For many years, travel program success has been measured in savings. In an effort to simplify hotel program management, companies define success by the number of rates negotiated and whether a new negotiated rate is higher or lower than the prior year's negotiated rate or best available rate. Often, this results in travel buyers spreading the program too thin when they select properties in markets where they have no leverage. Furthermore, hotels are reducing the number of rooms available at the negotiated rates, leading travelers to book at higher rates or to find lower and better rates in alternative channels. More often than not, this strategy results in a massive difference between projected savings based on negotiated rates and actual spend because travelers are simply not able to book negotiated rates all the time.
Define the Real Value of Your Travel Program
Travelers assume that if they're booking a preferred hotel, it's the best deal. Often, it's not. Many companies overlook commission structures when they sign chainwide agreements because they can't count them toward the metric they are using to show savings with negotiated rates. It's a similar frustration with ancillary spend. If a negotiated hotel rate includes breakfast, that doesn't count as savings. And yet, when you add up what the room and breakfast would cost when purchased separately, the negotiated package will likely be superior. The real issue lies in how a company quantifies the actual value of its program.
Measure Your Negotiated Rates Against the Market's Average Booked Rate
Suppliers are taking a more dynamic approach and using real-time data to maximize revenue. It's time to do the same in maximizing the real value of your program. The bygone metric of measuring success by comparing your negotiated rate to best available rate or last year's negotiated rate has very little grounding in reality, given the disparity in how and where rooms are sold at any given moment in time.
Instead, measure your savings relative to the average booked rate at the market level. Actively monitor rate availability and communicate performance with your suppliers regularly. This will be a great lever for renegotiation if a supplier is not holding up its end of the bargain. Watch the market before and after a hotel booking is made so you can guarantee the best available prices and options for your travelers.
Enlist the support of your travelers. Communicate program goals and benefits, educate them on changes and provide them with their own report cards on how their booking behavior is impacting savings goals. Understand the needs of your travelers and define the right mix of hotels and extended-stay properties in your top markets or in those markets where you anticipate growth.
Choose Your Battles
Negotiate static rates only in markets where you have leverage. Ensure you have enough volume to justify the number of preferred hotels. In markets with less volume, save time by negotiating multiyear dynamic rates or use current market prices. Then use market-level rate caps to manage spend. Bring this all together by adapting your program throughout the year. Challenge suppliers that aren't living up to their commitments, add and remove hotels as necessary and use the changes as opportunities to solicit traveler feedback.
The key to making this work is directing your travelers not just to book preferred properties but to book the best-value rates. Driving spend to a property when it's not the best value hurts your company on the front end and negatively affects future pricing.
Get Your Entire Company on the Same Page
A value-driven travel program will save more money in the long run but requires all stakeholders and systems to communicate effectively and to clearly define the long-term outcomes they wish to achieve. Sometimes this means unprecedented collaboration between procurement and travel managers to rethink accountability for both teams. It's possible to document savings from market rate caps, from rebooking of lower rates through price assurance tools, from traveler report cards that demonstrate improvements in booking behaviors and, ultimately, from a quantifiable measure of satisfaction with the program itself.
Establish your goals and then implement incremental adjustments in that direction. Sustainable change happens in stages and is reinforced when you share performance data with those contributing to the success.