The Covid-19 pandemic upended the "rules" for how corporate lodging programs are put together. Though business travel is beginning to return, some buyers are rolling over 2020 rates again since many travel managers still don’t have enough current data for negotiation leverage or know yet where their travel will be concentrated in the coming year.
Further, some buyers moved to or intensified their dynamic pricing last year, along with chainwide discounts, and those have not abated. In addition, the annual request for proposal process is being replaced by a continuous sourcing cycle for a growing number of companies. Rate auditing or reshopping tools are more important than ever to keep a handle on the best prices available in this quickly changing market.
WHOSE MARKET IS IT?
The expectation in mid-2020 by some prognosticators was that buyers would have the upper hand after hotels had called the shots for about a decade. But it’s more complicated than that. The recovery is playing out on a local level and is dependent upon the destination and hotel tier. Secondary and tertiary as well as suburban markets are seeing occupancy recovery, while urban gateway cities for international travelers lag. The latter also are where some hotels, particularly full-service properties, remain closed or are operating at less than full capacity.
The business vertical matters, too. Essential workers helped extended-stay properties lead in the recovery by tier. But higher-end corporate guests, like those from consulting and financial firms who tend to stay in luxury or upper-upscale hotels, are only just now beginning to return to the office and then the road.
But with leisure demand skyrocketing as vaccination distribution expands coupled with relaxed Centers for Disease Control and Prevention guidance, hotel companies might not be as reliant on the more elastic, volatile business travel segment as in the past, particularly in the U.S. For one, unlike other crises, rate integrity has been stronger than anticipated, with some companies seeing average daily rates already surpass those from 2019 for certain markets. Will those companies go after business travel the same way? Corporate buyers may have a hard time getting discounted rates unless they have meaningful volume.
Perhaps smaller hotel companies will make moves to capture more corporate clients. The pandemic has already impacted two years of programming, and its ripple effect looks like it will be influencing a third.