The 2015 hotel negotiation season has been admittedly challenging for most buyers. Corporate customers are being required to keep travel cost increases mitigated in a year that is forecast to see an average 4.5% increase globally. Hotel brands are investing significant time and money in sales people, marketing and infrastructure to try and become the “brand of choice” to the premium paying corporate customer. In reality, customers are being faced with challenging supplier business approaches including an extraordinarily high percent of hotels declining to bid, first round rate increases at levels not before seen, mandatory 24-hour hotel cancellation policies and, most recently, brand bypass strategies on value added amenities.
Maximizing Bid Response
This seems to be the year of the “declining to bid” for corporate RFP’s. To date, Travel and Transport’s Partner Solutions Group has seen on average 8% of total hotels “declining to bid” in first round submissions. We do see definitive position differences by brand with a range anywhere between 0-15% on average.
To set yourself up for best bid responses, we recommend that corporate customers re-evaluate bid documents. Make sure that intelligence is robust enough to show the value of your spend in relation to what is important to the hotel to make a business decision on rate. Hotels rely on their day-of-week intelligence unless you provide data that they do not have access to.
is not always better.”
One night average length of stay Tuesday peak bookings are not going to give a corporate buyer maximum leverage. Instead, concentrate negotiations on markets where you have 2.5+ nights with Sunday or Wednesday arrivals.
First round rates are higher than ever before. An average of 7-10% is our new norm for first round bid expectation. This along with elimination of value-added amenities (i.e. breakfast, Wi-Fi, parking) sets up a corporate customer’s negotiation stage. Negotiation will require an in-depth knowledge of travel patterns and a willingness to negotiate at property and management company level.
Most corporate hotel negotiations are well within RFP negotiation stages, however, some are complete and others have yet to be sent out. With that said, at the time of this publication, we are encountering some interesting market behavior in negotiated average weighted rate increases for 2015 vs. 2014.
What Makes a “Brand of Choice”?
What makes a hotel brand a “brand of choice” for corporate travel buyers? It certainly is not declining to bid, giving extraordinary rate increases and elimination of value adds – and it is not through channel by-pass.
You may be aware that one hotel chain recently announced that free Wi-Fi will be provided at full-service hotels for loyalty members who book directly through the hotel’s channels. In conversations Travel and Transport has had with our clients, many feel this goes against a managed travel programs’ goals regarding compliance and duty of care and questions the meaning of a true partnership.
The question for the corporate buyer: “What is the cost of a direct booking?”
More questions to ask:
- Are you getting the best rate?How good are lowest rate guarantees if the only source of comparison is the hotel brand’s website?
- Are you losing control? If your travelers book direct, how will you know? More importantly, how can you ensure they are booking your preferred suppliers and staying within policy?
- Are you degrading the quality of your purchasing data?
- What is the cost of having a productive employee call a hotel direct or have to maintain yet another booking profile?
- What are the risk implications? Do you know where your travelers are staying? If not, how do you manage natural or geo-political disasters?
Strategies and Recommendations
Travel and Transport suggests buyers consider various strategies in order to minimize risk of losing savings on lodging expense:
- Negotiate complimentary internet in your rate code on a hotel-by-hotel basis.
- Encourage travelers to obtain their internet access through a company phone plan (i.e. tether your laptop / tablet to mobile device).
- Reconsider your preferred vendors. The only way to change supplier behavior is to discontinue use of the supplier.
When we look to the hotel industry for reaction, early indicators are that there is limited interest in following this bypass initiative. We applaud these corporate business-minded brands. Travel and Transport suggests that our suppliers look to customers and use this opportunity to shift share to their brands.
Travel and Transport’s Partner Solutions Group is dedicated to providing our clients with consulting services and expert guidance in the air, car rental and hotel sectors. We are prepared to help you navigate through challenging issues such as these. Contact us today to learn more.