There are a lot more options in sourcing accommodations – and a lot more challenges
Artificial intelligence, chatbots, data analytics, continuous sourcing, global connectivity, dynamic pricing, outsourcing…
Corporate hotel programs have often been criticized as stagnant and unchanging – not responsive to a rapidly changing industry. But that contention is being challenged with rapid-fire innovations like these and others yet on the horizon, disrupting the landscape.
While some may have hoped for some single seismic shift, this multitude of targeted transformations is painting a new picture of what a hotel program is. But to put these innovations in context, first start with a quick overview of where the hotel industry is and how that is affecting relationships with corporate clients.
The most obvious headline is that lodging is doing just fine, thank you. In fact, Lukasz Dabrowski, senior vice president of hotel solutions for HRS, says corporate programs will be challenged to keep hotel costs from rising too much in 2019. Blockbuster industry growth in the last two years is resulting in overall global spend rising 5.8 percent in 2017 and a “stunning” 7.1 percent this year, he notes, and with limited new supply coming online in many top business city centers.
That has driven travel managers, says Dabrowski, to look to alternative lodging like sharing and corporate apartments. It also means larger chains are being firmer in negotiations and slower to confirm flexible options (like same-day cancellations). In turn, buyers are reacting with a mix of program analysis, finding opportunities in the data and a welcome expansion of sourcing options.
Scott Brennan, chief growth officer for RoomIt by CWT, says hotel consolidation (Marriott/Starwood, AccorHotels/ FRHI, etc.) is creating an increase of hotel volume thresholds for bids, supported by demand growing faster than hotel inventory. Hotels are asking for more room nights from the client in order to participate in a hotel program.
The many recent acquisitions, says Brennan, have given hotels power to demand fixed negotiated rates causing travel programs with low volumes to be cut out of such negotiations.AI, Chatbots & More
Of course, technology frequently leads the way in innovation. Virginie Pouget, head of global consulting for Egencia, says data analytics and accurate metrics reporting now play an important role in helping travel managers understand the success of their current hotel programs, identify areas that need improvement and provide leverage when they enter into future negotiations with their hotel partners.
This summer, the company released the Egencia Analytics Studio, which allows travel managers to assess hotel spend, negotiated savings, missed savings and other metrics to analyze the effectiveness of their hotel program – and optimize it accordingly. A consulting team also provides program updates to top management through data dashboards and visual reports showing their current program’s performance with relevant metrics, as well as traveler expense data.
In addition, Egencia will soon be introducing a hotel chat feature accessible through the Egencia mobile app that will allow business travelers to chat directly with hotel property representatives. The product is the result of a partnership with Expedia Group PartnerCentral.
The movement toward increased rate accuracy, notes Dabrowski, has spawned automated services that review live rates in self-booking and other channels, finally bridging the gap between negotiation and point-of-sale. A 2017 study from GBTA found 17 percent of rates in live shopping channels are wrong; HRS has seen average error rates of 20 to 25 percent.
Beyond rate auditing, says Dabrowski, HRS’s new Rate Filter, introduced in August, “takes this conversation to a new place by preventing erroneous rates from even getting into shopping channels.”
In addition, the impact of artificial intelligence advances by the quarter. Machine learning helps drive faster delivery of hotel options that are both traveler-preferred and within policy. When personalization of technology can be married to policy compliance, Dabrowski says, “you’ve got the seedlings of huge gains in preferred hotel usage.”
And as aggregator content is admitted to the client’s booking tools, Brennan says hotels will need to make sure negotiated rates are loaded, available and are competitive. Powerful data consolidation tools are now available offering more accurate spend data, empowering travel managers during negotiations.New Pricing & Sourcing Models
While it has been a goal for years, dynamic pricing is becoming more mainstream as technologies make it increasingly viable. William Sarcona, assistant general manager for KIE/Kintetsu, says his TMC is seeing more and more hotels shifting to dynamic rates (a discount off the best available rate). However, he cautions, this does not necessarily mean an end to traditional negotiated rates; while they will undoubtedly be a smaller piece of a typical corporate hotel program, negotiated rates continue to provide the best price in clients’ most frequently-booked cities.
Brennan agrees buyers should expect more dynamic pricing and an increase in local negotiations. As a result, he says, they should utilize their TMC’s extensive resources for data collection, analytics and negotiations. Understanding the hotel inventory in a managed travel program is key, he says, as this can influence and reduce the efforts put into negotiations and program management.
Another major change, according to Dabrowski, is the advent of continuous sourcing. As companies go through constant cycles of M&A and expansion, programs are increasingly moving from the traditional once-a-year RFP scenario. “It’s hard to live with a fixed annual program given how quickly traveling priorities can change,” he says, “and the missed opportunities for savings can be tremendous.”
It’s long past the time when it was sufficient to put together an annual hotel program, stick it in a drawer and forget about it. And even periodic monitoring has now evolved to continuous monitoring; regular oversight of program performance is necessary to ensure projected savings and other annual goals will be met.
By monitoring regularly, Pouget says, managers can easily identify areas that need to be addressed immediately or improved over time, as well as move forward negotiations with current and new partnerships.Global Goes Regional
As travel programs grow more global, the need to have coverage on the ground everywhere becomes increasingly critical. Dabrowski says HRS is seeing more opportunities attached to exploring the regional opportunities from within. Clients who are considering expansion into a particular region – especially in Asia-Pacific – are engaging with his company far earlier than in the past. This gives them a sense of the realities on the ground with chains they work with on other continents, and with business-grade independent properties that may offer compelling pricing, the right locations, etc.
These travel managers, he says, find it’s worthwhile to regionalize and outsource to competent local expert teams working within a global setup from inside the markets.Straight to the Source(s)
While hotel companies might be consolidating, that is not the case with booking channels and sourcing options, which have exploded. As a result, it’s become a priority to streamline hotel programs, and innovation is playing a large part.
For example, Pouget says Egencia is exploring a tiered destination approach to provide best available rates in key markets, as well as secondary and tertiary markets. In addition, she says, the company is negotiating multi-year deals with suppliers, leveraging Expedia Group content and offering clients specific deals.
Travel managers who work with hotel partners that offer a global footprint and a wide breadth of brands find globalizing the program streamlines the process, according to Carol Lynch, vice president of global sales for Wyndham Hotels & Resorts. She points out the approach provides more opportunity to think strategically about partnerships and smart spending. “It helps with consistency, soup-to-nuts: booking process, brand experience for travelers, duty of care, payments and so forth,” says Lynch.Keeping Travelers Happy
With the recent trend toward traveler satisfaction, it’s not surprising to find some of the more innovative initiatives in this arena – and they frequently involve loyalty incentives. Derek DeCross, senior vice president of global sales for IHG, says loyalty programs are a key component of business travel. So the hotel group is developing programs within their IHG Rewards Club and IHG Business Rewards to make it easier for business to business customers to use the power of traveler loyalty to drive behavior that supports their program goals.
One example, says DeCross, is enabling business travelers to participate in promotions through the company’s preferred booking method. IHG is also using campaigns with the kind of B2B offers that travelers are looking for – like sought-after tiers, with benefits such as free room upgrades and late check out, or through point multipliers.
Innovation has expanded loyalty programs beyond the big brands. Brennan says RoomIt by CWT introduced its Loyalty Booster points and miles program earlier this year and it has delivered up to a 12 percent increase in the hotel attachment rate.
This is important, he says, because booking direct with a hotel does not allow corporate travel managers to locate and contact travelers in case of emergency, track spending in a consolidated way, or negotiate rates based on volume. “And considering that globally, three in ten business travelers are happy to sacrifice safety for hotel loyalty and rewards incentives,” says Brennan, “it’s a pretty obvious way to increase in-program bookings.”
Furthermore, although travelers are often loyal to their points programs, there is huge value to incorporating smaller boutique brands that don’t have the overhead of a major chain, according to Jennifer Dzialo, vice president corporate land product Americas, at FCM, which is part of Flight Centre Travel Group.
If travelers are very brand loyal, Dzialo cautions travel managers to work with their TMCs to make sure it is the best brand for their overall program. It’s distinctly possible that points are luring travelers to more expensive properties. And she says, there are plenty of ways to get travelers to switch loyalty programs with minimal disruption.Small is Bountiful
New technologies are offering better hotel options to those with fewer resources – like small and medium-sized businesses. For example, the new IHG Business Edge launched in August, was built for small to medium sized companies and piloted with 300 companies across 17 countries.
Since then, DeCross says over 1,500 companies have signed up to get benefits that include discounted rates, elite status after travelers complete their first stay and an administrator’s portal to monitor such data as hotel spend, room nights, average daily rate, savings and IHG Rewards Club participation over the previous 12 months.But Relationships Still Matter
Even with all this innovation, relationships should remain key to any hotel program – meaning travel managers would be wise to focus on those properties most important to them.
Gino Engels, chief commercial officer at OTA Insight, a consultancy, cautions that with increased transparency, rates from every channel are being made known across platforms. What used to be a one-to-one relationship is now threatened because hotels do not know where the guest is booking, so it’s hard to sustain a relationship.
In the face of that new reality, Engels says, “travel managers should know their clients and be able to bring a personal touch as even mega-agencies like booking.com are trying to do.”
Travel managers will be reducing the number of properties they have in hotel programs and drive business to their “serious partners,” says Gus Vonderheide, vice president of global sales for Hyatt. A more strategic approach to property selection means travel managers will be looking for more opportunities to engage with top partners down the road.
And Brennan says RoomIt continues to see the most value and savings being driven by the high-volume hotels in customer hotel programs. Suppliers are in control right now, he notes, and may offer buyers less rate negotiation. As a result, travel managers should focus their programs on markets with at least 150-plus room nights and allow the other markets to be covered by their chain and/or agency discounts, if applicable.
Bottom line: Stay on top of the changes but don’t forget the one thing that never changes: Connections count.