Change is constant. Digital is magnifying
stale practices that are in need of reinvention. This environment signals a
glaring misalignment between hotel management and market dynamics.
Procurement has long relied on annual sourcing cycles to
manage hotel spend. Yearly planning offers a road map at the time when property
rates are loaded, but set-it-and-forget-it category management is no longer
enough.
Today's market requires a lot of buyers, making it difficult
to keep pace with changing business needs, to track market fluctuations, to
measure the value of preferred rates against what's available and to make
adjustments throughout the year. In 2017, more travel buyers will adopt a
year-round approach to manage hotel performance rather than limit hotel
management to the traditional RFP season.
Four Trends Accelerating This Shift
Supplier consolidation is game-changing: Consolidation
has increased over the last two years. While the Accor/Fairmont, HNA
Tourism/Carlson Hotels and Marriott/Starwood mergers didn't have vast impacts
on 2017 negotiations, the implications for 2018—particularly from the
Marriott/Starwood merger—will be significant. Now's the time to prepare. Buyers
who do prepare already have established the analytics structure to anticipate,
gauge the impact and respond to changing scenarios before hotel season.
Hotel rates are in flux: Hotel rates are generally
softening, but they fluctuate market to market. It is unclear if the downward
shift in North America and the Middle East, the upward change in Asia and Latin
America or the steady trend in Europe will continue. Buyers who maintain a
pulse on how markets are changing between cycles are better equipped to adjust
and continuously improve their programs.
Persistent yield management strategies are rising: Suppliers
are becoming sophisticated in controlling their inventory. They adjust rates on
a daily, even hourly, basis. They promote dynamic, or best available, rates;
fixed rates; or a hybrid of the two. And some offer special rates to travelers
who book directly. As a result, preferred rates on average are unavailable for
booking 35 percent of the time. Corporate travel buyers with additional
visibility into supplier strategies can monitor changes in a complex hotel
market and adjust elements dynamically.
Noncompliance becomes engaging: Most hotel compliance
rates hover around 50 percent to 60 percent largely because few companies
mandate preferred hotels. Most reimburse travelers who choose nonpreferred
properties, who fail to book the preferred rate or who don't book in advance
causing high leakage. Buyers who actively engage and communicate with travelers
are defying these averages.
Buyers will respond to market fluctuations and
ongoing changes in the hotel category by adopting a dynamic approach. The key
is to invest in ongoing program management so you can break the sourcing cycle
and improve your hotel program. Going forward, there will be no managing hotel
spend without this year-round strategy.