September spells one thing in the diary of every Travel and Lodging Manager – Hotel RFP. It is not exactly the season to be jolly but there are some tips and tricks to make this hotel season easier on your workload and even sweeter in your programme.
5 tips for an improved Hotel and Lodging Programme
1. Find out what properties your travellers want to book
Many programmes make the mistake of negotiating superior discounts at hotels only to find there is no demand for these properties from their travellers. Driving demand to honour supplier agreements becomes a major hassle later in the year yet perhaps that agreement should not have been made in the first place.
Overcome this challenge by consolidating data from all feeds, including TMC, Card and Expense as a minimum, to get an accurate picture of hotel properties and ancillary packages and bonuses that travellers prefer. Once this data is on hand, it is easier to know which hotels to get superior rates for. This is a valuable time saver.
We know that travel management is not just about securing savings but about marketing and promoting the programme across the company. Traveller satisfaction surveys are a helpful way to see what your travellers care about the most. Every organisation comes with its own culture and set of priorities. What works in one place may not work in another. Whether travellers value loyalty, personalisation, home stays, increased choice, mobile booking and/or superior-to-market rates centralised in one channel, know your traveller personas and adapt the hotel programme to suit them.
2. Negotiate rates based on three tiers of measured demand
In the past two years, hotels, and now, corporates, have started to incorporate dynamic pricing to counteract the traditional approach of negotiating multiple RFPs. The traditional approach is not yet dead, however the industry has evolved to go beyond it to determine the best programme fit.
While certain travel programmes like the Ernst and Young travel programme have benefited greatly from intoducing this approach to several preferred properties, the industry has, for the most part, gravitated towards a hybrid approach where both fixed and dynamic rates are used. In a GBTA 2019 session titled “Ditch the Annual Hotel RFP Process for Dynamic Programme Management,” attending travel managers were asked which sourcing approach they used in their programmes. Only 2% reported that their hotel programmes were completely dynamic and only 22% had a fully static programme. 76% reported they had a hybrid programme made up of both fixed and dynamic rates.
We recommend that programmes organise properties into three tiers. These three tiers will determine what kind of rate to negotiate: fixed, dynamic or mixed. They are based on the demand recorded by past travel activity. The first tier would be your programme’s preferred hotels receiving the most demand. As demand is guaranteed it is recommended to use fixed rate discounts. Use analytics to measure a complete picture of hotel spend at each property and compare this figure against the Best Available Rate (BAR). These discounts should ideally fall at 20 to 49% off BAR.
The second tier of properties have slightly less historical demand than the first so it will be most beneficial if your programme incorporates dynamic and chain-wide agreements for these properties.
The main benefit of incorporating dynamic pricing is that it saves time as travel managers do not have to go through onerous RFPs with each hotel in the programme. As such, they can offer a wider range of properties to their travellers. Dynamic rates also create a unique situation where the negotiated discount follows and responds to the market. At times of high occupancy, hotels make more money while corporates achieve vast savings in times of low occupancy. As travel managers cannot be sure of the level of demand for the second tier of properties, a dynamic or chain-wide agreement will be better suited. Ensure that some sort of Rate Cap is introduced per city so travellers book away from more expensive properties during periods of high demand.
Use analytics to measure the rates achieved on a yearly basis as well as for each booking. Measure a Track Booked Rate vs. BAR on every hotel booking while also measuring the effect of dynamic pricing by looking at the Average Daily Rate (ADR) year-over-year. The ideal rate for this tier should be 10 to 25% off of BAR.
The third tier of properties should be properties with significantly less measured historical demand. Instead of trying to negotiate discounts with properties where your programme provides less than 50 room nights per hotel, use the discounted content available via a TMC. They consolidate the volume they support overall to achieve a greater discount than one programme ever will, so take advantage of that.
Use analytics to measure ongoing rates against the BAR in each city. Your rates should ideally lie between 10 and 20% off BAR.
Using this three-tiered approach ensures that your hotel and lodging programme is based off data measuring what travellers are actually booking. This will ensure that you achieve maximum cost savings while delivering a best-in-class hotel programme simultaneously.
3. Use appropriate channels to market your hotel programme to travellers
As we know, travel management is not limited to securing cost savings, there is also brand awareness and marketing involved in driving demand and awareness for the programme. Make sure travellers know via their booking tool what benefits they receive at each property whether it be loyalty points and/or extra ancillaries.
Often travellers book off-channel as they think the deal they got is better, however the programme has benefits they do not see within the online booking tool. If each hotel property benefit is marketed appropriately in the booking channel and all value-added extras are mentioned, travellers will most likely book preferred properties.
4. Don’t forget about loyalty programmes
In a GBTA session titled “How to Have a Best-in-Class Travel Accommodation Programme,” it was revealed that 58% of travellers are enrolled in one major loyalty hotel programme. According to a recent survey conducted by GBTA, 82% of business travellers say loyalty programmes are strongly considered when making booking decisions.
From a Procurement perspective, loyalty is not that important. It is, however, important to travellers. Placing a greater focus on loyalty in the negotiation and contract process will be sure to drive greater demand later on.
Also, adding loyalty points benefits onto preferred hotels can be a good way to drive demand and promote compliance within the programme. Having your own corporate loyalty programme can even be beneficial in driving good booking behaviour.
5. Keep a close eye on programme data, room rates and availability metrics
These tips and tricks are impossible to put into action without superior data management. TMC data, although useful in some cases, doesn’t make the cut for this type of analysis.
“The utilization of the TMC can be lacking in some cases. It is really important to use multiple sources of data to give you a better picture of your spend to drive the negotiations. We see leakage of agencies at typically 40 to 45%, If you are seeing only your agency data you are missing a big portion of your overall programme,” said Director of CWT Solution Group Eric Jongeling in a BTN webinar.
After achieving a total trip cost, the next step would be to bring in BAR figures so you know how your programme is in comparison to the best rate offered commercially. Walking into senior management meetings with this comparison will do wonders in proving the financial value of the hotel and lodging programme.
Another set of data that most don’t look at is rate availability data. Based on our analysis, 5-25% of the time a Preferred (flat) rate is not available to be booked. Knowing these figures should help when determining whether to class a property as Preferred or Non-preferred and also whether to use fixed or dynamic pricing. In properties where there is a high variation between the preferred rate and the actual booked rate, travellers may be booking higher rates due to lack of low-rate availability. Based off this data, it may be beneficial to use dynamic pricing or give that property a lower profile in the programme.
A good quality hotel and lodging programme bases decisions not off emotions or perceptions but off of actual travel demand and pricing figures. The analysis mentioned above is the foundation you need.
Nobody wants to bother introducing tougher policy measures later in the year to drive demand. All this can be avoided by adding prices and hotels in the mix that travellers are guaranteed to book. Factor in some dynamic pricing to save negotiation time and you have the recipe for hotel and lodging programme success.
If you feel your programme analytics can use improvement, speak to our travel data experts.