Sourcing hotels is normalizing! While we see continuous change in all areas of preferred supplier negotiations, the hotel sector is working towards increasing transparency and partnerships with their corporate customers.
KEY DRIVERS TO THE ONGOING RISE IN ROOM RATES:
- Pressure of Wage Increases: Hoteliers around the world continue to struggle with retaining quality staff alongside the pressure for wage increases. Over the past few years, average hourly earnings for employees in the hospitality sector has grown by 28.55%.
- Traveler mix and room availability management: Occupancy has always been a key driver in securing a competitive negotiated rate, whether standard or last room availability (LRA). With the dramatic increase in leisure travel, properties are now paying closer attention to the mix of room availability per demographic of traveler.
Properties are making a conscious decision and forcing a change of mix within their property management. There is no longer the benefit of consistency between group, business/transient, and leisure, requiring properties to determine how to approach, balance and ensure their rates and availability are properly aligned with their individual strategy.
BEST PRACTICES FOR SOURCING APPROACHES
- Today’s Data: Most companies have adjusted their business travel needs and expectations. Be realistic as to how your business has changed and what is on the horizon. It is important to stop looking back! Look at your current and near future projections based on your booking data in order to ensure you are not over promising, nor under predicting the number of room nights you will be requiring
- Be Individual: Your corporate culture and traveler needs are unique. Avoid generalizing your requirements, ensuring the property is a good fit for what your travelers want. Understanding this will limit the number of properties you request bids from, and ensure you are identifying the right match of services with traveler expectations.
- Have a dialogue when possible: While most larger sourcing programs are performed digitally, if you are negotiating with a single property near your corporate location, it is important to speak with the property’s management. Come to the table with an open hand, knowing your needs while at the same time understand the purchasing power you have or don’t have. Being open and transparent helps build trust in the relationship and will benefit your longer term negotiation outcomes.
Fixed or Static Rates: A fixed rate is a pre-determined nightly room rate that will not fluctuate over the term of the agreement. This is particularly beneficial
for ease of budgeting. By choosing a fixed rate, this will limit any potential savings by automated rate searching tools that identify a lower rate at that
property, i.e. Travel Incorporated’s HotelRate Check product.
Percentage Off Rates: Percentage off rates are generally the most recommended when negotiating chain-wide agreements, which will discount the current
rate at their property by the percentage contracted. This approach provides the highest flexibility for both the properties and your company while still
maintaining a discount and the ability to ensure the lowest rate class is being captured.
Last Room Availability (LRA): If you have a property that is one of the most desired by your travelers and guests, you may elect to negotiate a slightly higher
nightly rate to guarantee that if a room is available you will be able to book it. This is a situation when you need to determine if the LRA rate provides the
appropriate value to offset the increased price.
The two key components to keep in mind when sourcing your preferred supplier agreements and specific properties are:
- Make certain the property/chain will load the rates in the Global Distribution System. Travel policies are highly encouraging their travelers to book
through their preferred channels to not only increase their negotiation leverage but for Duty of Care purposes beyond air.
- Source with Intent.
• Solicit only the hotels that fit within your program guidelines and needs.
• Understand what is important to you as well as the property. Create a partnership through dialogue and fact based data
Travel Incorporated is here to assist with any of your hotel sourcing needs. Contact your Client Success Manager today for more details.