As the request for proposal season approaches, Catherine Chetwynd seeks expert advice on best practice for hotel and air purchasing
THE BUYER'S VIEW
Rudiger Bruss is global category manager for travel and mobility services at German tyre and automotive supplier Continental AG. We also asked ACTE for its response to Bruss' pointsCONTINENTAL EMPLOYEES head to many locations in relatively remote areas, where there is not a lot of choice for hotels.
“It’s not like Paris, London or New York,” says Bruss. “In these destinations we are lucky if there are five options which are acceptable, and narrowing it down from five is difficult, if not impossible. We tender between 1,200 and 1,500 hotels and end up with 1,000 properties.
“It’s a headache, and from this year we will switch to an electronic request for proposal [eRFP] tool. It is absolutely necessary because it speeds up the process and makes it more transparent for the hotels and for us, and getting the information in exactly the same format from different suppliers makes it easier to compare.”
Bruss says hotels are fairly easy to evaluate in that there is a room and a bed, and services such as free wifi, breakfast and parking that can be mandated.
ACTE view
eRFPs have had mixed reviews but, for less complex sectors, they streamline information and can work well.
HOWEVER, AIRLINE RFPs are not such a breeze. There are only four cabin classes and Continental uses business class for long-haul and economy for short-haul. “We are running into huge issues with what airlines are offering, because the number of booking classes makes proper price comparison almost impossible,” says Bruss.
An airline with two codes on one fare might display a higher entry price-point than one with five, but might also more reliably offer that fare, says Bruss. “And I can see what I have booked in the past, but that’s not a guarantee of what is available in the future, so comparisons are difficult. We had our first eRFP for airline early this year, using Elemica, a sourcing service in which we have a stake, and it was quite successful. We ask as few questions as possible to make it easy.”
ACTE view
Simplify the process to ensure the best possible result for all parties, and consider eRFPs – even for air.
BRUSS PLAYS, TO HIS ADVANTAGE, the need to use several airports in Continental’s home market, Germany.
“About one third of our departures are from Hanover, one third from Frankfurt and one third from Munich, with small volumes from other German locations,” he explains. “As Hanover does not have any intercontinental destinations, flights will always include a stopover. This allows us to tell people in Frankfurt, if the CEO has to make a stopover to make a connection to reach his destination, then you can as well. That opens up more suppliers.”
ACTE view
Be creative to negotiate better fares from airlines and more options for travellers.
LENGTH OF CONTRACT has been much debated, but given the vagaries of the world’s economies, fixing prices over a three-year contract is not viable.
“Few suppliers would have problems with an open-ended or two, three or five-year contract, as long as pricing is revised at least once a year,” Bruss says.
“As a purchaser, I like to have pricing fixed for as long as possible, but in some categories that is not always possible. We try to have two- or three-year contracts because that puts less stress on resources: we sign once, go through legal once and change pricing every 12 months. But we don’t insist on that, and 90 per cent of our air and hotel contracts are for one year.”
ACTE view
Consider offering long contracts and build in the ability to renegotiate prices.
INVOLVING TRAVELLERS or the travel manager in the process is important. “I usually involve only my internal customer, travel management, which is part of HR,” says Bruss. “I get their list of requirements and include those in the RFP document. I show the TMC account manager the tender and chat about what we are doing, but otherwise they are not involved.”
ACTE view
Look carefully at whom you need to involve in the process.
THE AMOUNT OF QUESTIONS in some trade bodies’ template RFPs is mind-blowing, running into many hundreds. “I try to limit the number of questions we are asking: if a hotel’s parking is included in the rate or if they do not have parking, they have to answer that, but I don’t care if they have a spa or not,” says Bruss.
ACTE view
Ask for essential information only.
RFPS HAVE A REPUTATION for taking up undue amounts of time but if they are succinct, processing can be cut to a minimum.
“I try to give suppliers three to four weeks to come back with an offer, then analysis takes one to two weeks, renegotiation two to four weeks, so it takes only eight to 12 weeks to make the decision,” says Bruss. “For hotels, preparation takes longer because of the number of locations.”
Bruss meets representatives of airlines for quarterly reviews and after the request for quotation (RFQ) process, which is focused on price only; and with large hotel chains before and after the RFQ process, so meeting them in person specifically for the RFP is less important.
ACTE view
Planning and streamlining add to efficiency. Keep good data systems and try to strip out some unnecessary processes.
BRUSS DOES NOT subscribe to the popular perception that travel is a particularly emotive business. “Travel does work differently from some purchasing categories, such as nuts and bolts or office materials, but it is not difficult compared to tendering for creative processes such as marketing services, which are really hard to quantify,” he says. “It can be done well and I think everyone wins when you have a proper RFP process.”
ACTE view
Take a down-to-earth approach and marry up travellers’ requirements with commercial imperatives to create the perfect storm of an RFP.
THE FINAL WORD goes to Bruss: “I have huge respect for suppliers who say no to an RFP because their resources are already stretched – one supplier did that a couple of years ago. This is so much better than the one who bent over backwards to get our business, and we found out later he was having three or four major implementations together with ours and could not handle any of them properly.”
THE CONSULTANT’S VIEW
Chris Pouney is director of business travel at Severnside Consulting“CRITICAL TO PROCURING services that are heavily utilised by all levels of the organisation is managing stakeholder expectation. Procurement of travel typically follows a ‘diamond model’ of engagement – with many stakeholders having relationships with each supplier. It is crucial that the procurement team harnesses this energy for the good of the process.
“For airline RFPs, understanding inventory management and your traveller behaviour is essential. Conduct testing to see if the classes offered are available when you need them and monitor performance closely, or else you may have a nasty surprise at the end of the contract.
“Ensure that the ancillary services included in hotel rates are used by travellers, otherwise free breakfast can preclude being able to negotiate on something of genuine value to the organisation.
“Mid-sized buyers, in particular, should not forget about the SME [small- and medium-sized enterprise] market deals, or even just using your TMC’s rates and buying power. An optimum airline programme can utilise a hybrid of corporate rates, TMC rates, SME schemes and spot buying, depending on volume and criticality of route.”
THE TMC VIEW
Paul Broughton is sales director for the EMEA region at Chambers Travel Management
“WHERE WE GET CLIENTS with locations that are not in city centres, properties are not so comfortable with responding to an eRFP, so we end up contacting hotels direct.
“For airline negotiations, eRFPs are still rare mainly because there are so many variables – routeings, booking classes, fare types and so on – and companies struggle to find a balance between their commercial objectives and the requirements of stakeholders, so we find we negotiate directly with airlines, face-to-face.
“Data is king, and it is important to work with a TMC that can provide comprehensive management information so you can give suppliers demonstrable volumes to get a win-win.
“Having negotiated a preferred hotel rate, corporates need to fulfil their promise to move a percentage of their business. Today, airlines and hotel chains are much stronger on ensuring that deal commitments are fulfilled, otherwise they pull the deal or apply penalties.”