The corporate travel industry is in constant flux as emerging technologies influence traditional, often inefficient practices. One area of corporate travel that offers major opportunity for reinvention is how travel buyers manage their hotel spend.
Hotels have traditionally competed for corporate business through a time-consuming, unwieldy request-for-proposal process followed by negotiations, typically taking place on an annual basis. However, this practice is becoming increasingly outdated as the market shifts. More and more, travel buyers are moving beyond the once-a-year RFP process. Instead, they’re approaching their hotel management spend through ongoing analysis and review—which means taking action and making adjustments year-round.
It makes sense. Fast-moving technology developments and the ever-expanding amount of data available to suppliers, corporate travel managers and travelers themselves are making rates and inventory much more transparent than ever before. And as business travelers increasingly expect the experiences they have on their business trips to mirror those that they have on their leisure trips, traveler demands are changing.
Fluctuating rates are having an effect as well. It’s not uncommon for rates at a single hotel property to now change on a daily or hourly basis. Meanwhile, the rates of different markets around the world change significantly from month to month and year to year. Some markets are trending upward, while others are trending downward or staying flat. According to travel consultancy Advito, New York, Paris and Houston all saw rates fall between 2016 and 2017, while Shanghai and Beijing both saw rates jump. Suppliers have the advantage in some markets, while buyers have the advantage in others. And just because hotel rates in a specific market are staying steady now doesn’t necessarily mean this will continue in the following cycle. Buyers who pay attention to these fluctuations are likely to have an advantage in the market.
The increasing number of mergers in the hotel space is also playing a role in program management. 2016 saw a handful of major chain consolidations which are expected to impact upcoming negotiations—the merger between Marriott and Starwood Hotels and Resorts being the largest. Other consolidations, whether larger or smaller, are likely to take place in the future. To avoid being caught off-guard, buyers should already be thinking about how these mergers are likely to affect their hotel program and how they plan on addressing these changes.
Major hotel suppliers will also continue to apply sophisticated yield management techniques to maximize revenue and control inventory. For example, Marriott recently changed its cancellation policy from 24 hours to 48 hours prior to scheduled arrival. As Marwan Batrouni, Vice President, Global Hotel Strategy, at BCD Travel explains, “These new yield management techniques mean that on average, booked rates are starting to trend higher than negotiated preferred rates. This is one of several challenges corporate travel managers have to deal with as they manage the hotel spend category.”
After looking at such changes in the hotel space, it’s not difficult to see why traditional program management is no longer enough. Batrouni advises, “In order to better manage the hotel category, it’s essential to scrutinize the performance of your hotel program by tracking key performance indicators and monitoring supplier performance through constant audits.”
The new reality of today’s hotel sourcing market requires travel buyers to identify new opportunities, such as low rates and new supplier strategies, as well as red flags, such as low availability and changes in the competitiveness of rates in each market. By making year-round, market fluctuation-resistant adjustments, travel buyers will be poised to increase compliance, optimize spend, drive savings and improve traveler satisfaction.
This article was created collaboratively by SkiftX and BCD Travel, a global leader in comprehensive hotel program management, from sourcing and booking to compliance and traveler satisfaction. To learn more, visit BCD Travel.