Travel buyers who break the cycle of hotel procurement not only relieve themselves of the dread of long, tedious annual negotiations, they also improve the performance of their corporate hotel programs, said Advito expert Marwan Batrouni. Dynamic performance management for hotels—a data-driven strategy similar to ongoing air program management—is the way to achieve it.
In a recent blog, Batrouni, senior director and practice area leader of the business travel consultancy, explained the benefits of this year-round approach. Dynamic performance management gives hotel buyers the strategic information needed to:
- Replace negotiated fixed rates with negotiated dynamic rates in certain markets
- Add hotel price assurance programs
- Complement a preferred fixed-rate program with chainwide agreements
- Look into more spot buying and implement a lowest logical rate policy
- Use market caps to control costs
- Communicate more closely with travelers to influence behavior
Launching dynamic performance management starts with evaluating the current state of a corporate hotel program, Batrouni said. It’s essential to know whether a corporate travel program is really getting what has been negotiated with hoteliers. He said Advito gets these facts through two key audits conducted on behalf of clients.
A rate availability audit targets specified properties a month in advance to determine how frequently suppliers make rates available for booking. If a property’s negotiated rates aren’t available 25% of the time or more, “that’s a red flag,” Batrouni said. In addition, if loaded rates are higher than negotiated prices 15% of the time or more, that’s also a problem. This data helps determine whether hotels are playing “availability games” with their inventory and their yield management, he said.
A market rate (or best available rate, i.e., BAR) audit looks for the best available rate at every hotel negotiated by a corporate program. If the best available rate to the public is close to or lower than the company’s negotiated rate, that gets Advito’s immediate attention. “It means we found a better rate than the company is receiving, which diminishes the impact of their negotiations,” Batrouni explained.
Armed with this information, travel buyers can shift to dynamic performance management—making adjustments to their hotel programs throughout the year, Batrouni said. “It’s hotel program management on steroids.”