Companies overspend on hotels by millions of dollars. That wake-up-call statistic emerged from recent analysis of BCD Travel client data for large and midsize companies.
It’s a clear signal for companies to take action, said BCD hotel expert David Mitchell: “Every travel program should include standard hotel rate audits, rate availability audits and hotel price assurance. Every one of those services yields a return on investment.”
The analysis found:
- Without performing standard rate audits, a company overspends by $122,500 for every $5 million it spends on hotels.
- Using both standard rate auditing and rate availability audits prevents $225,000 in overspending for every $5 million spent on hotels.
- Hotel price monitoring programs like BCD Travel’s Hotel Price Assurance yield net savings of $110,000 for every 50,000 hotel bookings. (Note: Hotel Price Assurance is available in North America; in initial launch in the U.K. and Ireland; and is scheduled to roll out globally later this year.)
Today’s dynamic hotel market factors into the overspending, Mitchell told attendees of the Association of Corporate Travel Executives meeting in New York in April. “Hotels can put into place dynamic room management and pull rooms out of inventory,” he said. “It limits the opportunity to use corporate negotiated rates. That can push average daily rate up.”
“Hotel contracts and RFPs [requests for proposals] continue to get more complex,” said Mitchell, senior vice president of Supplier Relations & Global Hotel Strategy for the travel management company. Many buyers, hoteliers and their partners agree that the traditional approach to hotel sourcing doesn’t work very well; the trouble is coming up with another way.
Attendees to Mitchell’s ACTE panel discussion heard a few perspectives. TripBam’s Steve Reynolds noted his desire to “kill” the RFP process. Mitchell said BCD favors a diversified approach using traditional negotiated rates and market pricing. Rather than killing the RFP process, he said, clients should “take some steps” toward that.
“You can put in with preferred partners both fixed and dynamic negotiations. A little like the 80/20 rule,” Mitchell explained. “You can layer in chain programs to cover secondary markets and sold-out situations. Also, use tools for spot purchasing, a little like a lowest-fare program. Lastly, you should bring in a rate assurance tool to monitor rates and offer lower rates to a traveler even after they have purchased. It can be at the same hotel.
“All this should give you the ability to manage dynamically in that environment and message travelers to let them know rates are peaking,” he said.
Learn more about hotel pricing and savings strategies for today’s market by reading Rate Expectations: Is Dynamic Hotel Pricing Coming of Age?, a paper from business travel consultancy Advito.
