Hotel Rates Are Up; Here’s How to Push Back

by Fred Gebhart

With business travel on a sustained upswing, hotel demand and hotel rates are up. But that doesn’t mean corporate hotel spend has to follow in lockstep.

“Unlike in air, travel managers and travelers have options in hotels in most markets,” said Yon Abad, director of hotel solutions, CWT Solutions Group.

The supply of hotel rooms is static in most markets, and “hotel operators anticipate an increase in demand, just like airlines,” Abad said. But while “you don’t have a lot of choices when it comes to airlines, in most locations, it is entirely possible to develop your hotel program with fewer vendors.”

“When you go into negotiations, it comes down to showing that you can, and will, move market share.”

Data is king
If hotels are baulking on rates, you need to make a stronger case for what the client’s company brings to the property -- and what losing the business could cost the hotel.

“It comes down to knowing your data,” Abad said. “You need to be able to detail your total spend, not just room nights and room rate.

“F&B and other purchases are all part of your business value to the property and may be more important than a percentage point or two on the rate. Hotels recognize that. But it is up to you to present the data. You can’t expect the hotel to make your case for you.”

Travel spending projections
It’s no surprise that business travel volume is expected to continue to grow into 2015. The Global Business Travel Association Foundation and Carlson Wagonlit Travel project global business travel spending to jump by 8.6% next year over 2014 levels.

But those increases are not uniform by category or by geography.

Globally, hotel rates are expected to increase by 2.6% in 2015. That increase will be driven by a 6.3% jump in Latin America and tempered by an anemic 1% increase in European markets.

U.S. hotel prices are projected to increase 3.5% over 2014 rates.

Controlling hotel spend
Even with growing demand, travel managers don’t have to meekly accept whatever new rates hotels propose in the current round of negotiations.

Bob Brindley, vice president and principal for Advito, the research arm of BCD Travel, offers two tactics to control hotel spend.

The first tactic is to implement a two-pronged hotel program.

Start with property-specific or chain-specific contracts that lock in price and provide last-room availability in the client company’s most important markets.

Then back up those market-specific deals with chain-wide dynamic pricing agreements for secondary markets as well as for important markets with severe capacity limits that preclude last-room availability deals.

Automated price checking
The second tactic is automated price checking on every reservation. If spot pricing beats either of the corporate programs, shift the reservation to the lower-priced property.

“You should never pay more than the prevailing rate in any given market,” Brindley said. “Let technology keep checking rates right up until the final confirmation time. The TMC can and should be checking and re-checking to make sure you’re getting the lowest possible rate on every booking.”

Why not let travelers do their own price shopping?

About 70% of corporate hotel spend is booked direct, usually by travelers, Brindley said. But price shopping is probably not the most effective use of a traveler’s time, he pointed out.

If the goal is lowest possible price, automated price checking at the TMC level is more efficient.

And putting the TMC in charge of checking for lowest price brings more travelers into the corporate program.

“We see benefits in increasing the hotel capture rate,” Brindley said. “It has the potential to reduce total spending.”

New models
This is also a time for travel managers to start thinking about how they will incorporate new alternatives, like Uber and Airbnb, that are edging into the corporate travel world.

Companies like Yapta (price tracking) and Roomer (reselling nonrefundable room cancellations) have targeted TMCs and travel managers with corporate versions of their wildly popular consumer products.

Uber and Airbnb are working with Concur to target business travelers by streamlining the expense side using a web-based platform to collect and report spend. Airbnb is promising travel managers complete visibility into corporate bookings using Concur TripLink.

“Airbnb is becoming a genuine choice for some companies,” Abad said. “It is just a matter of time before this kind of lodging alternative becomes a part of negotiations.”

Next time: airline negotiations

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