Setting rate targets drives significant hotel program savings

Challenge:
One of our clients, a global medical firm, managed their hotel program traditionally using static negotiated rates. They also used rate caps to manage spend in all negotiated markets. In their primary markets, where they had a lot of leverage to negotiate competitive rates, their rate caps were set fairly competitive—well below their market rate. But in their secondary markets, the rate caps were much higher than their market rate. Because rate caps serve as decision-making anchors, this was driving high average booked rates.

Approach:
BCD leveraged the decision-making psychology behind anchoring and re-set the rate caps to at least 10% off standard rates. Instead of “caps” these values are now “targets” in that they represent an acceptable nightly rate for a hotel.

Results:

  • Rate targets implemented across all primary and secondary markets and set to 10% less than standard rates available to the general public
  • Elimination of sourcing in secondary markets (55% program size reduction)
  • Savings of 4.9% YOY in new non-program markets
  • Savings of 2% in top tier program markets

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