Payment solution of choice for the recession and recovery?
Tuesday, 07 Apr, 2010
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TravelMole guest comment by Trevor Elswood, group managing director of procurement specialist, BSI
Recent comments by Bjorn Hanson, associate professor at New York University Tisch Centre, paint a worrying picture for the future of corporations in relation to accommodation spend.
Bjorn predicts that more and more hotels will turn to increased service charges imposed on the business traveller for services previously ‘bundled’ into the cost of the bedroom.
Driven by hoteliers need to claw back margins, more outsourcing of services and observations of other pricing models in the travel sector, BSI is seeing the US model identified by Bjorg being mirrored in the UK.
We view this as a wake up call to those within a central travel or procurement function buying accommodation for their travellers.
As hotels widen their investment with new service offerings seeking to lead with a competitive room rate or simply identify unlocked profit potential, there is an increased need for vigilance when it comes to the unseen cost of travel.
Room service tray charges, car parking fees, internet access and early check out charges are all going largely undetected by TMCs and HBAs where the full invoice is not being scrutinised and thus the data not visible to the corporation.
We predict that the issue is likely to grow rather than reduce, as the hotel industry regains confidence and economies recover on the the back of projected increased demand.
As such, knowing the ‘Total Cost of Stay’ is a vital component in the procurement tool kit, and something which is already coming to the aid of our customers.
We have approached it with a stay calculator which makes the ‘extra costs’ of the stay visible to our consultants and our online customers. This calculator allows for a robust approximation of the total cost of stay, enabling a direct comparison of properties on the customer’s preferred hotel programme.
We are also seeing a marked growth in the use of ‘Bill Back’ to address the trend (i.e. where the hotel/venue sends the customer’s bill to HBA/TMC to process with the agent paying the hotels on the customer’s behalf and sending them a single invoice a maximum of four times a month).
Our mature bill back process has grown by over 30% in the past 2 years as corporations seek to have a 360 degree view of spend at hotels and reduce the very costly internal process of invoice and expense payment.
According to leading process mapping organisations, the cost of these is conservatively estimated to be £40 per invoice.
BSI customers such as E.ON, Orange and Tesco are provided with consolidated booking and payment data, giving them comprehensively detailed management information, a service far outclassing credit cards for line item detail. This rich management information generated by Bill Back allows negotiations to be extremely focused.
If you know that 90% of your travellers use the internet and 3% use car parks, your negotiation priorities are clearly set and the bill back process then allows BSI to effectively manage policy and negotiated terms post stay, therefore closing the circle of control and management of ‘Total Cost of Stay’ spend.
It is vital that travel managers and procurement executives look at the big picture to effectively bring down average rates.
However, adding it all back on through ‘back door’ charges defeats this objective.
For organisations seeking to deliver substantial bottom line savings there is a big warning from BSI – the ‘out of sight, out of mind’ accepted norm needs to change.
Procurement professionals in this sector need a clearer understanding of the advantages of the bill back model over lodge and corporate card solution. Currently many will not be able to deliver the vital detail of the stay expenditure which is the core of the value for procurement and agencies seeking to genuinely control expenditure.
The Bill Back model delivers on many fronts but importantly ‘compliance’ in terms of the use of the preferred agency is truly underpinned by the Bill Back model.
With compliance comes visibility and a great platform for policy evolution and purchasing leverage. The bill back renaissance is no flash in the pan – it has been developed on the back of growing awareness of the unquestionable bottom line benefits.
Phil Davies
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