To date, hotel mergers have not significantly impacted our industry. This is especially true in Europe, the Middle East and Africa (EMEA) where independent hotels are more frequently used than in the US.
Consolidation in the hotel space is also not new. However, consolidation activity has picked up speed in the last two years. Accor acquired Fairmont, HNA Tourism Group acquired Carlson Hotels.
The most significant is Marriott's acquisition of Starwood. This merger made me sit up and pay attention to the hotel merger trend. Why? Because although many questions remain unanswered around how it will impact each entity, and though the timing of the merger means 2017 negotiations may be safe, 2018 will be a very different story. In the case of Marriott, the time to act is now.
Hot hotel negotiations
When a large merger occurs, and this will not be the last, travel managers have to prepare for a change in negotiations.
The impact of hotel mergers on your individual corporate programme will depend on how much involvement your company has with the respective chains and markets.
Accor dominates the hotel market in Europe and IHG also has a huge presence. It's perhaps due to this that consolidation hasn't had the same impact as in the US. In the case of Marriott/Starwood there are currently no European cities with over 20% market share when entity is reviewed.
However, in today's global market place a significant change to one region's hotel market will naturally impact any company that regularly travels to that region.
It is for this reason that travel managers should follow these tips to make the most of recent, and future, consolidation activity.
- Prepare for a challenging environment: When companies merge, the mindset of one can sometimes be applied to the other. For example, data indicates Marriott is less likely to take part in corporate programme RFPs than other chains. This trend is even more prevalent for clients in EMEA with a 34% decline rate, versus 18% globally. Starwood has typically taken the opposite approach when it comes to RFPs may adopt the Marriott mindset.
- Leverage your combined hotel volume: Your negotiating power will increase by combining the bookings across the chains. Use this to get better rates in non-preferred markets or to agree chain-wide deals where available.
- Streamline negotiations: Mergers reduce the number of chains involved in the RFP process which in turn should streamline negotiations. Make the most of other major chains looking to maintain their relationship with you.
There can often be cultural dynamics at play and, in a lot of cases, European travellers prefer a more independent type of hotel as opposed to the brand standard approach that travellers in the US prefer.
For European-based companies already familiar with the aforementioned cultural dynamics and independent venue stock, the surge in consolidation activity in a comparatively standardised hotel market will be a positive step for those wanting lower rates in less traversed locations (when combined volume is leveraged).
Meanwhile US-based companies that have focused on consolidating volume with large chains like Marriott have struggled to gain a footing when looking to move spend in Europe to the chain.
Keeping traveller compliance in check
Hard-fought negotiations for preferred programmes can all too easily be diluted if your travellers book through non-preferred suppliers.
Technological advances have resulted in suppliers increasingly having direct contact with travellers. The global impact of large mergers once again becomes clear when well-regarded loyalty programmes come into play. Nearly a third of all non-compliant spend is with Marriott and Starwood.
Just as hotel chains embrace modern ways of selling, you too can embrace modern ways of communicating and incentivising your travellers to protect your preferred programme.
Keep it personal: Tailoring your travel programme and communications to specific segments of travellers will boost programme performance. Use demographics (generation Xers, millennials, baby boomers), frequency of travel (advanced travellers, intermediates or beginners) or average spend.
Plan on performance: Once segments have been determined, use key performance indicators to track behaviour such as average room rate, compliance to preferred hotel programme, compliance to booking channel and reason codes. Results can even be broken down by country, business units or trip types.
Incentivise individuals: Use this information to reward good performance or identify areas for improvement. Traveller scorecards are good for sharing programme performance, while reward systems can boost gamification.
Focus on the future
If the current climate is anything to go by, buyers should expect at least one other large merger in the coming years. To ensure your programme continues to perform at its best, keep these tips in mind:
- Be ready to expect the unexpected.
- Review your programme in-depth now to ensure you know your options before 2017 negotiations begin.
- Ensure you and your travellers can readily adapt to ensure maximum value, cost efficiency and traveller satisfaction in 2017 and well beyond.