Business Travel 101: Determining the right corporate hotel programme option for your business
Determining the right corporate hotel programme option for your business
Both TMCs and businesses with large hotel spends face the challenge to gather their figures, combine that information with all their upcoming needs and then set about trying to use this data to secure the best possible accommodation for their travellers and rates for their employers. But buying is no longer just about negotiating corporate rates with hotels. Here are some trends to look out for.
1 Customer Experience, not just corporate savings
Some companies still focus on the spend but more are looking at traveller needs and thinking instead of value for money.
An accommodation strategy is as much about the traveller experience as it is about savings through negotiation. Some places that travellers might want to stay, such as sharing economy properties, may meet corporate budget criteria but not its duty of care requirements.
Traveller experience is not only about the overnight stay itself. Travellers now commonly book their own travel online so consequently have visibility of what else the market has to offer. Travel managers are recognising that travellers are becoming more expert which is a strong argument for devolving more decision-making. For example, if managers choose to work with a chain rather than a specific property, travellers are capable of then selecting the specific property at the destination.
Rather than having a comprehensive programme with named properties at every location, buyers are increasingly focused on their key destinations, i.e. ones where they have sites or clients and consequently strong volumes, and then working with groups or suitable properties with a presence in the locale to get the best value.
Given the challenges faced by managers in achieving the uptake required to negotiate the keenest corporate rates, the trend is to focus on consolidating spend with one or two chain-wide deals. Managers can assess which domestic or worldwide locations their travellers are visiting and leverage all the volume to negotiate a sizeable discount with a couple of big hotel groups. Then even when only one traveller is booking one night with a contracted chain that traveller will still be able to benefit from a discounted corporate rate.
The buyer trend is to focus on destinations in which they either place – or know they will be placing because of a new company location or client – a significant number of room nights.
3 Total Cost of Travel
Buyers with significant extra spending on items such as parking and WiFi, should consider negotiating to include them in the room rate.
More importantly, a corporate should highlight their travellers’ total spend in a hotel every night they stay. Customers who have a relatively high TRevPAR (total revenue per available room) are generally more valuable to a property.
Buyers can leverage this extra spend to get a lower room rate. In the past F&B might have been a separate expense line. Better integration of data means that manager can encourage a change of behaviour, such as travellers eating their evening meal in the hotel, to achieve a lower room rate.
Flagging meeting spend with a property is also evidence of a more desirable corporate customer.
A customer whose travellers need room nights on a Sunday or Monday should similarly be able to negotiate a keen rate. Hotels have no incentive to offer a corporate room rate to a company offering 100 room nights on a Tuesday because popular, big business cities are regularly oversold on peak business travel nights. Travel managers need to make use of any data which shows them to be an attractive customer.
4 Group or Chain Properties
Most travel programmes seek discounts on rates and choices for travellers.
A corporate might typically have a tiered programme to cover as many requirements as possible such as a few chain deals for their big cities and, where possible, negotiated rates for specific hotels which reflect the chainwide deals.
The goal for any programme is to achieve as much volume as logical to support an overall discount.
As travellers increasingly do their own bookings it is important to encourage them to use the company code when using the supplier site or, as when they use third party consolidator or OTA, they won’t be recognised as a business traveller.
5 Loyalty Rewards
People who travel a lot for business can earn significant loyalty rewards.
Such benefits cost the corporate customer nothing and a company can use these points as an incentive to achieve greater programme compliance.
Points can also be a keen retention tool for frequent travellers because as the traveller accumulates points and moves through tiers, they will receive more benefits such as upgrades and free WiFi.
Companies can maximise the value of corporate rates by using reports and audits to check availability and uptake. This is especially important for corporates relying on only a few chains. The TMC should check to ensure negotiated rates have been loaded and available to book and if not, resolve the issue. It should also investigate any bookings which reports may reveal have been made at 5 or 10% above the negotiated rate.
A classic issue is that a negotiated rate is unavailable because of limited stock. For example, the property may be designating only a small number of rooms as standard and eligible for last room availability rate (LRA). If a hotel is unable to comply with a corporate’s needs over time because of rate unavailability or because of traveller choice, it might be time for a programme change.
Much can be written about pricing and negotiating but an increased emphasis on traveller choice means paying close attention to the uptake of a programme. If there is leakage, it may be because the properties might not be matching traveller taste which could be looking more for smaller, boutique properties, serviced apartments or sharing economy accommodation.
Corporate Hotel Programme Options
1 Corporate Rate
A negotiated rate available at specific groups or properties for that companies’ travellers. Rate are typically for certain room classes, e.g. a standard room with LRA, or inclusive of specific extras such as WiFi or parking.
Suitable for: Large-budget corporates who value rate certainty
2 Dynamic Pricing
A corporate-specific discount which can be applied to all the hotel’s BAR rates
Suitable for: Managed programmes that are able to negotiate aided by good insight into their volume and pattern of spend.
3 TMC Rate
The rates available to customers of a specific travel management company.
Suitable for: Smaller volume business measured either by total accommodation spend or per destination or property
4 Rate Caps/Per Diems
Freedom to choose any hotel based either on a cap for the room rate or a ceiling on daily subsistence spending.
Suitable for: Companies that value traveller choice and autonomy and are less concerned about compliance for purposes such as duty of care or consolidating spend
Favouring corporate rates over dynamic rates can have more to do with certainty than savings. Don’t reject dynamic pricing out of hand.
A lot of customers are wary because they think that if hotel groups are pushing it, it must mean higher rates but dynamic pricing is worth considering.
Corporate rates are set on the basis of peak night (Tuesday, Wednesday, Thursday) rates at peak times of the year but a lot of corporates do book accommodation on other nights of the week and low periods.
If you have only 100 room nights a year with a property you won’t be getting a big discount on your corporate rate but if you can consolidate your spend and get 15% off BAR on some of it, you will make savings.
Make use of dynamic rates on shoulder and low rate times. You might pay a bit more on a peak night but overall your average rate will come down.