address, and potentially very hard to track.
Once upon a time, hotels offered a standard or “run of the house” (ROH) rate and an upgrade or concierge rate, maybe $20 or $30 higher than the negotiated rate. To save money and to help keep travelers from perhaps treating themselves to an unnecessary upgrade, many travel managers limit the bids to ROH room types only.
Langsfeld supports this strategy: “The best rate is ROH…period. Using upgrades as a negotiated alternative is fraught with problems and difficult to enforce. Keep it simple and don’t open up the selection to higher cost when lower, acceptable costs are available.”
On the other hand, depending on the market, revenue managers will tell you that if you can get a discounted rate on a premium room type, go for it. Toby Valdez, former revenue manager and current director of sales for the Residence Inn Capitol Park in Sacramento, CA, explains how his inventory works.
“We have different room pools and a variety of room types. If a company has a negotiated rate that only applies to our studio king, a ‘standard’ room type, and those rooms are sold out, there’s no discounted alternative available for them. They can either go back to their search or pay the best available rate, BAR, for the upgraded room type.”
However, good luck negotiating a special rate for a premium room type in a high demand market; it’s become the exception not the rule in the current environment. Hotel revenue managers are reluctant to offer discounts on premium room types since they are guaranteed a better rate selling that room at BAR.
From Valdez’s perspective, if you can negotiate a premium rate, do it and consider it a win. There’s savings in the long run and you’ve driven volume into your preferred hotel.
Valdez also points out that if the hotel is a “group house” – a meeting and convention hotel – those contracts are generally written with the majority of rooms committed at ROH rates. If the hotel has 100 ROH rooms and a group contracts 75, that only leaves a fraction for corporate negotiated accounts; something to consider particularly in city-center locations. Ask your sales representative to share their property’s group to transient room ratio and use that to determine a course of actions in rate negotiation.
In addition to the correct rate, locally negotiated value-adds are probably the most difficult piece of your program to audit because it’s all about the people and not the technology. Both the traveler and the individual hotel staff need to be educated on which extras are included in the corporate negotiated rate. Your TMC needs to be in the groove as well.
Your auditing efforts, either internal or through an independent audit company, will help identify lapses in communication at the corporate, TMC or hotel level and make sure your travelers get what they pay for.
Finally, you need to audit the strength of your relationships with your hotel partners. As the rate loading process becomes more and more automated, the need for human interaction is less necessary but just as valuable.
“We sit down with our key corporate accounts regularly, either formally or informally over lunch, and share information,” explains Residence Inn’s Valdez. “If they have a project ramping up in our area, we want to know that so we can make any necessary adjustments beforehand. If our forecast shows area compression or limited availability over an extended period of time, we talk about it. Changes or additions to their program are proactive, not reactive.”
Your supplier’s sales representatives are your eyes and ears at the property and should be able to help identify issues that might arise before your quarterly audit or year-end review. Instead of being blind-sided by a rate increase due to lack of volume, you and your hotel partner can review the numbers, ask questions, and develop a strategy to help both the hotel and your program be successful. Your sales representative has a vested interest in ensuring your success and satisfaction, so aligning yourself with your key on-site sales representatives or property coordinators should be a priority.
Audits are an absolutely critical part of a well-managed hotel program. Data, data, data is the mantra in business these days and the more prepared you are, the better. If you don’t know where to start, consider enlisting a third party auditor to help you evaluate your program, identify your liabilities and develop a cost versus savings analysis.
No matter how big or small your travel program is, your travelers are entitled to the rates and concessions you negotiated and it’s up to you, in the long-term, to ensure they receive them. Mistakes happen, whether by human error, lack of communication or deliberate manipulation; catching and correcting those mistakes is an essential function of the travel department.