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Travel 3rd January 2018 - 5 min read

Data drives year-round hotel program improvement

By Al Norman

There are three things we know about hotel programs in large corporations:

  • The annual hotel sourcing process is onerous and takes at least 4-5 months;
  • Once hotel sourcing is done, Travel Managers tend to leave the category alone until the next sourcing season; and
  • Up to 40% of hotel spend is not captured through the TMC (called hotel leakage), so it is challenging to get a complete picture of hotel activity.

Given this reality, are there efficiencies that can make hotel program management more effective, even enjoyable? Definitely. The answer is to use better data and automate the data analysis. Consolidated, accurate and timely hotel data can help answer the following 8 questions to support savings initiatives, ongoing supplier management and annual sourcing efforts.

How much do I spend and where?

The first challenge is understanding your total spend.  Most companies know what they spend through each TMC.  The challenge is building a complete view that includes TMC and direct supplier bookings by property, brand, city and average daily rate comparisons.  It is important to see this data for last week, last month and year to date.

Key spend analytics include:

  • Total spend by property –Normalise and link specific hotel property spend across TMC, Card and Expense data
  • Total Chain and Brand spending — Link hotel properties to their chains and brand to manage suppliers
  • Spend in Preferred and non-Preferred properties overall and by city.
  • Spend by Business Unit hierarchy and by traveller
  • Short term rental spend such as Airbnb and VRBO
  • Spend by class of hotel
  • Meetings spend by hotel property

Each of these dimensions of spend give you the information you need to understand your program, and quickly find areas of improvement.

How is the program performing in key cities?

A city-level strategy is the most important element for hotel sourcing and optimisation.  Having a city-level view of your data answers questions such as: How many hotels are being used?  Which hotels are in the preferred program or not?  Which hotels have the highest/ lowest ADR (Average Daily Rate)?  Does a map-view show clusters of hotels within a city?  What is the total spend in a city and thus how many preferred hotels does that mean I need?

Am I getting the rates I negotiated?

There are three available complementary approaches to see if you are getting the best booked rate:

  • Rate Achievement analysis — Evaluate each actual booked rate at preferred properties against the negotiated seasonal preferred rate. Analyze if the booked rate was at, above or below the negotiated rate.  This is powerful insight for supplier meetings by identifying problem hotels.  If done with pre-trip data, you can fix rates prior to travel.  PredictX automates this analysis.
  • Spot checking future available rates – A onetime rate audit within a month of new rate loading that audits future rates for accuracy in each rate season.  This is typically done by the TMC.
  • Booked hotel price shopping – Recurring shopping of booked hotel rates prior to travel helps counter dynamic pricing by hotels. TripBAM technology is an example of this.

How are hotel chains and brands performing?

A supplier scorecard is required for ongoing supplier management as well as to prepare for sourcing. Hotel Supplier Scorecards include: spend by brand, spend in top cities, average supplier ADR vs overall ADR by city; market share overall and by city.  Rate Achievement analysis is a key supplier performance metric.

Which hotels should get an RFP?

Each RFP you send costs you time and money to evaluate, conduct negotiations and make final decisions.  Consultants and software providers always price per RFP for this reason.  An hour of strategy can save eight hours of sourcing effort.  The key analytics: Which preferred hotels have low volume and which non-preferred have high volume?  Is there demand in new cities?  Do you have too many or too few preferred hotels in a city?A good rule of thumb for a mature program is that if you are sending more than 10% of your RFPs to non-preferred properties, you need to work on your strategy first.

Do I need a chain deal?

The value of a negotiated chain deal is to achieve discounts where:

  • There is significant non-preferred property spend;
  • A sizeable portion of hotel spend is outside major urban areas with no preferred hotel.  For these cases, a chain deal or two can result in 10-12% off daily rates.   Key analysis here is spending by brand in non-preferred properties and in non-preferred cities.  It is important to include leakage spend in this analysis.

Are my travellers booking the right way?

Traveller booking behaviour can significantly impact hotel costs and savings.  Actionable metrics are

  • Preferred property usage
  • Leakage outside the TMC
  • Day of week ADR analysis by city and property
  • Chain deal support.  Two hotel behaviour metrics that are not typically measured but can drive 10% incremental savings are:
  • Online booking of hotels (visual guilt), and;
  • Advanced Purchase performance especially in high demand cities.  By slicing the data analysis by region, business unit, city, property, chain and even employee role, you can be surgical in improvement strategies.

What is driving hotel leakage outside the TMC?

See related article from PredictX called “Travel Leakage is Evil! Or Is it?” 

Understanding the drivers behind hotel leakage is the key to influencing it.  You need to evaluate Card and Expense spend data to see why it happens. We have identified the common reasons:  Travel to a non-preferred city, the customer has a better preferred rate, preferred hotels were too far from the meeting, and the traveller wanted reward points at a non-preferred hotel chains. Are they avoiding the TMC because they aren’t booking Air, or their hotel isn’t listed?  The value of managing hotel leakage rate savings, increased Hotel commissions, negotiating leverage and better duty of care.

Summary

Having the right data at your fingertips, makes travel managers more strategic, allows for meaningful conversations with key executives and drives incremental value.Most of the analysis discussed above is available on demand for any time period at the touch of a button in PredictX.  If your current data providers cannot do this, you are missing significant opportunities and expending too much effort.Will you be ready for next year’s sourcing season and your next hotel supplier quarterly meeting? Request a free demo and make sure you are.

 

About PredictX: PredictX is a travel data fusion company that lets you uncover incremental insights for your travel
and expense program through accurate and consolidated agency, card, expense and meetings data empowered by
advanced analytics. 

Al Norman
By Al Norman
5 min read

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