What do you need to know before you negotiate?
What do you need to know before you negotiate?
For your organisation to achieve a tight travel program, negotiating competitive airline and hotel accommodation contracts with suppliers is key. So it’s vital to approach these strategic negotiations armed with all the information you need to achieve a tactical outcome.
Know your organisation’s travel behaviours
Before you contact hotel and airline suppliers, it’s essential that you have -
- accurate and current information on your organisation’s travel patterns, to help you assess the best suppliers
- rich reporting and data indicating your travel volumes and travel spend
- a thorough understanding of your travellers, their preferences and what is important to them
- consider consolidating your travel with a smaller number of preferred suppliers in return for loyalty bonuses
- knowledge of whether your company travel is consistent and predictable or ad hoc?
- an accurate picture of your company culture - when the culture is strong employees relate to the company’s values and tend to book within your supplier policies
- an understanding of how well you can control your travellers to book according to your supplier strategy. Even the best supplier strategy won’t work it your travellers don’t make in policy bookings.
How a travel management company can help?
Your travel management company can offer a big picture overview of your travel program, while also providing meaningful reporting to help identify your organisation’s travel volumes and patterns. Also having an up-to-date future travel forecast, for the coming contract period, will give your organisation’s negotiations added leverage.
For example, reporting may reveal that your annual travel patterns are generally consistent from one year to the next – so you can then target specific suppliers which meet those needs. However some industries naturally have more ad hoc travel behaviour. A classic example is the education sector, where academics and researchers can travel to unusual destinations for one-off conferences or study tours. These travellers are often very price driven, so to stretch their research budget or funding money they will take the cheapest airfare option rather than have any loyalty to one supplier. In these cases, the organisation needs to consider a different supplier strategy to that of a company with predictable travel.
A professional account manager will also have their ear to the ground, so they can also provide expert insights into the latest travel industry trends, expected future price rises and supplier market intelligence. Starting your negotiations with this knowledge will help you gain the upper hand. However ultimately, the best outcome is to build a solid strategic partnership with your suppliers, built on mutual respect and trust.
When to negotiate?
While there used to be a preferred time of year to embark on hotel contract negotiations, that’s no longer the case. With innovations, digital disruptors and the more fluid nature of travel, negotiations can take place at any time of the year.
With so many new accommodation suppliers emerging and seasonal market changes, hotel contracts tend to be 12 month terms to take advantage of constant market changes.
In contrast, airline contracts are generally contracted for a longer term of two to three years. With only two main carriers offering the majority of seat market share for corporate travel in domestic Australia, there is less change in the commercial market conditions. Depending on international travel patterns, organisations tend to have a select number of preferred suppliers which provide the necessary program coverage. As a result airline negotiations occur less often, but should start well before a contract is due to be renewed.
Need Help With Your Contract Negotiation? The FCM Consulting Team Can Help
The FCM Consulting team provides procurement solutions and business advisory services to help companies generate more value from their corporate travel spend.
Working collaboratively with clients they also assist with developing tailored sourcing strategies to reduce costs, improve supplier value, effectively benchmark, forecast and analyse hotel, airline and car hire services.