By Jonathan Kao, Managing Director, Greater China
A corporate travel manager I spoke with in Shanghai described an unusual experience her travelers were having at preferred hotels: Front desk staff were asking them to prove they worked for the company whose negotiated rate they had booked.
One director was asked for a corporate badge or business card. Neither helped. His company doesn’t display its name on employee badges for security reasons, and printed business cards have largely disappeared from its workforce.
It might sound like a minor check-in inconvenience, or an issue particular to China. But it points to a much bigger question for companies managing hotel programs globally: How well does a negotiated corporate rate hold up once travelers start using it?
When the rate code is no longer enough
In China, access to corporate hotel rates has become increasingly difficult for hotels to control. Corporate and employee rates can be advertised through online marketplace and resale platforms, allowing people outside the intended organization to gain access to rates negotiated for specific companies.
Some hotels have responded by checking travelers’ company credentials at the front desk. But that addresses the problem at check-in rather than at booking and places the burden on the traveler. More importantly, it illustrates a broader weakness: A corporate rate code alone isn’t necessarily enough to protect a hotel program. And unauthorized access isn’t the only source of leakage.
When a lower rate takes travelers outside the program
Another dynamic can occur at the property level. A hotel salesperson recognizes a frequent traveler from a high-volume corporate account and offers to handle a future stay directly, potentially at a lower price than the company’s negotiated global rate.
The economics can make that tempting for both sides. Hotel properties have their own occupancy and revenue goals. Travelers see an opportunity to save money. Yet a transaction that looks better on an individual stay can create a very different outcome for the travel program. That’s where looking only at the nightly price can be misleading.
A corporate rate is a system, not just a number
A negotiated rate is only one part of the value created by a managed hotel program. Behind it can sit negotiated terms, preferred booking channels, payment arrangements, cancellation conditions, service standards, traveler support and the data companies use to understand their travel activity and negotiate with suppliers.
When a traveler books outside that structure, the hotel may be cheaper on a particular night. But the company may lose visibility into the stay and the ability to count that volume toward its hotel program. And if something goes wrong during the trip, the travel management company may have less visibility to support the traveler effectively.
That creates an understandable challenge for travel managers:
- A traveler sees one number and asks: Why is the rate I found lower than the rate my company negotiated?
- Travel managers have to answer a different question: What does the company get for the total cost of the stay and the way it is booked?
Those aren’t always the same calculation.
The challenge is bigger than China
The behavior may look different from market to market, but the tension behind it is familiar.
- Procurement wants visibility into volume, reliable data, cost control and stronger leverage when it is time to negotiate again.
- Hotel groups want sustainable corporate relationships and appropriate use of negotiated rates.
- Individual properties have their own occupancy and revenue objectives.
- Travelers want a competitive rate and an easy booking experience.
- And the managed travel program depends on bookings flowing through channels that support policy, traveler assistance and usable data.
The challenge arises when those interests point in different directions. China makes some of the friction particularly visible. But for global hotel program owners, the larger lesson is not really about China or even corporate rate codes. It’s about whether the structure supporting a negotiated hotel program works consistently in practice.
Three questions hotel program owners should ask
1. How much of our hotel activity can we actually see?
A competitive negotiated rate has limited strategic value if significant booking volume sits outside the managed program. Look beyond the contracted rate and understand whether travelers are consistently using the channels that make hotel activity visible.
2. Do hotel partners’ incentives support the program?
Conversations shouldn’t stop at the hotel group’s corporate level. Understanding what’s happening at the property level can uncover disconnects between the intent of a global agreement and the way individual hotels interact with travelers.
3. What does leakage really cost us?
A lower nightly price can appear to be a win. But hotel program performance should also consider what is lost when bookings move outside the program, including data visibility, traveler support, negotiated volume and future sourcing leverage.
Protect the system behind the rate
The more important question for travel managers is whether travelers, hotels and booking channels are reinforcing the structure that gives a corporate hotel program its value.
And while this example comes from China, BCD’s conversations with clients suggest the same situation can occur in any market. When travelers book outside the negotiated program, they may not only lose access to the corporate rate, but also negotiated amenities and cancellation terms that contribute to the overall value of the stay.
Because ultimately, negotiating the rate is only the beginning. The program delivers value when the rate, negotiated terms and amenities, channel, traveler experience, data and supplier relationship work together.
