A new trend emerged during 2020 hotel negotiations.
Corporate hotel programs that are willing to be flexible can achieve significant
savings from rethinking their approach to last room availability and cancellation
terms.
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Jonathan is HRS' SVP Hotel Solutions - Americas
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I know of one global technology company where acceptance of
greater than standard same-day cancellation penalties resulted in $1 million in
negotiated savings! Companies that practice this approach have experienced savings
ranging between 1.5 and 5% of their accommodation spend, depending upon program
profile factors such as traveler behavior, travel patterns and volumes.
There are two prime reasons:
• Buyer data makes it clear that same-day cancellation and
LRA access are simply not necessary for many hotel programs. Travelers are not
cancelling in great numbers on the day of arrival, nor are they having to book
during pricier LRA rate windows.
• Hotels in more and more markets are increasingly realizing
the inherent challenge of having too many bookings which allow same day cancellations.
This limits their ability to obtain higher-margin, close-in room bookings. Hotel
yield managers crave these last-minute options to improve their bottom-lines.
During rate negotiations hotels are increasingly willing to
trade some percentage points on rate for organizations with sustainable volumes
and a track record willing to exchange same-day cancellation to 24 or 48 hours.
This is particularly true in higher-cost markets such as Chicago, London and
San Francisco.
Those travel buyers who choose NOT to change their strategy can
use data analytics to ascertain the specific cost incurred by retaining the
“industry standard” of LRA and same-day cancellation. This is vital when organizations
evaluate adapting their hotel purchasing strategies in the face of changing
economic climates, business performance, M&A activity, etc.
How to Drive
Incremental Savings via LRA & Cancellation Flexibility
Here are some starting points to consider:
• No
need to wait
2020 rates being negotiated and loaded doesn’t preclude exploring
securing savings via these avenues until next year. Hotels are eager to have
more flexibility with their inventory. Depending upon location, they may be
willing to negotiate mid-year or sooner. Don’t be afraid to ask!
• Be
ready with your data
Know your traveler behavior and have your cancellation and
LRA metrics validated. Be on top of regional benchmarks for property types in
your program. Audit loaded rates in all booking channels so you know which
suppliers best adhere to negotiated terms.
• Create
your strategy
If you can, don’t be inflexible in your approach to LRA and
same-day cancellation. Consult with knowledgeable contacts inside and outside
of your company in select locations where you have measurable volume to get
some sense of the specific savings opportunity.
A little (properly-informed) flexibility on your part could
deliver newfound savings AND enhance your relationship with a grateful hotel
partner—an outcome suitable for any list of New Year’s resolutions.