A corporate negotiated hotel program offers travel managers cost savings, improved duty of care, and a better traveler experience. Lodging costs comprise up to 40% of a company’s total travel and entertainment expenses, providing a large opportunity for spend management. Hotels will offer lower room rates to clients in exchange for guaranteed volume. By committing volume to a hotel, clients receive rate discounts, discounts on hotel amenities, and assurances that travelers are staying in safe, secure locations.
Challenges to Corporate Hotel Programs
Complexity of Hotel Programs
Consolidation among hotel suppliers, technology advances and changing revenue management strategies are making it more challenging for companies to manage and validate savings. Travel managers need to spend more time developing and managing these programs to realize benefits. This has some questioning whether or not the process is worth the effort.
More Indirect Bookings
Latest estimates find that more than one-quarter of all hotel bookings come from third-party sites such as Expedia and Priceline. Corporate travelers claim they can find better rates online, so book outside the corporate negotiated block. This makes it difficult for the travel manager to validate rates and their usage. It also underscores the need for auditing and market rate shopping.
The structure of the largest U.S. hotel companies makes it more challenging for companies to negotiate hotel programs. There continues to be consolidation of hotel brand ownership, such as the Marriott/Starwood merger. Yet individual properties are not always owned at the corporate level. This leads to wide variations in qualifying hotel spending levels and changing requirements to secure agreements.
Changing Traveler Demographics
Younger business travelers have different hotel preferences. Travel managers want to provide them with options, so they are inviting boutique and newer hotel brands into their program. But this diversifies room night volume over a larger number of brands, reducing negotiation power.
Engineering Negotiated Hotel Programs
Hotel rates are dictated by historical volume, market conditions and buyer histories. Advances in yield management and property management technology give hotels data to guide the rates they offer. Rates often change multiple times a day. This fluctuation of the market makes it beneficial for coronations to secure a guaranteed rate to better manage their hotel spend.
Companies with sufficient hotel volumes can secure discounts, often at the best available rates. Best available rates can change by the day. Some hotels have redefined their room categories to curtail bookable rooms, limiting access to rooms at the negotiated corporate rate.
Re-shopping and Re-booking
Available rate may not always be the best available rates. To get a lower room rate, companies are turning to re-shopping tools. These tools check rates on multiple sites and re-book a reservation when a lower rate is found. They also guard against improperly loaded rates, which contribute to over payment on a room.
Need for Frequent Auditing
The best way to ensure hotel rate accuracy and prevent over-payment is to audit corporate rates frequently, even monthly. Hotels change their base rates based on market conditions, occupancy levels, and hotel spending. By auditing more frequently, companies can quickly identify if a better rate is available.
More information on the value of corporate negotiated hotel programs can be found here.