In a few too many business travel conversations, the topic of hotel sourcing seems to be like Groundhog Day. Industry veterans of traditional RFP seasons can sometimes carry on about legacy inefficiencies of the process, from hotels that don't respond to the operational effort it takes for corporate hotel programme managers to oversee the process in the last four months of the year. It's not hard to see why it can be tiring.
What's more, recent research has shown that despite the best intentions of hoteliers, travel managers and TMCs, there are far too many errors in the rates being shopped by travellers and agents. A global study conducted with GBTA Foundation earlier this year found that nearly one in six rates is incorrect, driving companies to ultimately absorb more expensive lodging costs. These kind of money-losing mistakes are certainly frustrating, especially to buyers who invest significant time and rigor in hotel sourcing.
Is the market broken? Given the flow of articles on the shortcomings of traditional hotel sourcing, it's easy for corporate hotel programme managers to feel disillusioned.
Don't fall for the hype — hotel sourcing still delivers projectable savings
A look at the data reveals the money-saving truth: done right, sourcing creates the right mix in the corporate hotel programme, generates savings, ensures that corporates maintain their ability to budget and plan - and keeps travellers happy.
An ACTE survey released in October 2017, in a study focused on the evolving nature of hotel sourcing, found that "managers who continue to use traditional hotel sourcing mentioned tactical benefits, such as improved negotiated rate versus industry benchmarks and better average room rates, as the top advantages arising from their approach."
Who wouldn't want to sit down with their CFO just before the Christmas holiday each year, and share that they managed to secure "better average hotel room rates" and "improved negotiated rates versus industry benchmarks?" Isn't this why we are attempting to "manage" travel in the first place?
Managing through newfound complexities
In fact, travel buyers may not be as challenged by the "traditional" hotel sourcing process as much as they are overwhelmed by the time it takes to stay on top of trends impacting modern-day hotel negotiations.
Driven in part by the wave of market consolidation in the chain sector, large global chains follow the lead of the airline industry and levy fees for a variety of à-la-carte, on-property services. Travel buyers are challenged to be aware of which chain has which kind of fee, and if their company delivers enough booking volume in a given destination to mitigate new costs. And as the largest chains revise their cancellation policies, the time-honoured flexibility that corporate programmes rely on now need to get spelled out in each and every hotel contract.
Adding to the difficulty of the task is the fact that hotel programme compliance can be rather low compared to air - leaving far too many travellers untracked. Given the importance of duty of care in these days of global uncertainty, travel managers are aware that a change is necessary.
As a separate study with GBTA Foundation shows, travellers want to do the right thing and follow their company's travel policy — but directly next on the list of influencing factors is convenience.
It becomes clear that the entire hotel segment must be viewed holistically; sourcing the optimal hotel programme based on benchmarking data, and ensuring rates are loaded as negotiated is the mere foundation. Driving adoption through traveller-centric end-to-end solutions, which eliminate and automate manual steps, becomes an essential element to leverage the full potential.
Leveraging data and on-the-ground experts to shoulder the sourcing workload
Amid all these developments that travel buyers navigate today, the simple fact of the matter is that their bosses expect them to perform; to ensure travellers can efficiently complete their journeys, perform their business objectives, and do so via a judicious use of the allocated travel budget.
So with the realities of these burdens, it is not surprising to see more corporations exploring the benefits of outsourcing the management of their hotel programmes. This is particularly bearing fruit in the hotel sourcing arena. The global hospitality industry is inherently complex, in part because the marketplace is highly fragmented and diverse. The lack of industry standards adds further complexity: different hotel brands use their own categories to describe inventory and travellers can access a variety of different rates from the same property in different channels.
Transparency is in high demand. It therefore makes sense that savvy travel buyers see the wisdom of leaning on local expertise and demand support and data to deliver the best options for their travellers. Despite the move towards centrally-managed multi-national and global programmes, the value of on-the-ground expertise is actually growing. Regional and local hotels outside the global chain brands often require more diligent and individual support in the RFP process as rates in local hotel markets can fluctuate frequently, be it due to the arrival of new properties, remodelling of existing hotels or regional security events.
In this day and age, where travel managers need to be(come) more strategic, the effort of monitoring these marketplace events and developments can hardly be handled by the travel management itself. Outsourcing the operational element of hotel sourcing has the two-fold benefit of staying engaged, without the time commitment and saving money without sweating over spreadsheets.
Lastly, as sourcing evolves and rate auditing tools proliferate, outsourcing facilitates the use of targeted RFP actions outside of the traditional RFP season. Any number of scenarios could justify this type of flexibility in the outreach eg a smaller company might be acquired, a new regional office might be opened or a new client with heavy in-person service demands may get signed.
In the past, a company would have to shop market rates until the annual RFP season returned. In an outsourcing environment, this is no longer the case. The combination of verified travel data and on-the-ground expertise makes this a manageable scenario for programmes of virtually any size.
As corporate hotel programme managers analyse solutions that work best for their unique fiscal and traveller culture, they should be sure to consider.
- Does their hotel sourcing solution have the data—mining expertise to wring the most benefit from existing and projected travel volume?
- Is there enough on-the-ground support in key destinations to drive truly-informed negotiating decisions and preferred property choices?
- Can a solution grow with the company, helping with operational issues even as the focus remains on bigger multi-year strategic goals?
- Is the approach to hotel sourcing truly holistic to ensure through traveller-centric end-to-end solutions that the hotel programme is brought to life and the full potential realised?
Hotel sourcing remains a tremendous opportunity for both savings and performance. Managers have a diverse array of solutions at their disposal: making the right choice can lead to both programme optimisation and recognition as a strategic leader within their organisation.