Seven steps to making business hotel savings revealed
Tuesday, 24 Jun, 2009
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Seven steps to enable companies reduce business travel hotel spend by up to 21% has been unveiled by Carlson Wagonlit Travel.
The advice follows a study by the travel management company’s research arm which suggests that corporate hotel spend is often underestimated and under-managed even though it can average almost 40% of a total travel budget.
CWT business intelligence vice president Christophe Renard said: “The global economic downturn has forced many companies to reduce their costs and manage their business travel more effectively.
“This study offers concrete, measurable ways to optimise hotel spend while satisfying the needs of travellers and the C-level suite.”
He added: “There are more than 250,000 chain hotels and independent properties that service corporate travellers worldwide.
“Pricing is complex and rates may vary depending on the day of the week, the season, and/or the economic conditions in a particular market.
“In addition, there are several distribution channels and a variety of standards for rating hotel quality that differ from one country to the next.
“Nonetheless, companies can work around this complexity and effectively manage their hotel spend by designing and enforcing a programme that responds to travellers’ needs, negotiating skilfully with preferred hotels, and continuously tracking performance.”
The research findings follow online surveys with 101 travel managers from companies of all sizes around the world as well as 5,016 corporate travellers and travel arrangers.
CWT’s seven steps that help companies drive hotel savings:
1. Consolidate data. Accurate, comprehensive data that provides a breakdown of room rates as well as additional expenses is needed to assess the total cost of stay. Companies can get the most complete data from a travel management company and corporate credit card provider. E-folios (electronic itemised invoices from the hotel), when available, also facilitate accurate consolidation of total spend.
2. Understand traveller needs and behaviour. Contrary to popular belief, travellers rate a hotel’s proximity to their place of business higher than hotel category, which is not necessarily a driver of satisfaction. Nonetheless, the research shows travellers prefer higher-category hotels for longer stays. Four types of corporate hotel guests were identified based on their varying needs for practicality (i.e. internet access, on-site restaurant, leisure/sport facilities) and comfort (hotel category, quality of service, security, atmosphere, environmental friendliness): “Demanding customers” (32%) rank all features high in importance; “Comfort seekers” (25%) rate comfort higher than practicality; “Pragmatic travellers” (9%) consider practical features more important than comfort; and “Easygoing guests” (34%) score all features relatively low in importance. By identifying the predominant segments in their companies, travel managers can design or adapt their hotel programmes accordingly.
The research also shows travellers prefer a “no-frills,” functional approach to online hotel booking over photos and feedback from their peers.
3. Design an effective hotel policy. A clear, comprehensive hotel policy drives compliance. To that end, the use of preferred hotels and preferred booking channels (i.e. the travel management company and corporate online booking tool) must be mandated. To support this, the research shows that booking through the travel management company results in the use of more preferred hotels, as well as rates that are 18-21% lower compared to other booking channels such as hotel call centres and websites, a call to the hotel directly, online travel agencies and specialised hotel booking sites.
When preferred properties are unavailable, travellers need precise instructions on what to do. This might mean booking a preferred chain, when available, over a non-preferred property or respecting a city cap (i.e., spend limit) in places not covered by the preferred hotel programme. Furthermore, the policy should authorise bookings at non-preferred hotels only when the rate is at least 20% lower than that of a preferred property. Travellers must also have clear guidelines on which amenity charges will be reimbursed, as these can add up to 33% to the total cost of stay. Finally, mandating the use of the preferred corporate credit card leads to better tracking of hotel spend.
4. Optimise the preferred hotel programme. Companies should negotiate a preferred hotel agreement whenever spend reaches $10,000 at a particular property. Savings may also result from introducing lower-category hotels that meet travellers’ needs into the programme, since the average price difference from one category to the next is 21-25%. In order to limit rate increases and drive compliance through consistency, companies should retain at least 80% of their preferred hotels from one year to the next.
5. Negotiate effectively. Individual, property-level agreements tend to generate greater savings than chain-wide deals, which offer a uniform percentage discount off the best available rate at all hotels within the chain. Therefore, when a company’s volume is particularly high, it can be more advantageous to negotiate a property-level agreement even with a chain hotel. Conversely, chain-wide deals enable companies with highly dispersed travel patterns to extend the benefits of a preferred hotel programme to markets where their volume is insufficient for property-level negotiations.
Negotiating last-room availability clauses (i.e. hotels must offer the negotiated rate even when only one room of the negotiated type is available) ensures that companies pay a lower average room rate over the entire year. Although most companies prefer the predictability of negotiated fixed rates, dynamic pricing agreements, whereby companies receive a negotiated fixed discount on fluctuating hotel rates, can outperform negotiated flat rates.
6. Improve traveller compliance. In addition to policy mandates that are widely communicated, travellers and travel arrangers must have easy access to the list of preferred hotels, as well as a user-friendly corporate online booking tool. In addition, travel counsellors at the point of sale should be authorised to enforce compliance, as well as request that travellers make air and hotel bookings at the same time. Companies must follow-up with non-compliant travellers.
7. Track performance. Several performance indicators must be tracked in terms of programme design, sourcing, traveller compliance, and hotelier performance. It is particularly important that global distribution system rate-loading audits be conducted several times, particularly at the beginning of the hotel programme, since errors are more widespread than commonly thought. An initial CWT audit of five companies’ hotel programmes revealed that only 50% of negotiated rates were loaded correctly by hoteliers. Furthermore, conducting rate-loading audits can reduce the proportion of rates that are not loaded in the first place from 40% to 16% on average. Regular rate audits of hoteliers are also important, as they help to ensure they are respecting their commitments. They also identify travellers who are staying in higher-category rooms than authorised.
*The full report is available at www.carlsonwagonlit.com.
Phil Davies
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