Business travel is booming again – and so are prices. Average daily hotel rates in Europe have moved six per cent ahead of pre-Covid levels, according to lodging data company STR. Further hikes can be expected imminently as demand strengthens: STR forecasts that room occupancy on weekdays (the days that matter to business travellers) will return to pre-pandemic levels by the end of June.
It is precisely as hotels fill and prices rise that travel buyers’ negotiated rates with preferred properties come into their own. “During Covid, the savings provided by static corporate rates were a lot less because best available rates were better than the discounts that had been negotiated in 2019 and were continuing to be rolled over,” says Steve Reynolds, CEO and founder of hotel rate reshopping and auditing technology provider Tripbam. “Now we are starting to see these discounted rates provide value.”
Yet the rates buyers negotiate can only provide value if they are available when travellers attempt to book them. After her last hotel request for proposal (RFP) cycle, Willis Towers Watson category manager Clare Francis commissioned an audit six weeks later and discovered that 36 per cent of the rates she had negotiated had not been loaded into the global distribution systems used by travel management companies and corporate booking tools. Astonishing as it may seem, that’s a pretty normal figure.
Failure to load rates is by no means the only problem. Hotels may not switch on discounted rates when they get busy, even if the client agreement guarantees last room availability – a guarantee for which the buyer usually pays a premium. Tripbam’s analysis of the millions of rates which pass through its database suggests travellers only have access to rooms at LRA-negotiated fixed rates 74 per cent of the time.
Top performers
Five hotels in London which most consistently have contracted discounts
available at point of booking:
• Leonardo London Tower Bridge
• The Tower - A Guoman Hotel
• Hilton London Paddington Hotel
• Hilton London Euston Hotel
• London Marriott Hotel Grosvenor Square
(Source: Tripbam)
Bad as that may be, non-availability of other rate types is often worse. Reynolds says discounted BARs, another common type of rate agreement, are available only 62 per cent of the time, while chainwide discounts, used for nearly 30 per cent of corporate bookings, only have 60 per cent availability.
Cumulatively, these lost discounts are costly. “The average company expects to save 15-25 per cent by having a hotel programme in place,” says Reynolds. “Due to LRA-related issues, the saving is reduced to 10-20 per cent. On average, if a company expects to save €1 million by having a hotel programme, €160,000 of that is lost each year due to LRA issues. This will increase as occupancy comes back and hotels prefer to sell rooms at the highest price.”
Non-availability of rates can be either deliberate or accidental. Poor communication plays its part. “A lot of deals are done at chain level and the hotel revenue manager doesn’t always know if last room availability has been agreed,” says Reynolds.
According to John Melchior, managing director of MD Travel Group Consulting, “in most cases it’s incompetence rather than unwillingness. I’ve also been told it’s pressure of work. A hotel may have a thousand agreements that need to be loaded at the same time but not enough staff to do that. I can’t believe hotels would be stupid enough to deliberately make rates unavailable on a consistent basis, because travel managers speak to each other. However, at individual property level a manager may not honour LRA if they see a big group booking is coming in and the hotel will sell out anyway.”
Fortunately, there are ways to minimise rate non-availability, but they need investment of time, money or both. Francis hires a third party to check rates have been loaded correctly into GDSs, and that LRA has been included, and room categories and cancellation policy are also correct. The auditor performs the first round of checks roughly six weeks after Francis completes her annual hotel programme, and then two more rounds at further intervals of two to three weeks.
By the end of this process, availability is up to 90-95 per cent, after which point Francis steps in personally to demand explanations from errant hotels. If she is still unsatisfied, “I have taken properties off our programme,” Francis says. “It tends to be independents in secondary and tertiary locations.”
Francis considers it “important to run an audit. A lot of time and investment goes into an RFP and we need to track our spend. We also don’t want any traveller issues,” she says.
But she also makes it clear that auditing is the final phase of her strategy to maximise rate availability, not the beginning. Francis likes to build long-term relationships with hotels partners, which she regards as ultimately more valuable than always chasing the absolute lowest rate on offer. Rate availability problems, she finds, are far less frequent with long-standing, trusted properties.
In many cases, buyers have stronger relationships with chains rather than with individual hotels within the chain which may have different owners and priorities. “If one hotel doesn’t make rates available, it affects the reputation of the whole chain, so at chain level they take this very seriously, which is why you should talk to the chain instead of the hotel,” says Melchior. “It will be far more aware of the value you bring. Say: ‘Are you willing to risk all your business for a hotel that’s not honouring its side of the agreement?’”
That means the buyer does need to be prepared to ditch a hotel if it avoids all efforts to meet its commitments. Walking away could be a difficult decision but ultimately it is a sanction which may occasionally prove necessary. “If you can’t shift share, it’s likely the issue won’t be resolved as the hotel will believe it can get your business regardless of its LRA performance,” says Reynolds.