4 reasons not to postpone your 2020/21 hotel RFP

1. Market conditions have changed

Companies need to review their existing hotel programmes in a new light, focusing more on health and safety than they may have in the past. This may mean adding or deleting hotels from their travel programmes. RFPs provide companies the opportunity to do this en masse, rather than one by one.

Due to prevailing conditions, customers that have previously been using 3rd party content may want to switch to direct relationships. Furthermore, there are many organisations that may not have had a formal preferred hotel programme pre-COVID and are now realising that they need one. These firms will not be able to wait until 2022 to address this issue.  

2. Cash is king

Few businesses have seen their revenue untouched during this crisis, making expense control imperative as the economy transitions back to some semblance of normal. The RFP process, for all its flaws, remains the best method to quickly and accurately build a successful hotel programme that reduces lodging expenses and contributes positively to operating margins.

It is expected that not all markets or all properties will see an overall decline in room rates. Some may rise in an effort to regain lost revenue or to take advantage of local market conditions. Other markets may see hotels offering dramatically reduced rates as corporate and leisure travel slowly returns. In any event, companies will still require the best local rates that their volume can justify. Using corporate rates negotiated during the completely different pre-COVID environment ignores the new reality we are all experiencing.

3. Enter the dynamic marketplace

In the recent past, many hotels have been seeking to transition from static property-level rates to dynamic rates for their corporate clients. More companies will be willing to consider dynamic rates, perhaps combined with a rate ceiling, given the uncertainty of the market. This shift could outlast the recovery period and become the new normal for corporate programmes.

4. Everything has changed, but nothing has changed

The basics of the industry are still supply and demand. Each party seeking the right price point to optimize value for their respective interests given the market conditions. It’s true that the list of hotels temporarily or permanently closed makes the overall supply uncertain, while government and corporate restrictions and the general reticence to travel make demand figures unknowable. Therefore, finding the right room rate that offers good value for a reasonable return will be an evolving process over the next months and years.

The opposite of a moratorium on Hotel RFPs may in fact be required in favor of more frequent semiannual, or even quarterly RFPs, in high-flux markets. Hoteliers and client companies will need to continually iterate their programmes as conditions change, travellers get more comfortable traveling, borders open, and the industry rebounds.