Imagine wasting 400 hours of your life? In 400 hours a person can walk from Paris to Minsk or from Copenhagen to Naples. As it turns out it also takes about 400 hours for travel buyers to secure discounted rates during the Request For Proposal (RFP) season, that time of year when corporate travel buyers think about their hotel rate programme for the next 12 months.
Wouldn’t it be terrible if all that time and effort was wasted?
Generally speaking this time and effort does return discounts to the tune of about 23% off the best available rate (BAR). However, during the 2019 RFP season brands will be leveraging their scale by placing more conditions on companies in order to retain chain-wide or even individual discounts, and fixed pricing will likely come at a higher price premium. Also, a clear lower limit is appearing in hotel negotiations. Any properties that see somewhere between 150 and 300 room nights or less, will yield discounts that aren’t worth the time or money spent on negotiations.
In order to ensure you aren’t wasting the equivalent of a nice stroll across Europe, it’s important to have much more than just price-point in mind during the 2019 RFP season.
For example, let’s assume you do negotiate for a good discount at one of your high volume properties. How often will this discounted rate even be available? According to a recent study, corporate negotiated rates without a last room availability agreement are unavailable 26% of the time.
Last room availability is therefore key in your negotiations, but hotels are putting this guarantee at a growing premium. In fact, CWT Solutions Group found that companies are overpaying by as much as 8%. The actual breakeven point for LRA varies by company, but generally speaking you should not be paying more than a 3% premium.
Another thing to watch out for is the teaser rates some providers will put forth during RFP season, as it may apply to a low-priced room that only represents a small percentage of a hotel’s inventory. Then a higher tiered room could be loaded for a higher price, but masked as a preferred rate. It is important to make sure hotels define the exact room type that a discounted rate will be associated with.
Ok, now availability has been proven, and you have gotten the rate and room type spelled out clearly in the contract. What else should you consider in conjunction with your 2019 negotiations?
The 24-48 hour cancellation policy trend we have all heard about will continue to be a battleground topic. The trend is unacceptable for companies, but it isn’t going away as hotels are seeking to hold onto this inventory.
It’s important, therefore, to have a rate tracker that can work within those tight cancellation windows. If a hotel is forced to concede that it is not in a sell-out condition, the hotel can start opening rates back up. At this point rate tracking tools can find and book those better rates, which mean automatic reductions in your travel spend.
It is also highly recommended to not rely on a single source of rates. Although your corporate negotiated rate will likely only come through a Global Distribution System (GDS), utilizing other sources of rates will help mitigate against any rate fluctuations and help provide greater availability in lower volume travel areas. By increasing availability to all markets globally, you will see an increase in your travelers sticking to your travel policy, leading to better tracking of travel spend and improved duty of care.
Blog Author: Scott Brennan, Chief Growth Officer and Founder, RoomIt by CWT