As the hotel technology provider to hundreds of large, medium and small corporations, we get a unique perspective into what makes for a good hotel program and what doesn't. It's not based upon opinion; it's based upon the data we collect across millions of hotel bookings.
One thing that may surprise corporate travel managers is that overall program size does not matter. Instead, what matters is the number of nights that you're able to deliver to a hotel in return for a good discount and your ability to shift that volume as needed. Establish these two capabilities, and savings will come your way. Another thing we've found is that with technology, hotel savings from a strong hotel program can be as big or greater than what you get from an air program.
Based on the data and learnings we've gleaned over the past six years, here are a few rules a company should follow to maximize hotel program savings:
1. Cover as many bookings as you can with a preferred property discount. As long as you can audit, the type of rate negotiated doesn't matter, whether dynamic or flat. The discount as compared to the market should be 25 percent or more where you have the volume. Cover as many bookings as you can with this deeply discounted rate. To achieve the widest coverage, dynamic sourcing is the answer. Don't wait until once a year to get your deals in place; get them as soon as they are needed by monitoring your spend on an ongoing basis. Eighty percent coverage is the dream; 60 percent is the norm.
2. Make sure your preferred hotels are performing as expected on four key metrics:
- The discount should average at least 25 percent below the market rate at that hotel.
- Ensure through daily rate auditing that you get your discount at least 90 percent of the time.
- Compare your negotiated rate to the rates of other companies with similar spend at that hotel. Again, it doesn't matter if your overall hotel program is big or small. What matters is how many room nights you can provide an individual property.
- Monitor hotel performance regularly. If a hotel is not performing as expected, contact it to fix the issue or remove it from the program. Don't wait until the end of the year before making a change.
3. Cover secondary markets with a chainwide discount of 15 percent or more. Try to get last room availability, or your actual savings will be half of what you expect. If you can't get a chainwide discount, consider searching across a select group of hotels within an area to move bookings into the best hotels at the best rate.
4. Cover the rest with a group discount. Any bookings not covered by a property-level or chainwide discount should be covered by searching across a group of hotels that meet certain user-defined criteria, by your travel agency or by a consortia discount.
5. Establish the ability to shift volume as needed either to highly preferred hotels or away from nonpreferred properties. Customers with proven ability to shift share obtain much greater discounts. This can be done through proper configuration of the online booking tool and shopping daily for the best rate across a group of preferred hotels to nudge travelers to the properties where you want them to stay.
If a company does all of the above—negotiates good rates with at least a 25 percent discount, covers 80 percent of their bookings with a preferred property deal, covers 15 percent with a chainwide discount and the rest with a hotel group search or an agency discount—the overall hotel program savings will be more than 25 percent.
Most companies today achieve an overall savings of only around 15 percent on their hotel spend. With a bit more effort and the support of technology to achieve the objectives outlined above, 25 percent savings or more can be achieved. What would an additional 10 percent cost reduction in spend mean for you and your company? For travel managers, I'm thinking a nice bonus at year-end.