More companies are opting for dynamic and not static pricing because there's little risk of rates getting back to 2019's highs this year. Are airfares next?
Dell is now booking all of its rooms based on dynamic pricing, as previously contracted rates have become obsolete in the wake of the pandemic.
More large organizations are being tipped to follow the move, with hotel prices expected to be a lot lower compared to 2019 levels — but for how long remains to be seen.
Traditionally, corporate travel managers will agree on set, or “static,” rates with hotels, with negotiations based largely on the number of employees that are expected to stay there. The higher the volume, the lower the rate, as a rule. These negotiations can take time, with the annual request-for-proposal process lasting up to six to nine months.
Now dynamic rates are in vogue: For the travel manager, these are the hotel’s best available rates with an agreed percentage discount.
The Dynamic Switch
“We have slowly been moving away from the traditional request-for-proposal process for quite some time,” said Shannon Blando, global category manager, travel, at Dell. “Before Covid, our program was probably 80 percent dynamic.”
But now Dell is all-in with around 100 percent of its hotel pricing obtained dynamically.
During the pandemic, Dell shifted all of its static rates over to this more modern method. “The rates dropped so rapidly that our static rates no longer made sense for us,” she added, speaking at an online event on Tuesday.
However, with hotel occupancies edging up in some recovering countries, there are questions over how long this dynamic approach will last. Will 2022’s hotel rates revert back to the high prices in 2019?
It’s hard to tell, and for Blando it’s the biggest challenge. As she’s in a procurement role, Blando said she was judged on cost savings. “How can you forecast travel into next year, or three years?” she said.
Dell will be watching rates closely, and if travel does resume to a significant volume, she admitted it could make sense to revert to locking back in static rates at some properties.
Dell uses re-shopping platform TripBam to help it dynamically source rates from a range of properties. Re-shopping tools allow travel managers to book a room, or flight, but then automatically rebook it if that price drops.
TripBam founder and CEO Steve Reynolds said larger companies have migrated to “a dynamic, continuous sourcing environment.”
In the short term, though, he said some companies will slide back to static rates. His advice for travel managers in that interim period is to simply talk to hotels directly.
“You’ve just got to go at the property level, because they’re the ones that will want your business, even if it is half of what you potentially do on 2019 levels,” said Reynolds, also speaking at the event. “Deal with individuals that are actually in the hotel, and you’re going to have much better results. Send bids direct to the property, not through a hotel account manager.”
“Continuous sourcing” is the logical procurement response to dynamic prices being offered. Now TripBam is ramping up to help company travel managers counter the growing trend of dynamic, or continuous, pricing that’s spreading to aviation.
Airline rates, like hotel rates, are also prone to fluctuations. But these fluctuations will become more extreme as airlines develop new pricing techniques, partly to recoup losses that have mounted over the past 18 months.
Continuous pricing is also made possible by using the so-called New Distribution Capability. Lufthansa debuted its version in October last year, and its top distribution executive told Skift it would boost revenue for airlines and agencies alike.
Emirates is also onboard. “Part of our strategy is to have more dynamic pricing, with fares changing quite rapidly in response to market requirements on a daily basis,” Adnan Abdul Fattah Kazim, its chief commercial officer, told Skift in April.
TripBam is developing a platform for travel buyers to keep track, and re-shop if necessary these fluctuating airfares.
“As we get into air, as we start digging into the data, as we start seeing the issues around contract availability, and market share measurement, and some of the other craziness in the air space, continuous sourcing is something else we’ll be looking at as well,” Reynolds said.
Last month Tim Nichols, global supplier leader for travel, meetings and events at accountancy company EY, left to become TripBam’s new vice president of air solutions. He’s tasked with leading the rollout of its new solutions in the air category.
“I don’t think we’re going to have it there from day one, but if we can disrupt the sourcing process to make it easier for buyers, and give buyers the confidence that they’re getting the deals as promised, that’s where we’ll go,” he added.
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Photo credit: Dell has slowly been moving away from using request-for-proposals to set hotel rates. Pictured is the Dell presence at CES 2020. Dell