Sixty-two per cent of buyers foresee opportunities to reduce
hotel room rates and negotiate more flexible terms and conditions for the
balance of 2020 and beyond once coronavirus travel restrictions begin to lift,
according to a new survey by hotel solutions provider HRS.
The company conducted a flash survey of corporate travel
programme managers and procurement executives between 30 April and 4 May, which
revealed that to achieve their goal of lowering rates, 51 per cent of
respondents plan to issue RFPs. In exchange for more flexible terms when
travellers get back on the road, a resounding 81 per cent of those polled are
willing to negotiate contracts for the rest of 2020 and the full 2021 calendar
year, or 15 to 18 months.
In addition to aiming for better rates and more flexibility,
more than half (58 per cent) of buyers are seeing these negotiations as an
opportunity to reduce the number of suppliers they work with, offering
preferred hotel partners the chance to win more share from existing clients.
Speaking to BTN Europe, HRS chief executive Tobias Ragge said
the company has been seeing some corporates move to consolidate their
programmes in recent years anyway. “It’s a more strategic approach for some
programmes, and it’s also being driven by the fact that suppliers do not
necessarily want to take the time to negotiate rates unless they can be
guaranteed volume. The fewer suppliers you have in your programme, the more
leverage you have in the negotiating process because you’re more likely to be
able to offer the volume they want to see.
“We’ve also been seeing a trend where corporates are
starting to combine their transient and meetings spend, so now procurement
managers are looking for better deals in exchange for their business.”
Major hotel companies announcing new cleaning and hygiene
programmes for when guests start returning to their properties stand to win a
larger share of corporate business, with 86 per cent of buyers surveyed prioritising
partners with revised, specific Covid-19 cleaning protocols.
Ragge said: “For the travel managers, this situation with
Covid means they are really going to have to be sure they are looking after
their travellers so it makes sense for them to prioritise suppliers that can
meet their duty of care expectations.
“But this could also mean that more corporates will have to
start mandating their hotel programmes to ensure travellers are booking those
suppliers that the travel manager already knows is implementing strict cleaning
protocols. That’s why it won’t make sense for buyers to forego the RFP process
this year and roll rates over to 2021; hoteliers are going to be playing with
their rates to stimulate demand and will likely be running promotions that will
be picked up the major OTAs, and as we’ve always seen with corporate
programmes, if a traveller can find a lower rate online – and I believe they
will when travel returns – then it undermines the value of a managed programme.
People will start asking questions and eventually they will wonder why buyers waste
their time on the RFP process if they can’t get a better deal.
“As we’ve seen in other recoveries this century (9/11,
SARS), aggressive online travel agencies gain market share by undercutting
outdated negotiated corporate rates. Today’s business traveller instinctively
shops hotel rates more than ever before. It’s vital that managers promoting
their managed travel channels for safety reasons have the best rates in those
channels as well, as it directly impacts the integrity and reputation of the
programme across the company.
“Don’t forget that the terms of negotiated rates will change
as well. If, for instance, hotels are not allowed to offer buffet breakfast
anymore, then travel managers will need to determine if their travellers will
want to have breakfast included at all or if they would prefer to buy it
elsewhere. Gyms and fitness centres might need to stay closed to stop the
spread of the virus, so then that value will be taken away from rates that
include access to these facilities. So suppliers and travel managers alike are
going to have to be flexible in negotiating rates, and I believe those rates
should be valid for 15-18 months.”
Ragge concluded: “Our industry is suffering through
previously unimaginable hard times, with suppliers and other parties all
resource-challenged due to layoffs and furloughs. Procurement leaders
understand this reality. However, they are also being tasked by their CFOs to
renegotiate and develop precise financial plans focused on the costs they
anticipate to get business up and running in the back half of 2020. This is
particularly true for Fortune 500 global programmes. Once safety protocols are
in place, companies will authorise necessary trips to visit clients and pitch
prospects. These survey results fall in line with what we’re hearing from
clients across every vertical market.
“Beyond the tragedy of the pandemic, this upcoming period
looks like simple market dynamics at work. Hotel suppliers have had the benefit
of high occupancy and growing rates for more than a decade. With international
travel stalled and leisure travel (especially to inner city properties)
reduced, business travel leaders correctly see savings opportunities as they
focus on their core destinations and deliver volume for hoteliers throughout
the week. Domestic corporate demand will play a decisive, leading role in this
recovery. With corporations consolidating their programmes and driving market
share, proactive hoteliers have the chance to create strategic partnerships and
grow beyond transient travel into high-yielding groups and meetings volume with
their preferred clients.”