Marwan Batrouni, Advito senior director and hotel practice area leader
The news: First, occupancy at U.S. hotels hit record levels in March and April. Next, a PricewaterhouseCoopers report predicted U.S. occupancy will reach 65.7% this year, a level not seen since 1981. Then, on June 1, hotel executives quoted in an article by Business Travel News made the proclamation travel buyers were fearing: Rates will rise.
Advice for travel managers: Rising demand empowers hotels to retain pricing power and engage in tough negotiations. Last room availability (LRA) is at a premium in most U.S. markets. More properties are offering non-last room availability (NLRA) as a way to manage demand. Prices are rising in all markets, especially primary business destinations. Hotels are heading into negotiations looking for commitments and minimum targets from travel buyers before they’ll even consider rate reductions.
Travel buyers should begin outlining their negotiating strategy immediately. Plan to negotiate effectively and aggressively, even in what’s becoming a “seller’s market” for U.S. hotels. Don’t just submit to hotel demands for large rate increases; if your spend is substantial, you have negotiating power.
Arm yourself with data and insights for existing spending and traveler trends. Benchmark to know how your spend stacks up against peer programs. Call on expert advisers to guide you through the negotiating process and toward little-known savings opportunities.
Most importantly, set specific and realistic targets about what you want to achieve for your hotel program, then monitor your progress toward those targets throughout the RFP process. Doing so will help you keep your eyes on the prize when the meetings get long and negotiations heat up.
Check out Advito’s eight tips for travel managers heading into hotel negotiations.
