Boost hotel negotiations ROI with VAT reclaim

Ask hotels to help your program recoup foreign value-added tax.

For years, corporate travel programs have focused on room rates and amenities during their annual negotiations with hotels. But the experts at business travel consulting firm Advito say now’s the time to add another topic to the conversation: VAT reclaim.

Value-added tax, or VAT, is included in hotel, dining and car rental bills and more when travelers go to countries that assess the tax. It can be a significant expense: VAT rates can be as high as 25%. The good news is most T&E-related VAT is eligible for reclaim. The bad news: In the past, it’s been hard to collect.

Tallying value-added taxes

VAT taxes add up. For example, a company spending €5 million per year on foreign travel could easily be losing €300,000 by failing to go after VAT. Here’s a look at the VAT rates travelers pay in top European Union business destinations.

  • Belgium     21%
  • Denmark   25%
  • France   20%, up from 19.6%
  • Germany  19%
  • Italy   22%, up from 21%
  • Netherlands   21%
  • Spain   21%
  • Poland   23%
  • Sweden   25%
  • U.K.   20%

Source: European Commission, January 2014 

Recouping that money has historically been a challenge for companies because it’s a confusing, bureaucratic, time-consuming process. But automation has made VAT reclaim for European Union transactions much easier. BCD Travel has partnered with, VAT-recovery firm Taxeo to automate the process.

“That makes VAT reclaim a viable option for any corporate travel program,” said Marwan Batrouni, senior director and hotel practice leader at Advito. Getting hotels’ cooperation can greatly enhance the success of a company’s automated VAT reclaim efforts, and there’s no better time to engage hotels in the process than during annual negotiations, he said.

For a corporate travel program, the value of a preferred hotel program increases when the hotel facilitates and streamlines the VAT recovery. For a hotel, this additional value comes from simply participating in an automated process. Reclaimed VAT goes up, while costly manual intervention and service fees go down.

The result is an increased return on investment for the corporate travel program—which comes on top of all other negotiated rate reductions.

Batrouni said formalizing an agreement on VAT reclaim can benefit both corporate travel programs and hotels by:

  • Reinforcing the importance of hotel program compliance
  • Reducing what’s currently being spent on VAT-recovery efforts
  • Strengthening the partnership by adding another financial incentive—VAT recovery—to negotiated room rates and amenities

The first step in adding VAT reclaim to the hotel-negotiating process is simple: Add it to the agenda. The next step is ensuring the right people are at the table—or at least consulted. Travel managers will need to ask that hotels’ VAT experts be available to answer questions that come up during negotiations.

Automating VAT reclaim presents a significant opportunity for mature corporate travel programs looking for increasingly elusive savings.

“VAT opens up a new savings beyond rates and amenities,” Batrouni said.

icon-electricWant to know more? Check out the video below about VAT reclaim opportunities and download BCD Travel’s paper and infographic: VAT Reclaim: Don’t Leave Money on the Table. Then ask how BCD Travel, Advito and Taxeo can help you reclaim the money you’re leaving on the table.

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