< PrevNext > Buyers Break the Hotel Procurement Cycle By Advito managing director April Bridgeman / 27 January 2017 Share Change is constant. Digital is magnifying stale practices that are in need of reinvention. This environment signals a glaring misalignment between hotel management and market dynamics.Procurement has long relied on annual sourcing cycles to manage hotel spend. Yearly planning offers a road map at the time when property rates are loaded, but set-it-and-forget-it category management is no longer enough.Today's market requires a lot of buyers, making it difficult to keep pace with changing business needs, to track market fluctuations, to measure the value of preferred rates against what's available and to make adjustments throughout the year. In 2017, more travel buyers will adopt a year-round approach to manage hotel performance rather than limit hotel management to the traditional RFP season.Four Trends Accelerating This ShiftSupplier consolidation is game-changing: Consolidation has increased over the last two years. While the Accor/Fairmont, HNA Tourism/Carlson Hotels and Marriott/Starwood mergers didn't have vast impacts on 2017 negotiations, the implications for 2018—particularly from the Marriott/Starwood merger—will be significant. Now's the time to prepare. Buyers who do prepare already have established the analytics structure to anticipate, gauge the impact and respond to changing scenarios before hotel season.Hotel rates are in flux: Hotel rates are generally softening, but they fluctuate market to market. It is unclear if the downward shift in North America and the Middle East, the upward change in Asia and Latin America or the steady trend in Europe will continue. Buyers who maintain a pulse on how markets are changing between cycles are better equipped to adjust and continuously improve their programs.Persistent yield management strategies are rising: Suppliers are becoming sophisticated in controlling their inventory. They adjust rates on a daily, even hourly, basis. They promote dynamic, or best available, rates; fixed rates; or a hybrid of the two. And some offer special rates to travelers who book directly. As a result, preferred rates on average are unavailable for booking 35 percent of the time. Corporate travel buyers with additional visibility into supplier strategies can monitor changes in a complex hotel market and adjust elements dynamically.Noncompliance becomes engaging: Most hotel compliance rates hover around 50 percent to 60 percent largely because few companies mandate preferred hotels. Most reimburse travelers who choose nonpreferred properties, who fail to book the preferred rate or who don't book in advance causing high leakage. Buyers who actively engage and communicate with travelers are defying these averages. Buyers will respond to market fluctuations and ongoing changes in the hotel category by adopting a dynamic approach. The key is to invest in ongoing program management so you can break the sourcing cycle and improve your hotel program. Going forward, there will be no managing hotel spend without this year-round strategy.