It’s time again for many to assemble corporate hotel programs for next year. The clear goal is to save money and provide sufficient choice for travelers. There are many ways to get it done, and each comes with its own set of considerations. Louise Miller of Areka Consulting breaks down the options.
Most companies still have a sourcing cycle for their hotel programs and we’re in the thick of it now. Hotel channels and rates never have been more complex and the opportunity to save money and satisfy travelers never has been bigger.
Corporate hotel programs were relatively simple 15 years ago: negotiate with top properties and chains, load rates into the global distribution system and use travel management company consortia rates to supplement. Companies with large and concentrated spend frequently saw 50 percent to 70 percent usage of their negotiated hotel rates. Even smaller companies achieved big savings in markets where they had spend to leverage.
That’s changed during the past few years as companies learned more about their hotel channel and content options. Let’s examine some of the topics on buyers’ minds.
Non-Commissionable Net Rates, Commissions And Other Incentives
Hotels are offering non-commissionable corporate rates with less than the expected 8 percent to 10 percent discount for netting out the commissions. In many cases they are offering no discount at all on these rates. Hoteliers state that the complexity of loading non-commissionable rates isn’t worth the effort unless they expect big volumes.
When faced with such a scenario, consider asking for fully commissionable rates in the next negotiating round.
Once you determine the expected volume and savings in your new program, you’ll have some decisions to make about what to do with those commissions – if they materialize at all. If your travelers use the TMC’s consortia rates or your commissionable negotiated rates, they will. Who shares in the commissions is another issue.
If you already share in the commissions, then you’ll benefit from the increased usage of those rates. If your TMC keeps all the commissions generated by your company’s bookings, keep an eye on the utilization of rates that qualify for commissions. Ask the TMC to invest part of the extra earnings into your program.
Be aware that transparency in TMC revenue streams is declining rapidly. Buyers express mixed feelings on this topic. Some will seek the best rates without worrying about how their specific programs impact TMC revenue from hotels. Others want the attributable hotel commissions returned to them.
Commissions are not the only type of hotel revenue to consider. Other types of incentives may apply in OTA-to-TMC and OTA-to-corporate arrangements. On the former, such deals usually are not structured in a way that makes clear what’s attributable, and buyers say most TMCs don’t share those incentives anyway.
Meanwhile, most companies don’t have sufficient volume or clout to bypass their TMC and realize a worthy return from direct deals with alternative hotel content providers.
Some buyers tell us they see initial bookings using negotiated rates change during the reshopping process to another rate type, and the TMC takes a chunk of that savings.
Rate reshopping delivers value, but buyers should frequently review the details. What rate was initially booked? What’s the new rate? What were the content sources for each? You may be surprised by the declining utilization of your negotiated hotel rates and discounts.
One of our clients recently was shocked to find that the utilization of its corporate negotiated rates and chainwide deals outside their headquarters city dropped below 10 percent. The reason was lower rates found during reshopping.
Prepaid And Nonrefundable Rates
Travelers experiment with prepaid and nonrefundable rates only to uncover the lack of flexibility. For example, if a rate is booked through an OTA, any permissible changes must go through that OTA. Neither the TMC nor the hotel itself can make those changes. Moreover, travelers often don’t accrue loyalty points for such bookings.
At least five buyers in the past month told me they worked with their TMCs to restrict the rate types offered. This helps to minimize trip friction while still maintaining targeted savings levels.
In general, if travelers value flexibility and loyalty benefits, they are less likely to use the types of restrictive rates OTAs provide. On the other hand, in cities where prices are through the roof during periods of high demand, travelers are more accepting of a nonrefundable or prepaid rate that saves 30 percent.
TMCs during the past five years dramatically increased the number and types of rates they offered by evolving hotel platforms with sophisticated rules engines and entering into commercial relationships with aggregators and OTAs. Expedia Affiliates Network and Booking.com are popular content sources for TMCs nowadays. Many of the rates from these sources can be “turned on” in the GDS.
Adding potentially lower-priced options from these content sources to channels used by corporate travelers jeopardizes usage of corporate negotiated rates in cities where you have lower volume.
What’s Actually Booked?
Between 20 percent and 50 percent of travelers book directly with hotels — by phone, or on brand and property sites — and through OTAs. Corporate usage of Airbnb ranges from not at all to 10 percent of hotel spend. Airbnb bookings must go directly through the Airbnb platform; some online booking tools including SAP’s Concur Travel can show listings and link users to that platform. Data feeds from Airbnb to TMCs and travel risk management providers are becoming more common.
However, traditional TMC preferred and consortia rates, chainwide discounts and corporate-specific preferred rates remain the most commonly booked options for business travel via TMC channels. More TMCs also are developing “elite preferred” hotel programs through which they can mark up rates to drive more revenues. Some such programs use content from Expedia’s network, which the company developed many years ago. It’s obviously been very successful.
Ultimately, changes to channels and rate mixes may be good for travel buyers and managers. More options mean more opportunity for happy travelers, successful trips and savings. But for those of you seeking simplicity, it’s not going to happen in this category any time soon.
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