Room for Savings: Optimizing Hotel Spend - Carlson

Room for Savings: 

Optimizing Hotel Spend

Welcome to the CWT Travel Management 

Institute research series 

The CWT Travel Management Institute conducts in-depth research into effective 

travel management practices to help clients worldwide derive the greatest value from 

their travel programs. 

Drawing on the global resources of Carlson Wagonlit Travel (CWT), the institute aims 

to provide a regular flow of business intelligence and best practices, offering actionable 

insights into the eight key levers to effective travel management identified by CWT. 

The research presented in this report focuses on how companies can optimize their 

hotel spend. 

Other original research publications include: 

Playing by the Rules: Optimizing Travel Policy and Compliance (2008) 

Global Horizons: Consolidating a Travel Program (2007) 

Toward Excellence in Online Booking (2006) 

In addition, the CWT Travel Management Institute publishes white papers, case studies 

and the global periodical CWT Vision. 

Eight key levers to effective travel management 

1. Provide the right services and assistance to travelers and optimize 

transaction processing 

2. TACKLE HOTEL SPEND IN A DISCIPLINED AND PROFESSIONAL MANNER 

3. Continue to drive air and ground transportation savings 

4. Increase policy compliance and optimize demand management 

5. Further consolidate travel programs 

6. Address security needs and corporate social responsibility 

7. Integrate meetings and events in the travel program to control and optimize 

the related spend 

8. Develop executive dashboards and actionable performance measures

Contents 

Introduction 

Overview ...................................................................................................................................................3 

Research objectives...............................................................................................................................4 

About this research................................................................................................................................5 

Key findings in brief...............................................................................................................................8 

A complex market...............................................................................................................................................12 

Key findings explained 

1. Hotel spend is often underestimated although it represents nearly 40 percent of 

the total travel budget .......................................................................................................................21 

2. Companies can save 21 percent of hotel spend by adopting best practices...........26 

3. Seven steps enable companies to optimize hotel spend ..................................................31 

Consolidate data..................................................................................................................................32 

Understand traveler needs and behavior ...................................................................................37 

Design an effective hotel policy .....................................................................................................47 

Optimize the preferred hotel program ........................................................................................62 

Negotiate effectively ...........................................................................................................................80 

Improve traveler compliance........................................................................................................110 

Track performance............................................................................................................................123 

Conclusion ...........................................................................................................................................................133 

Appendices 

Glossary ..............................................................................................................................................134 

List of companies researched in case studies......................................................................135

Overview 

Hotel spend has been left unmanaged in many companies, due to the complex nature of the hotel 

market and the difficulty of gathering data to accurately evaluate spend. 

This situation is changing as travel managers experience greater pressure to reduce costs and look 

for new ways to achieve savings. As this research indicates, hotels represent nearly 40 percent of 

the travel budget on average. The stakes are therefore high. 

CWT research shows companies can save 21 percent of their hotel spend by adopting best 

practices. Room for Savings: Optimizing Hotel Spend explains recommended measures and their 

impact, along with step-by-step advice on how to improve performance in this area of the travel 

program. 

This study also debunks several myths. It explains, for example, which hotel and booking features 

travelers value most, why it is important to favor preferred hotels unless alternatives offer 

significantly lower room rates, how dynamic pricing can out-perform flat-rate deals in certain 

conditions, and the value of city caps. 

Optimizing hotel spend can pay, bringing savings and sustainability to the travel program while 

enhancing service and security for travelers. 

3

Research objectives 

This CWT research has four main objectives: 

1. Provide a clear overview of the corporate hotel industry and key trends 

2. Evaluate the amount companies typically spend on hotels within their total travel budget 

3. Calculate the savings companies can realistically achieve by adopting best practices 

4. Identify the keys to success for optimizing hotel spend

About this research 

For an in-depth understanding of key issues in 

hotel program management, CWT combined 

several research techniques: 

Surveys 

A detailed, online questionnaire on hotel 

spend optimization involving 101 travel 

managers from companies of all sizes 

worldwide 

An online survey of 5,016 corporate 

travelers and travel arrangers on their 

hotel preferences and booking behavior 

In-depth interviews 

Interviews with 19 experts, including highlevel 

executives from hotel chains 

(general management and sales/pricing 

managers), credit card companies, global 

distribution systems, travel research 

organizations and travel management 

professionals 

An audit of hotel rates in global distribution 

systems to analyze rate- loading 

performance and fluctuations in the best 

available rate over time 

Case studies 

Analyses of spend data and interviews 

with travel managers from six companies 

on issues such as hotel policy, 

compliance, dynamic pricing, chain deals 

and sustainable travel 

This research was carried out from May 2008 to 

January 2009 and involved a wide sample in 

terms of company size and industry, travel 

managers’ scope of responsibility and travelers’ 

home region, as shown in Figures 1-3. 

Quantitative analyses 

An analysis of hotel spend and 

transactions made by CWT clients in 

more than 60 countries worldwide 

An in-depth review of credit card 

transaction data and CWT booking data 

from two companies in four countries 

A study of preferred hotel programs to 

examine coverage and pricing 

5

Figure 1: Breakdown of surveyed companies by sector and travel spend 

Sector 

Consumer goods/retail 

12% 

Heavy industry/ 

manufacturing 

12% 

Banking/insurance/ 

financial services 

10% 

IT/technology/ 

telecommunications 

12% 

Government/ 

not-for-profit 

10% 

Pharmaceuticals 

9% 

Transportation/logistics 

2% 

Other 

4% 

Aerospace/defense 

6% 

Professional services 

6% 

Energy/chemicals 

8% 

Food/beverages 

9% 

Total travel spend (US$) 

Hotel spend (US$) 

$50-100M 

8% 

> $100M 

$15-30 

12% 

$30-50M 

7% > $50M 

2% 

7% 

< $2M 

$20-50M 

20% 

< $5M 

30% 

$5-15M 

27% 

32% 

$5-20M 

35% 

$2-5M 

20% 

Source: CWT Travel Management Institute 

Based on a survey of travel managers (101 responses)

Figure 2: Breakdown of surveyed travel managers by scope of responsibility and region 

Scope of responsibility 

Region 

National 

43% 

Global 

46% 

Asia Pacific 

7% 

Latin America 

2% 

Regional 

11% 

North America 

37% 

Europe, Middle East & Africa 

54% 


Based on a survey of travel managers (101 responses) 

Figure 3: Breakdown of surveyed travelers by region 

Europe, Middle East & Africa 

76% 

North America 

18% 

Asia Pacific 

6% 


Based on a survey of travelers (5,016 responses) 

7

Key findings in brief 

The research highlights three key findings: 

1. Hotel spend is often underestimated 

although it represents nearly 40 percent of 

the total travel budget on average. 

To arrive at this figure, CWT used three different 

methodologies, including case studies that reveal 

companies can spend as much as 46 percent 

on hotels, nearly as much as on air transportation. 

This finding may surprise travel managers, who 

estimate their hotel spend at just 28 percent of 

the travel budget on average. Nevertheless, travel 

managers acknowledge the importance of 

optimizing hotel spend, making it a higher priority 

in their travel programs. 

2. Companies can save 21 percent of hotel 

spend by adopting best practices in hotel 

spend management. 

These savings are found in four main areas: 

traveler compliance (9 percent), policy and 

program (8 percent), negotiations (6 percent) 

and performance tracking (1 percent), taking into 

account an estimated overlap of 3 percent. Client 

transaction data and case studies were used to 

calculate companies’ room for improvement 

(moving from average performance to best-inclass 

performance). 

3. Seven steps enable companies to optimize 

hotel spend. These are described below. 

Consolidate spend data. 

to leverage maximum volumes during 

negotiations, check that travelers are being 

charged the correct rate at preferred hotels, 

and monitor policy compliance. Yet the 

required data is notoriously difficult to gather 

and companies usually need to “cleanse” 

data from several sources (e.g., by 

harmonizing different coding systems and 

eliminating duplicate entries), which can be 

challenging. This partly explains why 39 

percent of travel managers believe they 

capture at most 75 percent of their hotel 

spend data. 

Nevertheless, it is possible to obtain all the 

necessary data from reports on TMC 

transactions and payments made by 

corporate credit card, and consolidate it 

with the help of specialists such as the TMC. 

Ideally, travel managers also ask chain hotels 

to provide e-folios (itemized electronic 

invoices), where available, for a better 

understanding of spend on amenities. 

Understand traveler needs and behavior. 

Needs vary among four segments identified 

by CWT (“comfort seekers,” “demanding 

customers,” “easygoing guests” and “pragmatic 

travelers”) and travel managers should take 

these into account when designing their 

hotel programs. As a general rule, travelers 

place practical considerations before 

comfort. Surveyed travelers say a hotel’s 

proximity to business locations is critical, far 

ahead of the next most important feature, 

hotel category. 

Comprehensive data is essential for buyers


Although travelers tend to choose highercategory 

hotels for longer stays, the category 

does not appear to be a direct driver of 

satisfaction. Similarly, travelers take a “no 

frills” approach to booking, ranking 

features such as photos and traveler 

feedback low in importance compared to 

speed and convenience. Contrary to popular 

belief, travelers tend not to shop around 

when booking a hotel and just 14 percent 

surf the Internet for this purpose. Thirty-five 

percent of travelers know where they want 

to stay before booking, which could explain 

why travelers place fairly low importance on 

having a wide choice of hotels and advice 

provided by the travel management 

company. 

Design an effective hotel policy. 

Mandates should be used, as travelers are 

more likely to comply with policy requirements 

than simple recommendations. In particular, 

companies should mandate the use of 

preferred hotels whenever available. This 

said, some companies authorize nonpreferred 

alternatives if they are significantly 

cheaper, at the risk of diluting the volumes 

spent at preferred hotels and decreasing 

related savings. In this case, CWT recommends 

stipulating that the room rate must be at least 

20 percent lower. 

At the same time, companies should provide 

clear guidelines on what to do when 

preferred properties are unavailable, 

including using a preferred chain, respecting 

a city cap, and following recommendations 

made by the TMC or online booking tool. 

Another important rule is booking through 

TMC channels, which enables travelers to 

access significantly lower prices both at 

preferred and non-preferred hotels. (CWT 

research shows that TMC-booked rates are 

on average 18-21 percent lower.) In addition, 

TMC booking enables travelers to be tracked 

in the event of an emergency, as well as save 

time when booking. An effective hotel policy 

also mandates booking at least two weeks 

in advance whenever possible and paying by 

corporate credit card. Finally, reimbursable/ 

non-reimbursable amenity charges should be 

addressed in the hotel policy. 

Optimize the preferred hotel program. 

A methodical approach can help companies 

select the right hotels in the right locations. 

First, they should consider any property or 

location that accounts for at least US$10,000 

in spend, bearing in mind that this threshold 

can vary between markets and companies. 

As volume discounts are at stake, buyers 

should concentrate spend on the smallest 

number of properties that meet the 

company’s needs. Moreover, significant 

savings can be achieved by reviewing the 

hotel categories included in the program. 

With an average rate difference of 21-25 

percent between categories, it is worth 

considering a multi-tier program, providing a 

range of properties for different populations of 

travelers or different destinations (e.g., lower 

categories for domestic travelers or specific 

business units). 

Another important decision is whether to 

retain current providers or work with 

competitor hotels. Although the latter often 

offer savings, CWT research indicates that 

companies that retain at least 80 percent of 

their preferred hotels from year to year tend 

to be more effective at limiting rate increases 

than companies that introduce more 

9

changes. In addition to providing the right 

services for travelers at the best rates, an 

effective hotel program should address 

security concerns and environmental 

friendliness. 

Negotiate effectively. 

Approximately one-third of companies sign 

deals with at least 100 properties and 

therefore need to vary their approach 

depending on the expected return on 

investment. Top-volume properties require 

full-scale negotiations using all possible 

negotiating levers such as including spend on 

amenities and conducting multiple rounds of 

negotiations. Other hotels may be approached 

with “light” property-level negotiations. 

When companies do not meet the room 

night/spend threshold for negotiating propertylevel 

agreements, they can strike chain-wide 

deals to extend the hotel program. 

Although flat-rate agreements are generally 

recommended for preferred properties, 

some companies have opted for dynamic 

pricing deals. The latter, which provide a 

percentage discount off the hotel’s public 

best available rate, can bring savings over flatrate 

deals when conditions are right (e.g., 

when hotels provide regular reporting and 

agree to renegotiate rates if the company’s 

rates evolve less favorably than the corporate 

market average). 

Where possible, companies should negotiate 

last-room availability (i.e., a hotelier’s 

commitment to offer the negotiated rate 

even if only one room of the negotiated type 

is available). This results in lower average 

room rates over the year, even if up-front 

negotiated rates tend to be slightly higher. If 

market conditions change in favor of buyers, 

companies should consider asking preferred 

hotels to renegotiate rates during the year. 

Improve traveler compliance. 

Policy compliance is notoriously low for hotel 

bookings. Case studies show that as few as 

26 percent of transactions involve preferred 

hotels and only 20 percent go through 

preferred booking channels. Higher levels 

of compliance are possible, although 

companies cannot expect 100 percent use 

of preferred hotels, as no program can cover 

all destinations. 

Among the best practices are ensuring the 

preferred hotel directory is up-to-date and 

easily accessible, communicating the travel 

policy to travel arrangers as well as travelers, 

configuring the corporate online booking tool 

to promote compliance, and taking follow-up 

action when travelers fail to comply. 

Moreover, the hotel program should be 

reviewed regularly to take into account 

travelers’ needs, as travelers most often cite 

practical business reasons for booking 

non-preferred hotels (even though 

surveyed travel managers tend to think noncompliance 

is driven mainly by travelers’ 

personal preference). 

Track performance. 

Close monitoring is key to the success of a 

hotel program in terms of improving traveler 

compliance, ensuring hoteliers deliver the 

agreed conditions, and taking corrective 

action as needed. As a general rule, 

compliance tracking could be improved by 

looking at indicators beyond the use of 

preferred hotels, which travelers do not


always have access to. Examples include the 

use of appropriate room types and 

compliance with city caps. 

Moreover, companies should conduct 

regular audits of rates loaded into global 

distribution systems (GDSs) and last-room 

availability as many errors tend to occur. In 

fact, in five case studies, only 50 percent of 

rates were loaded correctly in the initial 

period following negotiations and incorrect 

rates were on average 15 percent higher. 

Another study showed that squatter hotels 

(i.e., non-preferred properties that erroneously 

use the GDS codes intended for a company’s 

preferred hotels) accounted for 4-5 percent 

of two companies’ bookings and were on 

average 3-21 percent more expensive than 

preferred hotels. 

11

A complex market 

The complexity of the hotel market can make managing hotel spend seem particularly 

challenging. A vast number of suppliers, a diverse offering, different pricing strategies and 

multiple distribution channels are key features that travel managers need to understand 

when designing their hotel sourcing strategy and travel policy. 

A vast number of suppliers 

Business travelers stay at an estimated 250,000 

hotels around the world. These include both 

independent hotels, which dominate the market 

in all regions except North America, and chain 

properties, as shown in Figures 4-5. In any given 

city, corporate buyers and travelers may have a 

wide choice of suitable options. The largest 

companies can have hotel spend at hundreds or 

even thousands of properties every year, making 

effective sourcing particularly challenging. Working 

with chains can reduce this complexity, although 

the best deals still tend to be negotiated at a 

property level, even when properties belong to a 

chain. 

Figure 4: Number of hotels used by business travelers per region and percentage of all 

hotels worldwide 

Region 

Number of 

corporate hotels 

Percentage of 

all hotels 

Europe, Middle East & Africa 105,000 42% 

North America 72,500 29% 

Asia Pacific 50,000 20% 

Latin America 22,500 9% 

Total 250,000 100% 

Source: CWT Travel Management Institute


Figure 5: Independent hotels dominate the business travel market in all regions except 

North America 

30% 

70% 

Europe, Middle East 

& Africa 

15% 

85% 

11% 

89% 

20% 

80% 

Independent hotels 

Chain properties 

(% of total properties) 


13

A lack of global standards to 

define hotel quality 

The potentially confusing choice of hotels is 

exacerbated by the fact that each hotel is unique 

in terms of pricing, amenities and quality of 

service, and yet there is no single standard to 

accurately assess properties. Numerous 

classification systems are in use by national 

governments and industry associations, and 

even those that look the same (e.g., star ratings) 

can have different definitions. Corporate hotel 

experts therefore use their own criteria to help 

clients classify hotels. For example, CWT 

Solutions Group, the consulting arm of CWT, 

uses four categories that align with those used 

by other lodging industry consultants (Figure 6). 

Figure 6: Examples of hotel classification systems used by global industry consultants 

CWT global classification 

Smith Travel Research 

(STR) classification 

Hotel and Travel Index 

(HTI) classification 

Deluxe 

First 

Luxury property providing 

personalized amenities 

and services 

Full-service hotel with 

comfortable accommodations 

and public areas 

Luxury 

Upscale 

Superior Deluxe 

Deluxe 

Moderate Deluxe 

Superior First Class 

First Class 

Standard 

Full-service hotel with 

comfortable but sometimes 

simple accommodations 

Moderate 

Limited Service First Class 

Superior Tourist Class 

Tourist Class 

Moderate Tourist Class 

Economy 

Property providing basic 

amenities 

Economy 

Budget 

Unclassified 



Diverse markets 

Each city is unique in terms of economic 

conditions, the average size of hotels and 

negotiation styles, all of which impact hotel 

selection and corporate agreements. Figure 7 

illustrates the changes in average room rate 

observed across different markets between 

January 2008 and January 2009, highlighting 

dramatic decreases in cities like London, Sydney 

and Paris, compared with continued strong 

increases in Tokyo. 

Figure 7: Average room rates (ARR) have dropped dramatically in some cities in response to 

the economic downturn 

ARR January 2009 (US$) 

250 

Tokyo 

Paris 

New York 

200 

London 

Sydney 

Rome 

Hong Kong 

150 

Madrid 

Los Angeles 

Toronto 

Berlin 100 

Beijing 

Cairo 

Buenos Aires 

50 

-40 -20 0 20 40 


Based on data provided by Smith Travel Research 

ARR change January 2009 vs. January 2008 (%) 

15

Complex pricing 

Hoteliers use different pricing strategies that take 

into account supply and demand. 

Macro-economic rate fluctuations. Hotel 

supply is relatively inelastic in that new hotel 

rooms take time to come onto the market in 

times of strong demand and do not 

disappear when demand weakens. Strong 

economic growth therefore tends to be 

accompanied by high hotel occupancy and 

fast-growing room rates, while slower or 

negative growth leads to lower occupancy 

and rates that rise more slowly or even drop. 

This is illustrated in Figure 8, which shows the 

evolution of average room rates in the United 

States during the last recessions (1990s, 

early 2000s, and the end of 2008). 

Figure 8: Economic growth impacts hotel occupancy and rates 

Year-over-year changes in occupancy and average room rates (ARR) 

in the United States, January 1988 – January 2009 

(12-month moving averages*) 

Year-over-year 

change in ARR 

10 

Average occupancy (%) 

65 

5 

0 

60 

-5 

-10 

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 

55 

Year-over-year change in ARR Average occupancy Recession 


Based on U.S. hotel performance data provided by Smith Travel Research and STR Global 

* Twelve-month moving averages mean that the occupancy for January 2009 is the average occupancy from February 2008-January 2009 

and the year-over-year change is the difference between the annual average for January 2008 and for January 2009


Seasonal, weekly and daily rate 

fluctuations. Hoteliers have traditionally set 

different rates for high and low seasons. 

Many also differentiate between peak 

weekdays (Tuesday to Thursday), weekends 

that are typically cheaper at destinations 

attracting few tourists, and special 

promotional periods used to maximize their 

room yield or revenue per available room 

(RevPAR), as shown in Figures 9-10. 

Moreover, hotels that have adopted yield 

management techniques may change their 

rates daily to optimize revenues based on 

anticipated demand and competitors’ pricing 

(Figure 11). 

These fluctuating prices represent the best 

available rates (BAR) offered to any 

customer of the hotel. Companies that 

negotiate a deal either obtain a fixedpercentage 

discount off the BAR, which is 

known as a dynamic pricing agreement, or, 

more commonly, a flat rate that applies 

throughout the year except during “blackout” 

dates that are specified in advance. 

Figure 9: Example of daily rate fluctuations at a hotel 

400 

A hotel in Charlotte, North Carolina 

Peak pricing 

300 

Rates 

(US$) 

200 

100 

Typical mid-week 

Typical weekend 

Promotional rates 

0 

July August September October 

November 

December 

2008 

* Best Available Rate 


Based on rates available on 148 different dates, July-December 2008 

17

Figure 10: Rates remain fairly constant during the business week 

2.5% difference 

A hotel in London 

Rates in US$ 

679 696 696 696 705 696 705 

Mon. Tues. Wed. Thurs. Fri. Sat. Sun. 

5% difference 

A hotel in Singapore 

Rates in US$ 

227 239 227 227 199 199 227 

Maximum price 

reductions (2.5-12%) 

occur mainly 

on Mondays 


12% difference 

A hotel in Berlin 

Rates in US$ 

121 135 135 135 121 148 121 


A hotel in Stuttgart 

Rates in US$ 

268 271 271 271 162 162 162 

A hotel in Minneapolis 

Rates in US$ 


169 169 169 169 79 79 169 

Major discounts 

occur on Fridays 

and Saturdays 

at properties that 

attract few tourists 



Based on rates available on October 16, 2008


Figure 11: Examples of daily rate fluctuations at hotels that use yield management techniques 


Based on GDS rates available for a stay on October 8, 2008 

Fragmented distribution 

Hotels use a variety of distribution channels, 

including travel management companies, their 

own branded Websites and call centers, online 

hotel booking agencies and other travel agencies. 

To limit distribution costs, many properties, 

especially those that are independently run, do 

not provide inventory to global distribution 

systems (GSDs). The content available in GDSs 

is increasing (thanks to agreements with Web 

aggregators), but the proportion of TMC hotel 

bookings made through GDSs still varies widely 

between regions, from an estimated 99 percent 

in North America to 65 percent in Asia Pacific, 

50 percent in Europe and just 35 percent in 

Latin America. Major travel management 

companies fill the gap with proprietary databases 

that reference hundreds of thousands of 

independent hotels and chains. 

This is a major reason why TMC booking 

channels (online booking tools or TMC 

counselors) have shown strong growth over 

recent years, despite the emergence of 

alternative channels. As Figure 12 shows, TMC 

bookings have grown to approximately 25 

percent of corporate hotel bookings over the last 

decade while the use of Internet booking 

agencies accounts for just 15 percent. Moreover, 

the proportion of corporate hotel bookings made 

by contacting hotels directly (by phone, fax or 

email) has dropped. Nevertheless, an estimated 

50 percent of all corporate hotel bookings are 

still made by contacting hotels directly, which 

complicates traveler tracking and data 

consolidation for travel managers. 

19

Figure 12: Most corporate hotel bookings are made by travelers contacting hotels directly, 

although the proportion made through TMC booking channels is growing 

Estimated use of different distribution channels as a percentage 

of corporate bookings 

Mid-1990s 2008 Future trends 

Internet 

(online travel agencies, 

online hotel specialists and 

hotel-branded Websites) 

Hotel/chain 

call center 

~15% 

~10% 

(hotel-branded Websites) 

(online travel agencies and 

online hotel specialists) 

 

~10% 

TMC 

(online booking tool 

or counselor) 

~25% 

 

~90% 

Hotel directly 

(phone/fax/email) 

~50% 

 


Today, business travelers have little incentive to 

shop around. Notably, travelers who book 

through Web hotel booking specialists cannot 

access their negotiated corporate rates, nor 

benefit from the one-stop shopping for hotels, 

flights and ground transportation provided by 

TMC booking channels. Moreover, “price parity” 

is common practice today, meaning hotels offer 

the same public rates via multiple booking 

channels. This practice emerged to help hoteliers 

regain control over their room rates, instead of 

enabling Web resellers to offer major discounts 

(which occurred particularly after 9/11, when 

occupancy dropped dramatically). With price 

parity, many hotels no longer keep their best 

rates for their own Websites, even though this 

distribution channel enables them to limit GDS 

costs while building direct contact with 

customers. Lower prices are sometimes available 

on different channels, but often they come with 

restrictions (e.g., cancellation penalties and 

immediate payment).

Hotel spend represents nearly 40 percent of total travel spend 

1. Hotel spend is often underestimated, 

although it represents nearly 40 percent 

of total travel spend 

Hotel spend accounts for nearly 40 percent of business travel spend on average and even 

more in some cases, according to CWT analyses. This finding may surprise travel managers, 

who estimate their companies spend on average 28 percent of their travel budgets on 

hotels. At the same time, survey respondents acknowledge the benefits offered by 

improved hotel spend management, making it a priority in their travel programs. 

Underestimated spend 

Surveyed travel managers say hotels account for 

28 percent of their companies’ total travel 

budgets on average. Eighty-three percent believe 

the share of hotel spend is under 35 percent 

(Figure 13). 

Figure 13: Surveyed travel managers believe hotels account for 28 percent of their companies’ 

total travel spend on average 



21

Data on hotel spend is however, notoriously 

difficult to obtain, implying that many companies 

may not have accurate figures. (This challenge is 

described further on Pages 32-36.) CWT 

therefore carried out analyses to evaluate the 

typical share of hotel spend in the transient travel 

budget. Three different methodologies produced 

matching results, as described below. 

1.“Top-down” global market analysis: 

39% of total travel spend 

CWT analyzed data on the global business travel 

market (hotel, air, rail and rental car) for 12 

major countries (Australia, Brazil, Canada, China, 

France, Germany, India, Italy, Japan, Spain, the 

United Kingdom and the United States) to 

evaluate the share of hotel spend. Several 

sources were used, including travel suppliers, 

travel booking information, trade associations, 

business intelligence companies and 

international institutions. The analysis separated 

transient travel from meetings and events spend. 

This exercise indicated hotels represent on 

average 39 percent of total travel spend, 

compared with 51 percent for air, 5 percent for 

rail and 5 percent for rental car. Looking at each 

region separately, the average proportion of hotel 

spend ranges from 37 percent in Asia Pacific to 

46 percent in Latin America (Figure 14). 

Figure 14: Hotel spend represents on average 39% of total travel spend 

Total travel 

spend* (%) 

100 

6 

Air 

Hotel 

6 

7 

Rail 

Car 

1 

15 

8 5 

5 

80 

60 

40 

40 

37 

46 

39 

40 

20 

54 

47 47 46 

51 

0 

Share of global 

travel spend 

North America 

47% 

Europe, Middle East 

& Africa 

Asia 

Pacific 

Latin 

America 

30% 20% 3% 

World 

*Transient travel (excluding meetings and events) 

Sources: Air France, Euromonitor, Datamonitor, Economist Intelligence Unit, International Air Transport Association, International Monetary Fund, 

Organisation for Economic Co-operation and Development, Renfe, World Travel & Tourism Council, CWT Travel Management Institute


2. “Bottom-up” U.S. market analysis: 

38% of total travel spend 

For another view of the share of hotels in travel 

spend, CWT analyzed consolidated 2008 client 

transactions in the largest global market, the 

United States. A bottom-up approach was taken, 

using transportation data to extrapolate total 

spend on hotels. This involved estimating the total 

number of room nights spent on business trips 

(based on air, rail and rental car bookings, and 

survey responses on the use of company/private 

car to reach hotels) and the average room rate 

(based on CWT hotel booking data). 

This analysis indicated hotels represent on 

average 38 percent of total travel spend in the 

United States (Figure 15). 

3. Company-level analysis: 28-46% 

of total travel spend 

Finally, CWT analyzed spend at a company level, 

using data from booking transactions and credit 

card reporting for three global companies. 

This exercise indicated hotel spend represents 

between 28 and 46 percent of total travel spend 

for the three companies analyzed. In other 

words, some companies spend nearly as much 

on hotels as on air transportation (Figure 16). 

Figure 16: Hotel spend accounts for 28-46% 

of total travel spend at 3 companies 

Figure 15: Hotel spend represents on average 

38% of total U.S. travel spend 

Other 

Rail 


Air 


Based on CWT transaction data and credit card data 


23

How to calculate your company’s 

transient hotel spend: 

three methods using TMC data 

1. Hotel spend = 76% of air spend 

This calculation is based on the “top-down” 

global market analysis described earlier ( i.e., 

39% ÷ 51% as seen in Figure 14, Page 22). It 

provides a rough estimate only. 

2. Hotel spend = total room nights generated 

by transportation x average room rate 

This method starts with transaction data on air 

trips involving overnight stays to calculate the 

total of room nights, which are multiplied by the 

average room rate paid by the company 

worldwide. 

A further 10-40 percent can be added to this 

total to include trips made by rail and car, 

depending on the company’s travel patterns. 

3. Hotel spend = total captured through TMC 

bookings matched with corporate credit card 

data 

This calculation is provided by consolidated data, 

through such solutions as CWT Agency+Card 

Reporting. This method is the most accurate, as 

described in detail on Pages 33-34.


A growing priority for 

travel managers 

Even though travel managers tend to 

underestimate their company’s hotel spend, they 

increasingly recognize the benefits offered by 

improved hotel spend management. In a CWT 

survey conducted in October 2008, 59 percent 

of travel managers identified optimizing hotel 

spend as a higher priority for 2009, on the same 

level as driving air and ground transportation 

savings (59 percent), and coming second only 

to improving traveler compliance (66 percent, as 

seen in Figure 17). Companies that optimize 

their hotel spend through a range of best 

practices can indeed achieve significant savings, 

as explained in the next part of this document. 

Figure 17: Surveyed travel managers say optimizing hotel spend is a growing priority 

Improving traveler compliance 66% 

Optimizing hotel spend 59% 

Driving air and ground transportation savings 59% 

Optimizing simple bookings 56% 

Optimizing the travel policy 56% 

Developing key performance indicators 46% 

Tackling meetings and events 39% 

Further consolidating the travel program 36% 

Enhancing the traveler experience 34% 

Addressing safety and security needs 20% 

Making the travel program more environmentally friendly 18% 


Based on a survey of 178 travel managers worldwide, October 2008 

25

2. Twenty-one percent savings through best 

practices 

Companies that adopt best practices in hotel spend management can save 21 percent of 

total hotel spend according to CWT research. These savings are found in four main areas: 

policy and program, negotiations, traveler compliance and performance tracking. 

Savings in four main areas 

CWT used client transaction data and case studies 

to compare average market performance with 

best-in-class performance and quantify the 

savings made possible through best practices. 

The largest savings come from improvements to 

traveler compliance (9 percent), in terms of how 

often preferred booking channels and preferred 

hotels are used. The next-largest savings 

opportunities come from improvements to the 

hotel policy and program (8 percent), followed 

by negotiations (6 percent) and performance 

tracking (1 percent), as shown in Figures 18-19. 

Figure 18: Companies can save 21% of total hotel spend by adopting best practices in 

hotel spend management 


Note: This savings estimate does not take into account year-over-year inflation. CWT calculates a 3-percent overlap between savings derived in the different 

areas. For example, savings achieved by booking through the travel management company are partly due to preferred hotels being used more often.

Twenty-one percent savings through best practices 

Figure 19: Calculations used to evaluate the savings impact of implementing best practices 

Improvement action 

Resulting 

savings on 

total hotel 

spend 

Sources 


category 

Replacing 20% of preferred hotels 

with preferred hotels in a lower 

category leads18% more travelers to 

use a lower-category hotel. 

3% 

Refer to CWT study Playing by the 

Rules: Optimizing Travel Policy and 

Compliance (2008). 

City caps 

Introducing moderate city caps for 

destinations covering 50% of hotel 

spend lowers the average room rate 

paid by travelers by 4.4%. 

4% 

Average room rates paid relative to 

rates negotiated by 5 companies, 

some with city caps and some without. 

Based on transactions totaling US$3.4 

million. 

Advance 

booking 

Implementing policy and compliance 

measures leads travelers to book on 

average 4 days earlier. 

1% 

Based on a 4-day difference between 

median and best performance. Each 

further day booked in advance leads to 

a 0.2% price reduction. Based on an 

analysis of rates paid and reservation 

dates for US$260 million in 

transactions across 11 cities. 

Consolidation 

Advance & booking 

negotiations 

Consolidating local to regional or 

regional to global hotel programs and 

using best practices in negotiations 

leads to savings of 6.5%. 

6% 

Refer to CWT study Global Horizons: 

Consolidating a Travel Program 

(2007): based on a survey of 50 travel 

managers and case studies. 

Preferred 

hotels 

Moving from average to best-in-class 

performance on preferred hotels 

increases the use of preferred hotels 

by 20 points (from 40% to 60%). 

4% 

Based on an industry benchmark of 

spend at preferred and non-preferred 

hotels for 7 companies. Rates are 10% 

lower at preferred hotels compared to 

other properties, based on a 5% 

further volume discount for each 

doubling of room nights. 

Preferred 

booking 

channels 

Moving from average to best-in-class 

performance on preferred booking 

channels increases TMC bookings by 

25 points (from 50% to 75%). 

5% 

Refer to CWT study Playing by the 

Rules: Optimizing Travel Policy and 

Compliance (2008): bookings through 

preferred channels are on average 

18% cheaper than others, based on 

262 hotel price samples for 79 hotels 

in 26 cities. 

GDS 

rate loading 

Introducing a series of 3 GDS audits 

(including auditing for rate squatting) 

and corrective actions reduces the 

proportion of unloaded rates to 17% 

(down from 40%) and incorrectly 

loaded rates to 6% (from 10%). 

1% 

Based on a GDS rate audit for 5 

companies and a rate squatting audit 

for 2 companies in 2008. Companies 

pay a 14% higher average rate when 

rates are not loaded and 15.5% more 

when loaded incorrectly. On average, 

5% of transactions involve squatted 

rates. 


24% 

3% 

Total savings: 

- 

= 

Overlap 

Net savings 21% 

27

Many organizations have yet to optimize their 

hotel spend and can therefore achieve significant 

savings. Some examples of the best practices 

observed by CWT are provided below, along with 

the savings available to companies that adopt 

them. More detail is provided on Pages 31-132. 

Hotel category 

The choice of hotel categories varies widely 

between companies even within the same 

industry, suggesting that many organizations 

could switch to lower-category hotels while 

remaining in line with industry standards. For 

example, the banking and finance sector spends 

more at deluxe hotels than the petroleum, 

energy and mining sector (on average 40 

percent of hotel spend compared to 25 percent 

respectively). 

Companies can achieve significant savings 

without drastically downgrading their hotel 

program. On average, companies can 

realistically switch to a lower category for 20 

percent of preferred hotels and in doing so, save 

3 percent of total hotel spend. This said, in the 

current economic climate, some companies 

could take tougher measures and save more. 

(For example, one analysis suggested a 

company could save approximately 10 percent 

of total hotel costs by switching 80 percent of its 

room nights to lower categories.) 

City caps 

Sixty-two percent of companies use rate caps to 

contain costs when travelers need to book outside 

the preferred hotel program, but there is room for 

improvement. Only 47 percent of companies 

define their rate limits at a city level (instead of 

nationally or regionally) and among those 

companies, only 64 percent update their city caps 

at least once a year (Figures 20-21). 

Adopting best practices for city caps means 

setting a reasonable per-night spend limit for 

main destinations. City caps should be updated 

at least once a year to account for market 

changes and they should be clearly 

communicated to travelers. Companies that 

implement these best practices can save on 

average 4 percent of hotel spend. 

Figure 20: 47% of companies define city caps while a further 15% define rate limits at 

a country or regional level 



Twenty-one percent savings through best practices 

Figure 21: Among companies that use city 

caps, 36% update them less than once a 

year 

Advance booking 

Travelers book hotels on average eight to nine 

days in advance of their stay. There are wide 

variations between companies, however, with 

extremes at both ends of the scale. The best 

performers have travelers booking on average 

11-14 days in advance, while others tend to book 

much closer to the date of stay. 

The difference between average and best 

performance on advance booking is four days. This 

is a realistic improvement target for many 

companies, offering 1 percent savings (Figure 22). 



Figure 22: Best performers have travelers booking on average 4 days earlier than 

other companies 

Companies (%) 

Best performance 

= travelers book 

on average 13 days 

in advance 

Improvement opportunity 

= travelers could book on 

average 4 days earlier 

Median performance 

= travelers book on 

average 9 days in 

advance 

Early bookers 

42% 

Late bookers 

26% 

23% 

2% 

7% 

15+ 14-11 

10-8 7-4 3-0 

Average number of days in advance of stay 


Based on CWT transaction data from all regions for companies making 100+ transactions, January – November 2008 

29

GDS auditing 

It is important to ensure that the rates negotiated 

with preferred hotels are correctly loaded into 

global distribution systems (GDSs) and that 

other “squatter” rates do not take up space 

allocated to the hotel program. Many companies 

conduct audits on selected properties, but they 

tend to do so rarely: once a year for 38 percent 

of companies and even less often for a further 9 

percent (Figure 23). 

Many companies could introduce more regular 

GDS audits (ideally several times a year, 

especially in the initial three to four months of 

program implementation) and follow up with 

hoteliers, saving on average 1 percent of hotel 

spend. 

Figure 23: 47% of companies conduct a GDS audit only once a year or less often, leaving 

room for improvement 



Seven steps to optimize hotel spend 

3. Seven steps to optimize hotel spend 

The complexities of the hotel market need not get in the way of effectively managing hotel 

spend. As noted in Key Finding 2, some companies perform significantly better than others 

in critical areas of the hotel program and achieve significant savings. To implement the 

best practices that bring benefits, CWT recommends a seven-step approach. 

Figure 24: A seven-step approach to optimize hotel spend 

7. 

Track 

performance 

1. 

Consolidate 

Data 

2. 

Understand 

traveler needs 

and behavior 

6. 

Improve 

traveler 

compliance 

3. 

Design 

an effective 

hotel policy 

5. 

Negotiate 

effectively 

4. 

Optimize the 

preferred 

hotel program 


31

1. Consolidate data 

Travel managers need accurate, comprehensive 

data to successfully manage hotel spend. This 

is particularly important for more effective 

sourcing and a better understanding of traveler 

behavior. Gathering and analyzing the right 

information is often a complex process, but best 

practices can help. 

Key challenges for consolidating data 

For a complete picture, travel managers require 

information on the total amount spent at hotels, 

distinguishing between meetings and events 

(M&E) spend and transient travel spend. This 

separation is necessary as a large part of M&E 

spend is non-recurrent (e.g., for major annual 

events) and negotiated separately, usually 

resulting in higher room rates. Recurring M&E 

spend (e.g., for regular team meetings) can be 

concentrated on preferred properties to obtain 

the negotiated transient room rates. Hoteliers, 

however, do not tend to consider M&E volumes 

when proposing transient rates (i.e., M&E room 

nights are not leveraged when negotiating 

transient rates). 

A breakdown of room rates and additional 

expenses per transaction is also necessary. This 

information enables buyers to leverage 

maximum spend volumes during negotiations, 

check that travelers are being charged the correct 

negotiated rate, and monitor their compliance 

with the company’s hotel policy. 

Many companies, however, do not have all the 

necessary data. In fact, 39 percent of surveyed 

travel managers believe they capture at most 75 

percent of their total hotel spend, as shown in 

Figure 25. 

Figure 25: 39% of travel managers believe they track less than 75% of their total hotel spend 



Seven steps to optimize hotel spend > Consolidate data 

Getting comprehensive data is no easy task. 

Buyers’ preferred source of information, booking 

data from the TMC, does not cover transactions 

made through other booking channels or ancillary 

expenses paid when a traveler is checking out of 

a hotel. Companies must therefore use several 

sources (e.g., the travel management company, 

corporate credit card issuer and hoteliers), which 

can make the consolidation process complex. 

Much of the challenge lies in the fact that each 

data source can use different codes for the same 

information (e.g., some credit card reports use 

the merchant code of the hotel while others 

simply use the hotel name). In addition, the data 

provided by different sources can overlap (e.g., 

when room night spend is captured by both TMC 

booking reports and credit card statements). This 

means that before the data can be aggregated, it 

needs to be “cleansed” to harmonize the codes 

and remove duplicate entries. 

Best practices 

To manage this complexity, several practices are 

recommended: 

Focus on two main sources of data: TMC 

transactions and corporate credit card 

spend. CWT analyzed 10 companies’ spend 

and found that when combined, these two 

sources can cover up to 100 percent of total 

hotel spend (Figures 26-27). For best results, 

companies should mandate booking through 

the TMC and payment with a corporate card 

while implementing measures to increase 

compliance (described on Pages 110-122). 

The data consolidation process can also be 

facilitated by working with a single TMC and 

credit card provider worldwide (or regionally 

as a first step). Consolidated data is provided 

by services such as CWT Agency+Card 

Reporting. 

Figure 26: Companies that combine data from TMC and corporate credit card transactions 

can track up to 100% of hotel spend 

Breakdown of expenses by ease of tracking 

Hotel spend (%) 

3 2 1 

100 

15 15 14 11 

Hard 

13 12 

15 

19 

27 to track 

33 

3 

80 

15 

1 

23 20 

58 

28 

1 

60 

36 

23 

15 

21 17 

50 14 

81 

86 

40 

79 

72 

23 

20 

51 

50 

41 41 

35 

17 

17 

Easy 

0 2 

to track 

D E F G H I J B L K Average 

Company 

Not booked through TMC 

nor paid by corporate 

credit card 

Payment by corporate 

credit card (but booking 

outside TMC) 

TMC booking 

(but not paid by 

corporate credit card) 

TMC booking + 

payment by 

corporate credit card 



33

Figure 27: Combined TMC and credit card transaction data provides companies with a 

comprehensive view of hotel spend 

TMC 

transaction data 

Corporate credit 

card reports 

Consolidated TMC 

& corporate credit 

card data 

Spend coverage 20-80% 20-100% 20-100% 

Booking date Yes No Yes 

Transaction 

details 

Check-in/check-out dates Yes Yes Yes 

Number of room nights Yes No Yes 

Room type Where available No Where available 

Category Where available No Where available 

Hotel profile 

City/address Yes Yes Yes 

Hotel chain Yes Yes Yes 

Booked or spent Booked Spent Booked & spent 

Room rate only Yes No Yes 

Amount 

Breakdown of charges 

(including amenities) 

No 

Yes (if e-folio 

available) 

Yes (if e-folio 

available) 

Total, including extra 

charges 

No Yes Yes 


If credit card data is unavailable, use data 

from selected hoteliers as a complement 

to TMC transaction data. Given the large 

number of preferred properties in hotel 

programs and the difficulty of consolidating 

data from different properties, it is advisable 

to focus on a small number of chains, some 

of which produce separate reports for 

transient and M&E spend. Hotelier data is 

more accurate and easier to process than 

data from expense management systems, 

which often require travelers to enter data 

manually (typically a source of inconsistencies) 

and are rarely implemented globally 

(therefore making consolidation a challenge). 

Ask hotels to provide e-folio data and use 

it whenever possible. E-folios provide 

companies with a detailed breakdown of 

spend, including room rate, number of 

nights, and extra charges for breakfast, 

Internet access, mini-bar and so on. As an 

additional benefit, this information can be 

fed directly into travelers’ expense reports, 

saving them time and reducing errors. For 

the moment, e-folios are mainly available at

Seven steps to optimize hotel spend > Consolidate data 

selected chain properties in North America, 

but deployment is sporadic, mainly due to 

hoteliers’ reluctance to invest in the 

necessary technology. E-folios may be 

offered more widely in the near future, 

especially if corporate buyers express strong 

demand for them. In the meantime, a 

detailed snapshot of spend at a limited 

number of hotels can provide travel 

managers with a more sophisticated 

understanding of their company’s hotel 

spend—not only to check how often 

travelers obtain the correct negotiated rate 

but to see how much they are spending on 

amenities. 

Work with a partner such as a TMC or a 

data aggregator who can process hotel 

data efficiently. Interpreting vast volumes 

of data requires dedicated database 

management software and specialized 

skills. Ideally, data is processed for every 

transaction rather than by hotel, destination 

or region, which would entail a loss of 

information. To provide a solid framework, 

several key information fields should be 

used such as property name, hotel code, 

booking date, rate code, number of room 

nights, total cost of room nights only, and 

total cost of room nights with extra charges 

(Figure 28). In addition, algorithms can be 

developed to cleanse the data; eliminate 

duplicate entries (i.e., those that figure in 

both TMC and credit card reports); estimate 

data that is missing (e.g., the number of 

room nights based on the total cost of stay); 

and separate spend related to meetings and 

events. 

35

Figure 28: Recommended data fields for analyzing hotel spend per transaction 


Data field 

Property name 

Hotel identification code 

Chain identification code 

Location (country/city) 

Negotiated rate/room type 

Items included in negotiated rate 

(e.g. breakfast and Internet access) 

Assessment 

Spend per hotel & preferred hotel compliance 

As above 

Spend per chain 

Spend per destination 

Application of correct negotiated rate 

& year-over-year rate changes 

As above 

Booking 

Stay 

Payment 

Booking date 

GDS rate code used 

Booking channel 

Check-in/check-out dates 

Number of room nights and travelers 

Room type 

Payment type (corporate credit card/ 

personal credit card/direct billing) 

Advance booking performance 

Correct rate loading 

Use of preferred booking channels 

Application of negotiated rates, seasonal rates 

& black-out dates 

Correct negotiated rate & stay pattern 

Traveler compliance & correct negotiated rate for room type 

Traveler compliance to correct payment method 

Cost 

Total cost including all expenses 

(ideally including e-folio breakdown) 

Total hotel spend & breakdown of spend on amenities 


SUMMARY 

Travel managers can consolidate data most effectively by: 

Distinguishing between transient spend and meetings and events volumes 

Focusing on TMC and corporate credit card reports to cover the majority of spend 

Using selected hotelier reports to obtain further data 

Asking hotels for granular e-folio data 

Working with a partner to process data

Seven steps to optimize hotel spend > Understand traveler needs and behavior 

2. Understand traveler 

needs and behavior 

When designing a preferred hotel program, 

travel managers need to understand why and 

how travelers choose where to stay and which 

hotels best suit their needs. Some of the CWT 

survey findings may come as a surprise. For 

example, travelers are not necessarily happier 

with higher-category hotels. On the other 

hand, they consider a convenient location to 

be critical. Furthermore, CWT has identified 

four types of corporate hotel guests based on 

their varying needs for comfort and practicality. 

By better understanding traveler priorities and 

choices, companies can optimize savings 

without compromising traveler satisfaction 

and productivity. 

Location ranks far above all other criteria, 

including hotel category 

Proximity to business locations is by far the 

most important hotel criterion for travelers 

according to the CWT survey. Hotel category and 

quality of service come next and are considered 

“very important,” as shown in Figure 29. Similarly, 

security is high on the list, underlining the need 

for companies to mitigate travel-related risks for 

their employees. Interestingly, environmental 

friendliness is considered more important than 

a number of items that impact traveler comfort 

such as the hotel’s style and the availability of a 

restaurant or sports and leisure facilities. 

Moreover, many travel managers may be 

surprised to learn travelers rank hotel loyalty 

programs very low in importance globally, 

although North American travelers give them a 

slightly higher ranking. Proximity to places of 

personal interest are also ranked simply as “nice 

to have.” Business concerns clearly come first. 

Figure 29: Proximity to business locations ranks highest among hotel features for travelers 

Travelers’ ranking of hotel features by importance 

Importance 

Proximity to business locations 


Quality of service 

Security 

Internet access 

Quality of food 

Environmental friendliness 

Atmosphere/style 

Availability of restaurant/room service 

Proximity to places of personal interest 

Leisure/sports facilities 

Hotel loyalty program 

Availability of meeting rooms 

Essential 

Important 

Nice to have 

Unimportant 

Unimportant Nice to have Important Essential 



37

Hotel category: not the most important 

driver of traveler satisfaction 

Although surveyed travelers state that the hotel 

category is important to them—it ranks second 

after proximity to business locations—it does not 

always appear to have a direct impact on how 

satisfied they are with their stay. In fact, some 

companies using lower category hotels achieve 

greater satisfaction scores than those using 

higher categories (Figure 30). 

Figure 30: Traveler satisfaction is not always driven by hotel category 

2.5 

Traveler satisfaction vs. hotel category 

L 

Average satisfaction level 

2.0 = satisfied - 3.0 = very satisfied 

2.25 

K 

B 

2.0 

Economy 

D 

F 

Standard 

G 

H 

I 

E 

J 

First 

Average hotel category 

Surveyed companies 


Based on a survey of travelers at 10 companies (3,901 responses) 

Travelers attach more importance to all hotel 

criteria the longer they stay. In particular, Internet 

access becomes critical (Figure 31) and not 

having it is the main source of dissatisfaction 

noted in the survey. It is worth noting that 

travelers tend to choose higher hotel categories 

for longer stays (Figure 32), which should be 

considered when designing a hotel program.


Figure 31: The longer the stay, the greater the importance of all hotel criteria, especially 


Travelers’ ranking of hotel features by importance 

Proximity to business locations 


Quality of service 

Security 

Quality of food 

Environmental friendliness 

Atmosphere/style 


Availability of restaurant/room service 

Proximity to places of personal interest 

Leisure/sports facilities 

Hotel loyalty program 

Availability of meeting rooms 

1 night 

2 nights 

3 nights 

4-7 nights 

8+ nights 

Unimportant Nice to have Important 

Essential 

Source: CWT Travel Management Institute, based on a survey of travelers (4,949 responses) 

Figure 32: Travelers choose higher category hotels for longer stays 

Deluxe 

First 

Standard 

Economy 



39

“No-frills” booking 

When it comes to booking tools, travelers want 

simple functionalities that work well. On the 

whole, they place little importance on extras 

such as hotel photos and feedback from other 

guests, both of which are common on leisure 

booking sites. What they value most is the ability 

to book quickly and when it is convenient for 

them. Other high-ranking criteria are immediate 

confirmation of booking, the ability to change or 

cancel a booking, and information on the hotel’s 

location. In addition, travelers acknowledge the 

importance of being able to access preferred 

hotels and book the best rate (Figure 33). 

Figure 33: Travelers consider speed and convenience to be the most important booking 

features 

Booking speed 

Ability to book at any time 

Immediate booking confirmation 

Ease of changing/cancelling booking 

Information on hotel location 

Absence of booking fees 

Ease of booking preferred hotels 

One-stop booking 

Ability to obtain best hotel rate 

Large choice of hotels 

Bill sent directly to the traveler’s company/TMC 

Ease of booking at destinations outside the program 

Ability to book independent hotels 

Quality of advice 

Hotel photos 

Traveler feedback 

Booking features ranked by importance to travelers 

Importance 

Unimportant Nice to have Important Essential 


Based on a survey of travelers (5,016 responses)


This ranking of booking features mirrors the fact 

that most travelers do not have to shop around 

to find a hotel. According to the CWT survey, 35 

percent already know where they want to 

stay, while 32 percent either choose from a 

range of hotels proposed to them or confirm a 

recommended option (Figure 34). This could 

explain why travelers place less importance on 

items such as having a wide choice of hotels, 

access to independent properties, and the 

quality of advice provided during booking. 

Figure 34: When travelers select their hotel, 35% already know where they want to stay 

Travelers (%) 

Travelers’ involvement in the choice of their hotel 

50 

Strong 

Medium 

Low 

40 

30 

20 

35 

10 

0 

Traveler 

knew where 

he/she 

wanted to 

stay 

21 

Traveler 

chose 

from a 

range of 

hotels 

11 

13 

10 

Traveler Assistant/ 

confirmed a travel 

recommended arranger 

option chose hotel 

Colleague/ 

client/ 

partner at 

destination 

chose hotel 

5 

TMC 

counselor 

recommended 

hotel 

2 

Traveling 

companion 

chose hotel 

3 

Other 



41

In fact, travelers often draw on their personal 

experience, selecting a hotel they have already 

stayed in (44 percent), as shown in Figure 35. 

Reassuringly for travel managers, the next most 

popular source of information is their company’s 

preferred hotel directory (41 percent). Contrary 

to popular belief, few travelers (14 percent) surf 

the Internet to find a hotel. 

The survey shows that, on the whole, travelers 

are also satisfied with the preferred booking 

methods, both using their company’s online 

booking tool and booking through travel 

management company counselors. 

Figure 35: When selecting a hotel, travelers rely mainly on personal experience and the 

company’s preferred hotel directory 




Four main segments of travelers 

Not every traveler approaches hotels in the same 

way. CWT analyzed survey responses from more 

than 4,500 travelers in 10 companies worldwide 

and found four distinct types of hotel guests 

based on the importance they place on comfort 

(hotel category, quality of service, security, 

atmosphere and environmental friendliness) and 

practicality (Internet access, restaurant, and 

leisure/sports facilities), as shown in Figure 36. 

“Demanding customers” (32 percent of 

surveyed travelers) rank all features high in 

importance. 

“Comfort seekers” (25 percent) rank 

comfort higher than practical features. 

“Pragmatic travelers” (9 percent) rank 

practicality higher than comfort. 

“Easygoing guests” (34 percent) rank all 

features relatively low in importance. 

Figure 36: Travelers can be segmented according to the importance they place on hotel 

comfort and practicality 



43

A number of differences between the four types 

of travelers can also be observed in their use of 

preferred hotels and booking channels. 

Travelers who attach the most importance 

to practicality (“pragmatic travelers” and 

“demanding customers”) are the most 

compliant with preferred hotels and 

preferred booking channels. They also tend 

to be younger, travel more frequently and 

more internationally, and have longer than 

average stays. 

Travelers who are the most concerned 

with comfort (“comfort seekers” and 

“demanding customers”), on the other 

hand, are the most compliant with preferred 

hotels. 

Travelers who are the least concerned 

with hotel features (“easygoing guests”) 

are the least likely to use preferred hotels. 

This information is illustrated in Figure 37. 

Figure 37: The four segments differ in their use of preferred hotels and booking channels 




It comes as no surprise that the proportion of 

different types of travelers varies between 

companies, as shown in Figure 38. 

Figure 38: The proportion of different segments varies between companies 


Based on a survey of travelers (1,006 responses for company F and 132 responses for company K) 

It can be useful for travel managers to conduct 

an internal survey to ensure they understand 

their travelers’ needs and gather feedback on 

travelers’ experiences on an ongoing basis. A 

clear view of different traveler segments can help 

travel managers adapt their hotel program 

accordingly. For example, if a company has a 

majority of easygoing guests, they may want to 

include lower-category hotels in their programs. 

On the other hand, if there is a fairly even 

proportion of the four segments, companies may 

want to provide a range of hotels at key locations 

so travelers who attach less importance to hotel 

features can take advantage of lower-cost 

properties. This said, a balance must be struck 

so that companies can increase compliance 

without diluting spend over too many properties, 

which would result in lower volume-based 

discounts. 

45

SUMMARY 

Understanding traveler needs and behavior: 

Proximity to business locations is the most important criterion for travelers, 

who generally place practicality above comfort when choosing hotels. 

Hotel category, while important, is not always a direct driver of traveler satisfaction. 

All hotel criteria become more important for longer stays. 

Travelers are satisfied with “no frills” booking features that work well. 

Companies can adapt their program to different segments of travelers, whose 

hotel preferences and booking behavior may vary.

Seven steps to optimize hotel spend > Design an effective hotel policy 

3. Design an effective 

hotel policy 

Travelers play a key role in optimizing hotel 

spend. To that end, they need clear guidelines 

on how to book, which hotels to use, and 

what to do in typical situations such as 

selecting a hotel when a preferred property 

is unavailable. Mandates tend to be more 

effective than simple recommendations and 

are increasingly common. 

Travel managers have to be selective when 

designing their travel policy, providing enough 

detail for travelers to understand what is required 

of them, but not so much that the policy 

becomes confusing. The following advice is 

worth considering. 

1. Mandate the use of preferred hotels 

Companies that mandate the use of preferred 

hotels tend to have higher levels of compliance 

than those that do not, as shown in an analysis 

of seven companies (Figure 39). Other factors 

such as the use of preferred booking channels 

and communicating effectively with travelers also 

come into play, as described on Pages 110-122. 

Figure 39: Companies that mandate the use of preferred hotels tend to have higher levels of 

compliance 

Use of preferred hotels as stipulated in the policy at 7 companies 

Use of 

preferred hotels (%) 

100 

Top performers 

Bottom performers 

80 

60 

40 

20 

77 76 73 67 62 53 47 

0 

Company J 

L B G I F D 

Mandatory Mandatory Mandatory Mandatory Mandatory 

Not specified 

Recommended 

Policy regarding the use of preferred hotels 


Based on survey of travelers (4,910 responses) 

47

2. Ask travelers to use serviced 

apartments for stays exceeding five 

nights 

Serviced apartments can provide a cost-effective 

solution for travelers staying longer than five 

nights, when the cost of accommodations and 

meal expenses are taken into account. These 

furnished apartments tend to provide similar 

amenities to hotels while providing a more 

relaxed, productive working environment for 

travelers. 

3. Provide guidelines on what to do 

when a preferred property is 

unavailable 

Travelers cannot always book at preferred 

properties, which may be fully booked or simply 

not exist at their destination. In these cases, CWT 

recommends three main guidelines: 

Ask travelers to use a preferred chain so 

the company still benefits from preferred 

rates, although chain deals tend to provide 

lower savings than property deals. This is 

discussed further on Pages 82-86. 

Set a price limit for travelers to respect if 

booking outside preferred properties or 

chains. CWT research shows that city caps 

can be an effective way to limit spend when 

travelers have to book outside the program. 

Although the average room rate paid in a city 

usually exceeds the negotiated rate(s), the 

difference is smaller for companies that use 

city caps (16 percent for those that do 

compared to 34 percent for those that do 

not, as seen in Figure 40). 

CWT recommends setting city caps mainly 

for cities that are not covered by the hotel 

program (i.e., the company has no preferred 

properties there) and not cities that are 

covered. This is to limit the temptation for 

travelers to book non-preferred hotels when 

preferred hotels are available. To set these 

city caps, it is useful to analyze benchmarking 

data provided by the TMC to determine the 

average room rate paid by companies for 

each relevant hotel category in each city 

concerned. These rates can be used as city 

caps. 

Some companies also set caps for cities that 

are covered by the program. To do so, they 

identify their average, lowest and highest 

negotiated rates in the cities concerned. The 

rate cap they set then depends on their 

strategy. Companies that wish to penalize 

travelers who book too late to obtain a room 

at a preferred hotel set the lowest city caps— 

sometimes even 10 percent lower than their 

lowest negotiated rate. At the other end of 

the scale, some companies may wish to set 

more generous city caps, especially in cities 

where occupancy is high and travelers may 

have difficulty obtaining a room at the 

negotiated rate. 

Although it is best to define spend limits at a 

city level, it may be appropriate to use 

country caps as well (i.e., city caps for key 

destinations and a country cap for all 

remaining locations).


Figure 40: Companies using city caps pay lower average room rates 

160 

Average room rate paid by companies with city caps vs. other companies (2008) 

140 

120 

100 

121 117 

111 

Average 

negotiated 

rate = 100 

Indexed 

rate 

80 

60 

40 

20 

0 

118 150 122 130 109 122 116 134 

Paris London Chicago Average 

City cap 

Companies with city cap 

Companies without city cap 


Based on CWT transaction data (Paris = 6 companies, London = 6 companies, Chicago = 5 companies) 

Have travelers follow recommendations 

made by the travel management 

company (TMC) at the point of sale (i.e., 

through travel counselors or the corporate 

online booking tool). The TMC can propose 

a variety of suitable properties and rates, 

including special promotions and its own 

“consortia” rates that can offer a discount off 

the best available rate. 

In addition, some companies may wish to 

specify a limit on the category travelers can select 

when booking outside the program. 

Currently, few companies provide such 

guidelines. Figure 41 shows that each of the 

three main rules (use preferred chains, respect a 

price limit in each city, and follow 

recommendations made by the TMC) is 

included in fewer than 40 percent of policies on 

average. Twenty-two percent of companies 

provide no rules at all regarding bookings outside 

of the program. Many travel managers therefore 

have an opportunity to improve their policy and 

achieve savings. 

49

Figure 41: Recommended rules for booking 

a hotel when preferred properties are 

unavailable are each included in fewer than 

40 percent of policies 


Based on a survey of travelers (103 responses) 

3. Authorize booking at non-preferred 

hotels only if the rate is at least 20 

percent cheaper 

The policy also needs to spell out whether or not 

travelers should book outside the program if a 

cheaper rate is available. According to the 

research, 88 percent of companies allow their 

travelers to book a lower rate outside the 

program even if a preferred hotel is available. 

Among those, however, only 14 percent specify 

that the rate must be cheaper by a certain 

amount. CWT recommends allowing travelers to 

choose a hotel outside the program only when 

the price difference is at least 20 percent lower 

for two main reasons: 

The use of non-preferred hotels 

negatively impacts negotiations with 

preferred hotels the following year as 

volumes are diluted. Even slight “leakage” 

from the program can have a surprising 

impact on the discount obtained. Based on 

different scenarios, CWT estimates that when 

room nights are lost to competitor hotels, the 

resulting increase in the negotiated rate 

requires non-preferred hotels to be 10-15 

percent cheaper to compensate. 

A cheaper rate at a non-preferred hotel 

can translate into a higher total cost of 

stay when amenities are taken into account. 

As seen on Page 98, extra charges can 

increase hotel spend by up to a third if they 

are not included in the negotiated rate. 

Furthermore, depending on where the hotel 

is located, transport costs such as taxis may 

be higher. Travelers often do not factor in 

these costs when comparing rates and may 

choose a non-preferred hotel erroneously 

believing it will be cheaper. 

4. Mandate booking through the travel 

management company 

There are several compelling reasons for 

mandating booking through the TMC (i.e., using 

a corporate online booking tool and/or going 

through a travel counselor). 

Travelers book preferred hotels more 

often. According to the CWT survey, travelers 

selected a preferred hotel in 92 percent of 

cases when using their corporate online 

booking tool and in 89 percent of cases 

when booking through a travel counselor 

(Figure 42). This compares to an average of 

23-62 percent compliant bookings made 

through other channels.


Figure 42: Travelers use preferred hotels more often when they book through the TMC 

% 

100 

Proportion of preferred hotels booked by booking channel 

8 11 

80 

60 

38 

50 

62 

67 

77 

40 

92 89 

20 

62 

50 

38 

33 

23 

0 

Corporate online 

booking tool 

TMC 

counselor 

Phone/fax/ 

email to hotel 

In person 


Website 

Other travel 

agent 

Web booking 

agency 

Preferred hotels 

Non-preferred hotels 



Travelers obtain lower rates, with greater 

flexibility and availability. Previous CWT 

research 1 shows that rates are on average 

18-21 percent cheaper when booked 

through a TMC counselor or online booking 

tool, compared to hotel call centers, hotel 

Websites and online travel agencies (Figure 

43). There are two main reasons for this. 

First, travelers get the correct negotiated rate 

at preferred hotels more often. Second, the 

TMC can propose the best available rates, 

including promotional rates and dynamic 

public rates that are sometimes lower than 

negotiated rates at the time of booking. 

Figure 44 shows this is the case for more 

than 20 percent of bookings at preferred 

hotels. In addition, booking through the TMC 

provides competitive room availability and 

flexibility in terms of being able to change 

or cancel reservations with little or no 

penalties (Figure 45). 

1 

Playing by the Rules: Optimizing Travel Policy and Compliance, CWT Travel Management Institute (2008) 

51

Figure 43: Rates are on average 18-21% cheaper when booked through the TMC 


Based on a CWT hotel price benchmark (262 price samples), June 2007 

Web booking sites sampled: Expedia.com, Travelocity.com, HRS.com, Hotels.com and Kayak.com 

Figure 44: The TMC can offer cheaper prices than the negotiated rate for more than 20 percent 

of bookings at preferred hotels 

Public best available rate (BAR) 

CWT consortia rate 

Public promotional rate 

Negotiated rate 


Based on transaction data, June 2007


Figure 45: Booking through the travel management company provides competitive room 

availability and flexibility 

* Flexibility: the ability to change or cancel bookings with little or no penalty 

Source: CWT Travel Management Institute, based on a hotel price benchmark (330 bookings) 

It is important to note that TMCs can obtain 

lower rates even at hotels outside a 

company’s program. To test this assertion, a 

major multinational company asked CWT to 

participate in a benchmarking exercise, 

comparing rates with the hotel booking specialist 

HRS. For this benchmark, the customer chose 10 

of the most important hotels used by their 

travelers in different cities around the world, 

picked three different dates and analyzed rates, 

availability and flexibility (i.e., the ability to change 

or cancel bookings with little or no penalty). As 

shown in Figure 46, the rates proposed by 

CWT were on average 5 percent cheaper than 

those offered by HRS. In addition, higher scores 

were obtained by CWT for hotel availability and 

flexibility, as confirmed by CWT research. 

53

Figure 46: In a rate benchmarking exercise conducted by a CWT client, CWT prices were on 

average 5% cheaper than those proposed by hotel booking specialist HRS and offered greater 

availability and flexibility 

CWT vs. HRS rate benchmark (3 dates at 10 hotels) 

Average room rate 

(CWT rate = 100) 

Average cancellation 

policy 

(4= highest flexibility) 

Average hotel 

availability (%) 

3.9 

100 105 

2.6 

93 

77 

CWT HRS CWT HRS CWT HRS 


CWT rate 

vs. HRS rate Cancellation 

policy 

CWT rate 


policy 

CWT rate 


policy 

CWT rate 


policy 

Date of stay Feb. 16, 2009 Feb. 18, 2009 March 3, 2009 Average 

CWT HRS CWT HRS CWT HRS CWT HRS 

A 

(Amsterdam) -28% 4 1 -22% 4 1 -2% 4 0 -17% 4 1 

B 

(Amsterdam) 0% 4 4 0% 4 4 0% 4 4 0% 4 4 

C (Tarrytown 

– U.S.) 

0% 4 4 0% 4 4 0% 4 4 0% 4 4 

D 

(La Guardia) 0% 4 4 N/A* 4 N/A N/A 4 N/A 0% 4 4 

E (Canary 

Islands) 

N/A N/A NA N/A 3 N/A N/A 3 N/A N/A 3 N/A 

F(Barcelona) N/A N/A NA 0% 3 1 0% 3 1 0% 3 1 

G (Paris) -26% 4 4 -10% 4 1 -35% 4 4 -24% 4 3 

H (Tokyo) +6% 4 0 +6% 4 0 +6% 4 0 +6% 4 0 

I (Munich) 0% 4 4 0% 4 4 0% 4 4 0% 4 4 

J 

(Mexico City) 

0% 4 4 N/A 4 N/A 0% 4 4 0% 4 4 

Average -6% 4 3 -4% 4 2 -4% 4 3 -5% 4 3 

4 = Cancellations possible on the day of arrival 

3 = Cancellations possible up to 24 hrs 

before arrival without penalties 

2 = Unknown/unclear 

1 = Cancellations possible more than 1 day before arrival, 

but incurring penalties 

0 = No refunds/cancellations 

*N/A: Hotel not found or unavailable through one or both booking channels 

Source: CWT Travel Management Institute (HRS data obtained from a third party)


Traveler tracking is possible in the event 

of an emergency when booking through a 

TMC, helping to ensure travelers are well 

protected and receive timely assistance 

when needed. Being able to identify and 

locate travelers quickly is an essential part of 

any travel risk management program. This is 

compromised when travelers book outside 

the travel management company. 

book through the preferred channels than on 

the Internet, according to surveyed travelers: 

20 minutes on average compared to 40 

minutes (Figure 47). 

Hotel spend is captured in TMC reports, 

which tend to be a company’s main source 

of spend data, as seen earlier (Page 33). 

Travelers save time in the booking 

process. On average, it takes half as long to 

Figure 47: Travelers book twice as fast through a TMC counselor or corporate online booking 

tool than through Web booking sites 



55

5. Mandate booking at least two weeks 

in advance whenever possible 

Companies may wish to mandate booking two 

weeks in advance whenever possible to drive 

savings. Figure 48 shows the difference in 

average room rates paid in 11 cities (US$266 

million worth of transactions) less than three 

days in advance all the way up to more than two 

weeks in advance of the stay. Moreover, twoweek 

advance bookings bring savings for all hotel 

categories. 

Figure 48: Booking in advance brings savings 

110 

Impact of advance booking on average room rate, 

by hotel category 

Indexed rate 

(15+ days = 100) 

105 

100 

Standard 

Deluxe 

First 

95 

0 

15+ 14-8 7-3 2-0 

Number of days booked in advance 


Based on transaction data from 11 cities 

There are two key explanations. First, travelers are 

more likely to obtain the negotiated room type 

and negotiated rate at a preferred hotel the 

further in advance they book. Second, if travelers 

pay the public best available rate, they are likely 

to pay less if they book earlier. This conclusion is 

based on an analysis of prices at 17 hotels, as 

shown in Figure 49. Interestingly, advance 

booking did not significantly lower the average 

room rate paid in most cases and sometimes 

even raised the rate slightly. However, in the few 

cases where room rates rose at the last minute 

(up to two days before check-in), the difference 

was more than double. In other words, early 

booking enables companies to limit the risk of 

last-minute price hikes, and ensure availability. 

On average, companies pay less when they book 

in advance.


Figure 49: Advance booking enables companies to limit the impact of last-minute price hikes 

Impact of advance booking on the average room rate 

Average rate is higher 

at 6 out of 17 hotels 

Indexed rate (15+ days = 100) 

Average rate is stable 


Indexed rate 

Average rate is cheaper 


Indexed rate 

250 

-120 

pts 

250 

-9 pts +274 

250 

pts 

200 

200 

200 

150 

150 

150 

100 

100 

100 

237 

50 

100 

87 80 80 

50 

100 100 98 99 

50 

100 

126 133 

0 

15+ 14-8 7-3 2-0 

0 

15+ 14-8 7-3 2-0 

0 

15+ 14-8 7-3 2-0 

Days in advance of stay 

*Includes one hotel in Moscow where the last minute price was 3.4 times more expensive than the 15+ day advance booking rate 

Source: CWT Travel Management institute 

Based on 196 GDS rates for 17 hotels for a reservation on October 8, 2008 

57

6. Address extra charges 

Travelers need clear guidelines on which charges 

are reimbursable when they are not included in 

the room rate. For example, expenses such as 

laundry may be authorized only for longer stays. 

Figure 50 provides examples of items often 

mentioned in travel policies. 

Figure 50: Sample policy regarding extra hotel charges 

Reimbursable expenses 

Breakfast 

Business phone calls (although 

the use of a corporate calling 

card is preferred) 

Laundry (within reason for stays 

exceeding 5 nights) 

Internet access for business 

purposes 

Use of fitness center 

Non-reimbursable expenses 

Laundry for stays under 5 nights 

In-room movies 

Recreational activities 

Spa treatments 

Room-service breakfast 

(if breakfast is included in the room 

rate) 

Alcoholic beverages from the 

mini-bar 


7. Mandate payment by corporate 

credit card 

As seen earlier (Pages 33-34), corporate credit 

card data can be invaluable for companies to 

accurately evaluate their hotel spend and help 

travelers better manage their expenses. At the 

same time, surveyed travel managers recognize 

that some travelers would prefer to have their 

hotel bill sent directly to their company or TMC. 

While direct billing can be particularly useful for 

travelers who do not have their own corporate 

card, it tends to be an expensive solution for 

companies due to administrative costs, TMC 

processing costs and lost savings. Surveyed 

companies believe travelers are less costconscious 

when they do not settle their hotel 

bills themselves and are more likely to incur 

penalty fees through last-minute cancellations.


Figure 51 sums up the pros and cons of different payment methods. 

Figure 51: Corporate credit cards help companies manage hotel spend: pros and cons of 

different payment methods 

Payment 

method 

Corporate 

credit card 

Pros Cons CWT rating 

Facilitates hotel spend tracking, 

especially if a single global credit 

card program is in place 

Enables e-folio reporting 

(when available) 

Provides services for travelers 

(e.g., insurance, 60-day payment 

and a high spend limit) 

Can provide incentives for 

companies 

Data is fed directly into expense 

management systems 

Data consolidation can be 

challenging when more than one 

corporate credit card is used 

Personal 

credit card 

Direct billing 

No need to negotiate and roll-out 

a corporate card program 

Useful for occasional travelers 

who do not have credit cards 

Easy for travelers (no expense 

report, quick check-out, and no 

need for travelers to provide 

personal credit card information 

as a booking guarantee) 

TMC can ensure correct rate is 

applied when checking the invoice 

Data consolidation is impossible 

Travelers may be reluctant to 

provide personal credit card 

information as a booking 

guarantee 

Travelers are less cost-conscious 

with regard to last-minute 

cancellations or no-shows 

Direct billing is accepted by fewer 

and fewer hotels and is a costly, 

manual process 

Data reconciliation can be 

challenging (not enough 

information on the invoice to 

identify the traveler/cost center 

to expense) 


59

SUMMARY 

An optimal hotel policy covers the following key points: 

Mandatory use of preferred hotels 

Guidelines on what to do when a preferred hotel is unavailable: use a preferred 

chain, book any hotel while respecting a price limit, or follow recommendations 

made by TMC counselors or flagged by the online booking tool 

Rules regarding the use of non-preferred hotels, which should be authorized only 

if they are at least 20 percent cheaper than available preferred hotels 

Mandatory booking through the TMC 

Mandatory advance booking whenever possible 

Guidelines on reimbursable and non-reimbursable extra charges 

Mandatory use of corporate credit card


Travel policies will become stricter 

According to the CWT survey of travel managers, 

most policies already mention key items. Mostly, 

however, guidelines are provided rather than strict 

rules. Mandates will become more common 

moving forward, as shown in Figure 52. 

Figure 52: Mandates will become more common in the near future 

Do you include or plan to include the following items in your hotel policy? 

Book through the travel 


58% 

36% 

3% 3% 

Book a preferred 

property/chain 

38% 

49% 

5% 8% 

Respect a rate cap 

37% 

24% 

13% 

26% 

Book through the corporate 

online booking tool 

34% 

33% 

19% 

14% 

Book a hotel at the same time 

as flights whenever possible 

29% 

46% 

5% 

20% 

Book a specific number of days 


22% 

44% 

5% 

29% 

Book nights of the week when 

rates are usually lower whenever 

possible 

7% 

9% 

6% 

78% 

Included 

and mandatory 

Included as a 

recommendation 

Will be included 

in 1-3 years 

Source: CWT Travel Management Institute, based on a survey of travel managers (96 responses) 

No plans to 

include this item 

How much stricter will your hotel policy become in 1-3 years regarding the following items? 

Book through the travel 


38% 

26% 

36% 

Book a preferred 

property/chain 

29% 

46% 

25% 

Respect a rate cap 

27% 

30% 

43% 

Book through the corporate 

online booking tool 

46% 

34% 

20% 

Book a hotel at the same time 

as flights whenever possible 

21% 

38% 

41% 

Book a specific number of days 


19% 

38% 

43% 

Much stricter Slightly stricter No significant change 

Source: CWT Travel Management Institute, based on a survey of travel managers (87 responses)

4. Optimize the preferred 

hotel program 

Knowing which hotels to select for the 

program is a challenge, but a methodical 

approach helps. This section provides 

guidelines on which locations to cover, the 

appropriate categories to use, and whether 

or not to favor existing suppliers over 

competitors. 

Eighty-eight percent of surveyed travel managers 

say their company has a hotel program. Most of 

the remainder have the smallest hotel budgets 

(under US$5 million). The main reason they cite 

for having a preferred hotel program is to reduce 

hotel costs, but ensuring security, satisfaction and 

convenience for travelers is also key. Providing a 

choice of environmentally friendly properties is 

considered less important but nonetheless 

relevant for 64 percent (Figure 53). 

Figure 53: The top 3 objectives of a hotel program are reduce costs, ensure security and satisfy 

travelers 

Hotel program objectives Travel managers (%) 

Reduce hotel costs 

80% 

19% 

1% 

Ensure traveler security 

68% 

27% 

5% 

Ensure traveler satisfaction 

64% 

36% 

Make it easier for travelers 

to find a suitable hotel 

48% 

45% 

7% 

Encourage the use of 

environmentally friendly hotels 

6% 

58% 

36% 

Primary Secondary Not applicable 



Seven steps to optimize hotel spend > Optimize the preferred hotel program 

To maximize the benefits of a preferred hotel 

program, companies need to cover as many of 

their major business destinations as possible and 

concentrate spend on the smallest number of 

properties at each, while ensuring travelers’ 

needs are met in terms of suitable locations, 

available rooms and amenities. This exercise is 

far from easy but can be facilitated by six main 

actions: forecasting hotel spend, identifying 

properties and locations that represent at least 

US$10,000 in spend, considering local market 

conditions, selecting appropriate hotel categories, 

deciding between existing preferred hotels and 

competitors, and considering primary and 

secondary preferred properties. 

Forecasting hotel spend 

The first step in building or reviewing a program 

is to identify locations travelers frequent most 

and to forecast hotel spend in each. Here it is 

important to think in terms of districts rather 

than just cities, given that travelers want to stay 

at a hotel close to their place of business. Figures 

on existing spend serve as a basis but should be 

adjusted to account for anticipated changes in 

travel patterns. Such forecasts can be challenging 

when a high proportion of overnight trips (57 

percent on average) are to locations outside 

companies’ own sites, as shown in Figure 54. 

Figure 54: On average 57% of overnight trips are to locations outside of companies’ own sites 



63

Identifying properties and locations that 

represent at least US$10,000 in spend 

Travel managers should consider including in 

their preferred hotel program any property that 

represents sufficient spend to make negotiations 

worthwhile for both parties. For buyers, the 

benefits of negotiating a deal typically outweigh 

costs when spend reaches US$10,000 (Figure 

55). For hoteliers, the threshold is often 100 

room nights, which may represent more than 

US$10,000. These figures vary, however, 

between cities and properties, and some 

hoteliers will be prepared to negotiate rates for 

fewer room nights. 

Figure 55: It is generally worthwhile for companies to negotiate a deal at any hotel 

representing at least US$10,000 in spend 

5,000 

US$ 

4,000 

3,000 

Savings 

outweigh costs 

when the 

company 

spends at least 

US$10,000 at 

the hotel 

Savings 

2,000 

1,000 

Typical costs (negotiation and program management) 

0 

0 10,000 20,000 30,000 40,000 50,000 60,000 

Annual spend at a hotel (US$) 

Actual costs vary between companies according to the number of hotels in the program, the country where costs are 

incurred, etc. Negotiation costs are based on typical costs for a program of 500 hotels. Savings assume typical volume 

discounts (i.e., 5%). 

Sources: CWT Hotel Solutions Group, CWT Travel Management Institute


Companies therefore need to identify properties 

that already represent the relevant spend 

volume. They should also analyze total spend at 

locations to see if the threshold may be reached 

by steering travelers toward fewer properties 

(Figure 56). Furthermore, companies may wish 

to designate preferred hotels in markets 

accounting for less spend, particularly at high-risk 

destinations, to guarantee travelers have the right 

level of security and comfort. 

Figure 56: Companies may be able to concentrate spend on fewer hotels within a city to 

reach the US$10,000 threshold 

Example: a company in Paris 

Before spend concentration at destination 

(10 hotels, including 4 above US$10,000 spend threshold) 

After spend concentration at destination 

(4 hotels above spend threshold) 

Hotel * 

Company’s office 

Client/supplier’s office 

*Spend is proportional to bubble size 


65

Considering local market conditions 

Market conditions can directly impact program 

design. In particular, if occupancy levels are high, 

more preferred properties may be required to 

cover room night needs than in lower-occupancy 

markets. The average size of hotels at a 

destination also comes into play as more 

properties may be needed if their average size is 

smaller. For example, one property may be 

enough to cover 500 room nights in Tokyo every 

year, but four or five may be required in Paris, as 

shown in Figure 57. 

Figure 57: More preferred hotels may be required in cities with high occupancy rates and 

smaller properties 

800 

Recommended number of hotels per destination 

Tokyo 

600 

Los Angeles 

Hong Kong 

New York 

Number of hotels 

required for 500 room 

nights annually 

1 

Average size 

of hotels 

(rooms) 

400 

Bangkok 

2 

3 

200 

Madrid 

Brussels 

Amsterdam 

Copenhagen 

London 

Paris 

4-5 

0 

65 70 75 80 85 90 

City occupancy rate (%) 

Note: More hotels may be needed for various reasons (e.g., for proximity to different business locations) 

Sources: CWT Travel Management Institute, Smith Travel Research, June 2008


Selecting appropriate hotel categories 

The average price difference between hotel 

categories can be significant, reaching 21-25 

percent, as shown in Figure 58. 

Although travelers say that the hotel category is 

important, lower categories do not necessarily 

mean less satisfaction, as seen earlier (Page 38). 

Given that high levels of traveler satisfaction can 

be achieved with more modest hotels, some 

companies may be able to switch to lower 

categories and achieve savings without 

negatively impacting their travelers’ experience. 

For example, CWT calculated that one company 

could realistically save 6 percent of total hotel 

spend by switching room nights to lower-price 

properties in the same category or one category 

below, without moving to less convenient 

locations (Figure 59). Many organizations have 

cut back on their use of deluxe and first-class 

hotels since the beginning of the global 

economic downturn, as shown in Figure 60, 

which compares the share of categories used by 

seven companies during the first and fourth 

quarters of 2008. 

Figure 58: The average price difference 

between hotel categories reaches 21-25% 


Based on 1,694,563 room nights for one global company 

67

Figure 59: One company could save 6% of its hotel spend by switching to lower-price hotels 

in the same category or one category below 

Breakdown of room nights before and after category switch 

100 

80 

Before 

After 

Room 

nights 

(%) 

60 

40 

63 

72 

20 

0 

22 

14 20 

7 

1 1 

Deluxe First Standard Economy 

Sources: CWT Hotel Solutions Group, CWT Travel Management Institute 

6% savings on total hotel spend of US$47M 

Figure 60: Companies used a smaller proportion of deluxe and first-class hotels in 2008 

% 

60 

Share of deluxe and first-class hotels booked by 7 global companies 

Q1 2008 vs. Q4 2008 

Q1 2008 

Q4 2008 

40 

20 

0 

52 50 

54 

42 

40 39 

38 

31 31 

34 

16 

11 

11 

7 

I C AC M T N H 


Based on transaction data 

Company


To select the appropriate categories, CWT offers 

the following advice: 

Benchmark the use of different hotel 

categories among peers (i.e., companies 

with a similar profile and in the same 

industry) with help from the travel 

management company. CWT client data 

shows notable differences between sectors 

and even between different companies 

within the same sectors (Figure 61). 

Figure 61: The share of hotel categories used varies between sectors and companies in the 

same sectors 

Total room nights by hotel category (2008) 

40% 

25% 

18% 17% 12% 7% 

22% 

52% 

65% 

69% 

61% 70% 

81% 

60% 

Banking & finance 

8% 9% 13% 

22% 17% 

11% 18% 

0% 1% 0% 0% 1% 1% 

0% 

Petroleum, energy & mining 

Pharmaceutical 

Consumer goods 

Telecommunications 

Automotive 

Average 

Economy 

Standard 

First 

Deluxe 


Based on transaction data (3,036,799 room nights) 

69

Figure 61(continued): The share of hotel categories used varies between sectors and 

companies in the same sectors 

Total room nights by hotel category (2008) 

Banking & finance 

30% 

22% 

15% 

57% 55% 47% 

74% 

40% 

58% 

65% 

71% 

47% 

41% 43% 

52% 

26% 

27% 

2% 2% 6% 5% 7% 

8% 

U S G M W X Y Average 

Company 

7% 

Petroleum, energy & mining 

45% 

16% 

29% 25% 25% 

48% 

62% 68% 

70% 

65% 

7% 9% 6% 14% 9% 

0% 0% 1% 

0% 1% 

Z AA J AB Average 

Company 

Economy 

Standard 

First 

Deluxe 


Based on transaction data (383,172 transactions)


Consider a multi-tier program. Buyers can 

include a range of hotel categories at key 

locations to adapt their programs to travelers 

with different expectations. For example, it 

may be appropriate for employees traveling 

in their own country to stay at lower-category 

hotels than long-haul travelers who may not 

be as familiar with the destination and 

typically stay longer. In fact, the majority of 

surveyed travelers agree with this principle 

(Figure 62). Similarly, higher-category hotels 

might be provided at destinations that 

typically involve longer stays, bearing in mind 

that nearly a quarter of all stays, or 69 

percent of room nights, involve at least 

three nights (Figures 63-64). Companies 

may also consider serviced apartments for 

stays of five nights or more. 

Figure 62: Both domestic and international travelers believe long-haul travelers should stay 

at higher quality hotels 

Strongly disagree 

Disagree 

Agree 

Strongly agree 



71

Figure 63: Hotel stays of at least three nights account for 69% of room nights 

8+ nights 

4-7 nights 

3 nights 

2 nights 

1 night 

Source: CWT Travel Management Institute, based on a survey of travelers (4,892 responses) 

Figure 64: Companies can identify destinations that typically involve longer stays and provide 

higher category preferred hotels or serviced apartments 

One company’s room nights (%) 

76 

60 

45 

27 

21 

21 20 

26 

19 17 15 

12 11 

15 

19 

18 

18 

30 

20 19 21 21 

6 

6 

12 

12 

10 

18 

10 

14 

31 

57 

19 

33 9 

20 

34 

13 

21 

30 

45 

48 48 

53 

Verona 

Turin Milan Rio Bangalore St. Louis Minneapolis Madrid Chicago Washington London 

de Janeiro 

1-4 nights 

5-8 nights 

9-15 nights >15 nights 

Source: CWT Travel Management Institute, based on transaction data for one company in 12 cities, January-August 2008


Different hotel categories may also be selected for 

use by different business units. Figure 65, for 

example, shows a company that has designed its 

program so that lower-margin divisions use 

significantly fewer first-category or luxury hotels. In 

addition, the company has specific hotel directories 

with a higher number of lower-category properties 

for travelers staying in their own countries. 

Figure 65: One company has designed its program so that lower-margin divisions use 

significantly fewer first-class or luxury hotels 


nights (%) 

Breakdown of hotel categories booked by business units 

Company G (banking & finance sector) 

100 

2 2 1 

15 

18 

28 24 

31 31 29 

80 

35 

47 

43 41 

48 50 

60 

45 

70 

60 

82 

34 

53 

34 34 37 

51 

40 

45 

40 

48 49 

40 

53 

21 

20 40 39 35 35 34 

18 

29 6 

25 

20 17 

12 12 10 10 9 9 

0 

Division a b c d e f g h i j k l m n o p 

Investment banking 

Retail banking 

Deluxe First Standard Serviced apartment 


73

Deciding between existing preferred 

hotels and competitors 

It is often worth considering competitor properties 

as they may suit travelers better and/or offer more 

savings. Indeed, 40 percent of companies change 

at least 25 percent of their preferred hotels from 

one year to the next (Figure 66). Case studies of 

two companies showed they maintained on 

average 58-77% of their preferred hotels year 

over year (Figure 67). 

Figure 66: 40% of companies change at least 25% of their preferred hotels every year 




Figure 67: Two companies maintained on average 58-77% of their preferred hotels 

year over year 

Company H 

Average program stability 

(preferred hotels retained year over year): 58% 

Company B 

Average program stability: 77% 

525 

525 

620 

(+18%) 

311 

309 

700 

(+13%) 

299 

49 

144 

208 

359 

359 

390 

(+9%) 

96 

294 

360 

(-8%) 

70 

6 

67 

217 

2006 2007 2008 

2006 2007 2008 

Preferred hotels 2006 


New hotels 2007 

Hotels added to or removed 

from the program in 2006 

New hotels 2008 

Before switching preferred hotels, travel 

managers should consider their ability to steer 

travelers toward new properties. Fifty-two 

percent of travel managers say travelers need at 

least three months to adjust to changes, and 

one case study shows that travelers continued 

to book a particular hotel one year after it had 

been removed from the program (Figure 68). 

Companies should implement measures to 

improve compliance if necessary. More 

importantly, companies should consider the 

long-term impact of any changes, as strong 

relationships with hoteliers can help them 

negotiate better rates. 

Figure 68: Travelers at one company 

continued to book a significant number of 

rooms at a hotel one year after it was 

removed from the program and 

compromised savings 

Figure 69 suggests companies that retain a 

large proportion of preferred hotels from year 

to year (at least 80 percent) tend to be more 

effective at limiting rate increases. 


75

Figure 69: Companies that retain at least 80% of preferred hotels from year to year tend to 

be more effective at limiting rate increases 

Change in average room rate (ARR) 2007-2008 according to program stability 

(7 companies' room nights in Paris) 

Average change: +19% Average change: +6% 

100 

16% 16% 25% -14% 32% -10% 15% Change (%) 

Program 

stability* 

(%) 

80 

60 

40 

64 

74 

81 

89 91 93 

20 

39 

0 

P AF O T B G Q 

Company 

* Program stability: hotels remaining in the program year over year (2006-08 average) 


When determining whether to retain current 

suppliers or select new ones, travel buyers 

should also consider the following: 

Current preferred properties that are 

frequently used and clearly meet travelers’ 

needs. 

Non-preferred hotels that are frequently 

used, particularly if they meet the 

US$10,000 spend threshold. Some 

companies design their programs around 

travelers’ current choices, but most try to 

strike a balance between the hotels travelers 

appear to prefer and those that offer greater 

savings. 

New entrants on the market or existing 

properties that have developed their 

offering through, for example, extensions or 

refurbishment. 

Considering primary and secondary 

preferred properties 

It can be useful to identify secondary preferred 

properties that will only be proposed to travelers 

by TMC counselors or the online booking tool if 

primary hotels are unavailable. Such a system 

enables companies to maximize volumes at key 

hotels while ensuring travelers obtain preferred 

rates as often as possible. 

Hotels suggested by travelers or local 

employees, which should be recorded 

throughout the year.


Ensuring properties meet security 

standards 

Ensuring travelers’ safety and security has 

become a top priority for travel managers, who 

are increasingly aware of the need to mitigate 

the risks associated with business travel. One key 

component of any risk management program is 

checking that preferred suppliers meet the 

requisite security standards. To this end, travel 

managers should ideally work with security 

specialists when designing their hotel program, 

particularly for high-risk destinations. 

Ongoing review 

A preferred hotel program needs to be reviewed 

regularly to ensure it continues to meet needs. 

Once a year is a basic minimum, but some 

companies review their programs more often. 

Extending coverage to meet demand and 

concentrating spend on fewer properties 

to maximize volume discounts, are the main 

trends in terms of program evolution, as shown 

in Figure 70. 

Figure 70: Many companies plan to increase program coverage and/or concentrate spend on 

fewer properties 

Increase 

Decrease 



77

SUMMARY 

Key points for optimizing a hotel program: 

Buyers should consider properties and locations that represent at least US$10,000 in 

spend. 

Travel patterns and local market conditions impact the number of hotels required to meet 

travelers’ needs. 

Significant savings are possible by providing different hotel categories for different 

populations of travelers. 

It can be worth considering competitor hotels, although a stable preferred hotel program 

promotes compliance and enhances negotiations with hoteliers. 

Companies can identify primary and secondary preferred properties, with the aim of 

maximizing bookings at key hotels. 

Few travel managers make environmental friendliness a key criterion for preferred hotels, 

even though it is important to travelers. Security should also be considered carefully. 

The “green” hotel program: myth or 

reality? 

Many travel managers are considering the 

environmental friendliness of their preferred 

hotels as awareness grows regarding carbon 

dioxide emissions resulting from business travel. 

Few, however, make it a primary concern. 

According to the CWT survey, only 6 percent say 

promoting the use of environmentally friendly 

hotels is a primary objective of their hotel 

programs, although 58 percent say it is a 

secondary objective. (See Figure 53 on Page 

62.) Similarly, only 9 percent of travel managers 

always take hotels’ “green” credentials into 

account when selecting preferred hotels, while 

28 percent do so usually and a further 45 

percent occasionally. 

This is one area where travel managers’ 

objectives are not in keeping with travelers’ 

expectations. As seen on Page 39, 

environmental friendliness is considered an 

important feature for travelers when deciding 

where to stay. 

This discrepancy reflects the difficulty companies 

have in evaluating hoteliers’ environmental 

initiatives. Some properties and chains have


undergone “green” certification, but a single, 

internationally recognized standard is still lacking. 

To fill the gap, some companies are integrating 

environmental questions into their requests for 

proposal. Such questions may include: 

Do you participate in a carbon offsetting 

program? 

Is your property located within walking 

distance of our offices or easily reached by 

public transportation? 

Do you have energy-efficient and/or waterefficient 

fixtures in your rooms? 

Do you have a water conservation program 

for linens, food service, landscaping, etc.? 

Are your employees trained in environmentally 

friendly practices? 

Does your property recycle materials such as 

paper, cans, glass and plastic? 

Do you use local and/or organic food? 

The answers can provide a useful indication of 

how environmentally committed a hotel is. 

Ideally each property would provide figures on 

the average carbon footprint per room night. As 

a guideline, CWT considers that a room night 

generates on average 28 kilograms (61.7 

pounds) of carbon, roughly the equivalent of a 

150-kilometer (93-mile) car trip. (See Figure 71 

for the average carbon emissions for long-haul 

and medium-haul trips.) Although hotels 

represent only a fraction of corporate travelers’ 

carbon footprint, they cannot be neglected by 

companies wishing to manage the 

environmental impact of their travel. 

Figure 71: Hotels represent on average 3-18% of carbon emissions per business trip 

Car/taxi 


Air transportation 

Assumptions: 

Air: Paris-Los Angeles round trip 

(long-haul) or Paris-Rome round trip 

(medium-haul) 

Hotel: two nights (28 kg CO 2 

per room 

night based on CWT estimates) 

Car/taxi: office-airport-hotel round 

trip in a mid-size car 


79

5. Negotiate effectively 

Negotiations may seem particularly 

challenging when a preferred hotel program 

can include hundreds of properties. To set the 

right objectives and obtain competitive deals, 

travel managers can implement a number of 

best practices involving the type of deal 

(property or chain-wide, flat-rate or dynamic 

pricing, with or without last-room availability), 

the negotiating approach and hotel selection 

criteria. 

Property or chain-wide deals? 

Property-level negotiations generally bring 

the largest savings. They should be 

considered for any individual hotel (i.e., an 

independent hotel or a property within a 

chain) that accounts for at least US$10,000 

in spend or 100 room nights, the typical 

threshold hotels set for this kind of deal. A 

large number of properties can fall into this 

category. As an indication, a third of surveyed 

companies sign preferred property deals with 

more than 100 hotels, while 2 percent sign 

more than 900 such deals (Figure 72). In 

fact, some large CWT clients have propertylevel 

deals with several thousand hotels. 

Most companies combine two main types of 

deals: property-level deals for hotels that account 

for their largest spend and chain-wide 

agreements for other properties. 

Figure 72: 31% of companies have more than 100 preferred property deals 

Number of preferred properties in hotel programs 

100 

Number of 

hotels 

Average hotel 

spend (US$M) 

7 

Number of 

hotels 

>900 

Average hotel 

spend (US$M) 

117 

80 

31 

>100 

28 

18 

601-900 

43 

Companies 

(%) 

60 

40 

12 

25 

51-100 

21-50 

8 

7 

30 

201-600 

26 

20 

32 

1-20 

2 

45 

101-200 

12 

0 



Seven steps to optimize hotel spend > Negotiate effectively 

To make the best use of resources, companies 

can take a two-tiered approach to property-level 

negotiations: 

Full-scale property-level negotiations 

involve support from local teams, face-toface 

talks with hoteliers, and a wide range of 

negotiation levers (discussed on Pages 95- 

104). This approach should be taken for the 

small proportion of hotels that account for 

the company’s largest spend. In the example 

shown in Figure 73, 11 percent of the hotels 

used by one company account for 82 

percent of its hotel spend, with each property 

representing at least US$25,000. 

“Light” property-level negotiations occur 

mainly via email exchanges and focus on the 

most basic negotiation levers. This approach 

is recommended for hotels that do not merit 

full-scale negotiations but nonetheless reach 

the US$10,000 threshold for property deals. 

As seen in Figure 73, 9 percent of hotels 

represent 9 percent of spend, each 

accounting for US$10,000-US$25,000. 

Figure 73: Negotiation tactics vary with the level of spend at each property 

Average room 

rate 

US$1,000 

Negotiation approaches according to hotel spend 

(Company AF) 

11% of hotels 

82% of spend 

“Full” propertylevel 

negotiations 

Sample hotel: 

3,257 room nights 

at an ARR of US$201 

(total spend: US$654,657) 

Chain agreements 

or no negotiations 

80% of hotels 

9% of spend 

US$100 

US$10,000 spend line 

US$25,000 spend line 

“Light” property-level 

negotiations 

9% of hotels 

9% of spend 

US$10 

1 10 100 1,000 10,000 

Number of room nights 



If a hotel belongs to a chain, property-level 

negotiations may start with a central contact at 

the chain who can propose rates for the targeted 

properties. If the buyer believes a better deal can 

be obtained, negotiations can continue with each 

property directly. 

81

Chain-wide agreements, as the name 

suggests, offer companies a uniform 

percentage discount off the best available 

rate offered by all hotels within a chain 

worldwide. They are often used as a 

complement to property-level agreements. 

Seventy-six percent of surveyed companies 

have at least one chain-wide deal in place, 

while 53 percent of companies plan to 

increase the proportion of hotel spend 

covered by such agreements over the next 

few years (Figures 74-75). 

Figure 74: 76% of companies have at least one chain-wide deal 




Figure 75: 53% of companies plan to increase the proportion of spend covered by chainwide 

deals 



83

Chain-wide deals tend to offer smaller discounts 

than individually negotiated rates, but they 

enable travel managers to extend the benefits 

of a preferred hotel program to destinations 

where spend volumes are too low for propertylevel 

negotiations, and to do so with minimal 

resources. 

Companies with highly dispersed travel 

patterns will therefore find chain-wide deals 

particularly useful. In the examples shown in 

Figure 76, Company AG is able to cover most of 

its spend through individual property deals. 

Company B, on the other hand, has spend 

spread out over many more locations and has 

therefore negotiated agreements with four 

chains in the United States, in addition to 

property-level deals with 140 hotels. Thanks to 

those chain deals, an additional 44 percent of 

room nights can be discounted. An analysis of 

the company’s spend in six cities shows that 

chain hotels account for up to 35 percent of 

room nights at those destinations. Further 

analysis of spend at two destinations shows that 

the average room rate paid at preferred chains is 

6 percent higher than that paid at individual 

preferred properties (Figures 77-78). 

Figure 76: Chain-wide deals are particularly useful for companies with highly dispersed 

travel patterns 

Company AG 

65% of spend = 11 locations 

Company B 

65% of spend = 60 locations 

Mostly preferred property agreements 

Preferred property agreements & chain-wide deals 

30% of the company’s U.S. hotel spend 1% of the company’s U.S. hotel spend 


Based on transaction data


Figure 77: One company spends up to 35% of room nights at preferred chains, based on an 

analysis of spend in six cities 

Breakdown of nights spent at preferred properties/chains and other hotels 

by a company’s travelers in 6 cities 

(Company B) 

100 

20 

16 

80 

41 

40 

43 


nights 

(%) 

60 

40 

20 

49 

24 

31 

35 31 29 

64 

22 

76 

57 

Other 

Preferred properties 

Preferred chains 

(excluding preferred 

properties within the chain) 

0 

Chicago Paris New York London Princeton Madrid 


Based on credit card data for one company’s hotel spend in 6 cities in April 2008 

14 

Figure 78: The ARR paid by the same company at its preferred chain in three cities was 

on average 6 percent higher than at preferred properties 

8 


Based on credit card data for one company’s hotel spend in 3 cities in April 2008 

85

There is, however, a risk associated with chainwide 

deals. In many cities where a preferred 

property is also available, travelers may be 

tempted to use the preferred chain and therefore 

dilute the volumes allocated to individual 

preferred properties. The hotel policy should 

therefore underline the procedure to follow 

when booking (i.e., choose preferred properties 

before preferred chains when both are 

available). 

travelers who might not accept fluctuating prices, 

difficulty in budgeting hotel costs, and a lack of 

clear-cut value brought by dynamic pricing 

(Figure 80). 

Flat-rate or dynamic pricing deal? 

Dynamic pricing agreements have long been a 

subject of debate among travel management 

professionals, mainly due to a lack of data to 

demonstrate the savings they can bring 

compared with negotiated flat rates. CWT 

therefore conducted in-depth case studies to 

discover just how well dynamic pricing deals can 

perform. 

Dynamic pricing agreements provide a fixed 

percentage discount off a hotel’s fluctuating best 

available rate (BAR). While companies 

commonly accept dynamic pricing in chain-wide 

deals, they tend to prefer flat rates whenever 

they have the requisite volume for a propertylevel 

agreement. 

According to the CWT survey, only 24 percent of 

companies have signed property-level deals 

based on dynamic pricing, and among those 

companies, 90 percent have done so with fewer 

than 10 hotels, as shown in Figure 79. Among 

companies that have signed dynamic pricing 

agreements, 39 percent say they did so only 

because the hotel(s) would not negotiate a flat 

rate. Companies that have refused dynamic 

pricing proposals cite several reasons, including 

the need to monitor prices, a fear that the room 

rate would increase, potential resistance from


Figure 79: 24% of companies have at least one dynamic pricing agreement with a preferred 

property 

Do you have dynamic pricing 

agreements with any of your 

preferred properties? 

If so, how many agreements do 

you have? 

Companies (%) 

100 

Companies (%) 

30 

80 

24 

Yes 

60 

20 

40 

76 

No 

10 

20 

0 



0 

28 10 24 18 10 10 

1 2 3 4-5 6-9 10+ 

Number of agreements 

Figure 80: Travel managers cite multiple reasons for refusing dynamic pricing deals 

Companies without a dynamic pricing agreement 

Did any hotels offer you a 

dynamic pricing agreement? 

% 

100 

% 

80 

Why did you refuse? 

(more than one answer possible) 

80 

39 

Yes 

60 

60 

40 

61 No 

0 

20 

We do not 

have the 

means to 

0 

monitor 

prices 

constantly 



40 

20 

68 61 61 57 57 

The average 

room rate 

would have 

increased 

Travelers 

would not 

have liked it 

The value of 

dynamic 

pricing 

agreements 

is unclear 

Hotel spend 

would have 

been difficult 

to budget 

11 

Other 

87

Despite this reticence, 40 percent of companies 

expect to increase the number of dynamic 

pricing deals in their portfolio, compared with 56 

percent who say it should remain roughly the 

same, and only 4 percent who expect a 

reduction. 

According to CWT analyses, dynamic pricing 

agreements can perform well under the right 

conditions. Notably, one company that had a 

dynamic pricing deal with 12 properties in a 

chain had, in the third year, an annual increase in 

the average rate paid that was 8 points lower 

than the corporate market average. In previous 

years, the company’s ARR had increased at the 

same rate as the market or one point less (Figure 

81). Moreover, an analysis of rates paid at one 

hotel in New York shows that the company 

outperformed other corporations that had flatrate 

agreements (Figure 82). Working closely 

with hoteliers to monitor rates helped the 

company achieve these results. In contrast, 

another company using dynamic pricing saw its 

average rate rise higher than the market, mainly 

due to losses at three properties that cancelled 

out savings achieved at six other hotels. 

Performance at two of those three hotels was 

particularly weak compared to previously 

excellent negotiated flat rates (Figures 83-84). 

Figure 81: One company’s ARR evolved favorably compared to the market average thanks to 

a dynamic pricing deal 

Evolution of average room rate indexed to 2005 rate at 12 U.S. hotels within a chain 

Company AF switched 

to a dynamic pricing 

agreement 

100 100 111 111 117 116 121 113 

Indexed rate increase 

between 2005 and 2008: 

- Company AF: +13% 

- All clients: +21% 

2005 2006 2007 2008 

(Jan.-Aug.) 

All CWT clients including 

those with flat-rate deals 

Company AF 


Based on transaction data (66,540 room nights for company AF and 268,258 room nights for all CWT clients)


Figure 82: An analysis of rates paid at one hotel in New York shows the company 

outperformed other corporations that had flat-rate agreements 

Evolution of average room rate indexed to 2005 rate at a hotel in New York 

150 

Company AF switched 

to a dynamic pricing 

agreement 

122 126 120 

125 130 121 

100 

100 100 

100 

109 107 106 

Indexed rate 

(2005 rate = 100) 

50 

0 

2005 

2006 2007 2008 

All clients 5 clients with flat rate deals Company AF 


Based on transaction data (121,000 room nights) 

89

Figure 83: Another company’s ARR rose more than the corporate market after switching to 

dynamic pricing 

Evolution of average room rate indexed to 2005 rate 

at 9 U.S. hotels within a chain 

Company AW switched 

to a dynamic pricing agreement 

All CWT clients, including 

those with flat-rate deals 

Company AW 

100 100 104 108 

Indexed rate increase 

2007-2008: 

- Company AW: +8% 

- All clients: +4% 

January - July 2007 

January - July 2008 



Figure 84: For the same company, losses at three properties cancelled out savings achieved 

at five other hotels 

Average room rates indexed to 2007 (2007 = 100) 

(January – July 2007 vs. January – July 2008) 

All clients 

Company AW 

99 97 98 99 

125 

114 110 111 

103 105 107 101 

103 101 

105 

97 96 

125 

121 

105 

104 108 

Average rate 

Atlanta Airport 

Logan Airport 

Oakdale 

Long Beach 

New York 

Newark 

Ontario Airport 

Phoenix 

Salt Lake City 

Seattle Airport 

Average 

Hotel locations 


Based on transaction data


These case studies show that dynamic pricing 

deals can provide a reasonable alternative to 

fixed rates if the following conditions are met: 

Hoteliers must provide regular reporting 

and agree to renegotiate if the company’s 

rates evolve less favorably than the 

corporate market average. A strong 

partnership with hoteliers is especially 

important during an initial trial period when 

major problems can be ironed out. The travel 

management company can also provide 

benchmark rate information to help evaluate 

performance. 

economic downturn, and companies that are 

entitled to a discount off the BAR will 

therefore have very attractive rates. On the 

other hand, rates can rise more than 

expected when demand is high, unless 

companies are able to negotiate a rate cap 

and/or a limit on the frequency of rate 

changes. 

Dynamic pricing seems more attractive during an 

economic downturn, when rates may drop 

further than expected at the time of annual 

negotiations. At other times, companies tend to 

prefer the predictability of flat-rate deals. 

Companies must accept the risks 

associated with fluctuating prices. Hotels 

may lower their best available rates 

significantly when demand falls, as in an 

Hoteliers and dynamic pricing: for or against? 

Some hoteliers are strong supporters of dynamic 

pricing, which they describe as a win-win 

proposition. They argue it enables them to 

maximize occupancy, improve revenues and 

offer competitive rates while simplifying the RFP 

and negotiation process for corporate clients. 

Their public best available rates may fluctuate 

often, even on a daily basis. This requires 

sophisticated yield management systems that 

have been out of reach for many independent 

hoteliers in the past but are now more 

accessible. 

Others say they prefer to keep price fluctuations 

to a minimum, using a small number of seasonal 

rates. They underline that flat rates help 

corporate buyers to budget and simplify 

communications to travelers regarding the rates 

they should be paying. In addition, some lowcost 

hoteliers say fluctuating prices are at odds 

with their brand positioning and may harm their 

relationship with corporate clients and travelers. 

91

Last-room availability 

A last-room availability (LRA) clause stipulates 

that the hotel must offer the negotiated rate to 

travelers even when only one room of the 

negotiated type is available at the property. This 

type of agreement is intended to protect 

companies from paying increased rates during 

periods of high demand, although hoteliers may 

specify “black-out” dates when the negotiated 

rate is unavailable. Approximately half of all 

hotels offering LRA impose black-outs, which 

involve 30-40 nights on average. 

Rates negotiated with LRA are slightly higher than 

non-LRA rates—typically by about 5-10 percent— 

but they tend to lower the average rate paid over 

the year because they enable companies to 

obtain the negotiated rate more often, as shown 

in Figures 85-86. 

Figure 85: An LRA clause enables companies to receive the negotiated rate more often 

Percentage of 7 companies’ room nights billed at the correct negotiated rate 

at a preferred property in London in 2007 

% 

100 

Without LRA 

8 11 

With LRA 

5 2 

80 

50 

60 

78 

40 

92 89 

95 98 100 

20 

50 

22 

0 

AL AP E AB AQ AF H 

Company 

Room rate below or equal to negotiated rate 

Room rate above negotiated rate 


Based on transaction data for 7 companies at one hotel in London in 2007 (2,211 room nights)


Figure 86: Companies pay a lower average room rate with an LRA agreement, even if the 

negotiated rate tends to be higher than non-LRA rates 

Average room rates paid by 2 companies with similar volumes 

at the same hotel in Paris in 2007 

Company AL (non-LRA) 

Average room rate: US$215 

(+8.3% vs. negotiated rate) 

Company H (LRA) 

Average room rate: US$200 

(-2.8% vs. negotiated rate) 

215 

200 

274 

Average 

room rate 

(US$) 

174 

199 

249 

178 

206 

ARR < negotiated rate ARR = negotiated rate ARR > negotiated rate 


Based on 2007 transaction data for two companies with similar room night volumes 

93

LRA is common in corporate contracts, although 

more difficult to obtain in recent years (Figure 

87). This trend may be reversed as hotels 

negotiate harder to maintain corporate business 

during the economic downturn. 

Figure 87: LRA has become more difficult to obtain in recent years 

% 

100 

Proportion of preferred hotel agreements offering LRA for 3 companies 

2006 vs. 2008 

6 8 9 18 13 28 

80 

60 

Non-LRA 

LRA 

40 

94 92 91 82 87 72 

20 

0 

2006 2008 2006 2008 2006 2008 

Company B Company AJ Company H 


Based on case studies of 3 companies


How best to negotiate? 

The rates companies obtain are strongly linked 

to the room night volumes they present to 

hoteliers, but other factors, ranging from spend 

on amenities to stay patterns, can be leveraged 

in negotiations. 

CWT recommends the following best practices: 

Know the local market. Buyers get the best 

deals when they have a keen knowledge of 

the hotel market in a particular city, including 

general price trends, the negotiating 

approach used by key hotels, and the 

evolving offering. For example, the buyer 

should know whether hotel rooms are in 

short supply, which suitable hotels are on 

offer, and how rates are evolving. This kind 

of knowledge is essential for selecting the 

right properties, setting the right 

negotiation targets, and knowing when to 

accept or reject a proposal. For example, in 

a buyers’ market, it may be possible to obtain 

not only substantial rate decreases but 

complementary amenities. Typical ways in 

which local market dynamics can impact 

rates and negotiating targets are shown in 

Figure 88. 

Figure 88: Local market knowledge helps buyers set the right negotiating targets 

Evolution of negotiated rates/occupancy in key gateway cities 

December 2008 vs. December 2007 

Moderate rate 

increases are likely 

- Refuse significant rate increases 

- A held rate is a good result 

New York 

Hong Kong 

London 

Dubai 

Sydney 

85% 

80% 

Paris 

Major rate 

increases are likely 

- A limited rate increase is a good result 

Cairo 

75% 

Los Angeles Berlin 

70% 

Buenos Aires 

Cape Town 

Change in occupancy 

Dec. 08 vs. Dec. 07 (%) Rome 

Toronto 

65% 

-15 -10 -5 

0 5 10 15 

Madrid 

Rio de Janeiro 

Mexico 

60% 

Rate decreases 

are likely 

Beijing 

- Refuse rate increases 

- A held or decreased rate is a good result 

55% 

50% 

Occupancy 

(December 2008) 

Moderate rate 

increases are expected 

- A held rate is a good result 

Sources: Smith Travel Research & The Bench, CWT Hotel Solutions Group, CWT Travel Management Institute 

95

Benchmark rates. Companies commonly 

make year-over-year rate comparisons to 

evaluate deals offered by existing preferred 

hotels. In addition, travel management 

companies can provide information on 

average rates negotiated and paid by clients 

with similar volumes at different properties 

in the relevant markets. 

Consolidate room night volumes. 

Companies with larger volumes of room 

nights can expect to receive better discounts. 

This is illustrated in Figure 89, where a 

company with twice the room nights of 

another receives an additional 6 percent 

discount at a hotel in Madrid and an 

additional 3 percent at another property in 

New York. In cities where occupancy is falling, 

discounts can rise to almost 10 percent 

whenever volumes are doubled. In markets 

where demand remains high, the same 

increase in volume may produce additional 

discounts of only 2-3 percent. (Figure 90). 

Figure 89: Companies obtain better discounts when they have larger room night volumes 

at a property 

Negotiated room rate by volume 

300 

A hotel in Madrid 

400 

-3% 

A hotel in New York 

Negotiated 

room rate (US$) 

200 

-6% 

300 

200 

100 

Doubling volume leads to 

a further discount of 6% 

100 

Doubling volume leads to 

a further discount of 3% 

0 

0 

0 1,000 2,000 3,000 0 1,000 2,000 3,000 

Annual room nights 

Annual room nights 


Based on negotiated rates for 2007


Figure 90: Volume-based discounts are impacted by market conditions 

Volume discount by room yield growth category 

10 

Decrease 

in RevPAR* 

Moderate increase 

in RevPAR 

High increase 

in RevPAR 

8 

Average: 

7.6% 

Discount 

for doubled 

volumes 

(%) 

6 

4 

2 

Average: 3.1% 

Average: 2.6% 

0 

Berlin 

Tokyo Madrid Chicago Paris Sydney New York London Shanghai 

*RevPAR: Revenue per available room 


Based on negotiated rates for 2007 

97

Companies can consolidate volumes in two 

main ways: by aggregating business from 

different countries or regions, and by 

rationalizing the number of preferred 

properties used by travelers at each destination. 

As shown in previous CWT research 2 , local to 

regional consolidation can lead to a 60 percent 

increase in the room nights allocated to preferred 

hotels in the program, while regional to global 

consolidation can add a further 30 percent. 

can add up to 33 percent to the total cost of 

stay, according to a CWT analysis of 

corporate credit card data (Figure 91). It is 

clearly worthwhile for companies to 

negotiate free amenities within their room 

rate wherever possible. Case studies show 

that companies obtain free breakfast and 

Internet access at up to 50 percent of their 

preferred properties, saving 2.6 percent of 

total hotel spend. 

Include amenities in negotiations. Services 

such as meals, parking and Internet access 

Figure 91: Amenity charges can add up to 33 percent to the total cost of stay 

% 

140 

120 

100 

80 

60 

40 

Extra charges as a percentage of the average room rate when incurred 

15 

8 

Potential cost of all extra 

charges as a percentage of 

the room rate 

100 100 

4 

6 

33 

20 

0 


Restaurant/ 

Room service 

Parking Internet Other Total 


Based on credit card spend data for one company in the U.S. in April 2008 

2 

Global Horizons: Consolidating a Travel Program, CWT Travel Management Institute (2007)


Ask for a permanent room allotment. 

Some hotels will agree to hold a specific 

number of rooms for the company on a 

permanent basis, releasing any that are not 

required 24 or 48 hours before the check-in 

date without charging cancellation fees. This 

service is usually provided free of charge and 

is worth negotiating when a company has 

very large volumes and when room 

availability can be problematic. 

companies whose travelers often stay longer 

than a few nights, for two reasons. First, 

longer stays may include lower occupancy 

nights such as weekends. In addition, longer 

stays reduce the average cost per guest, for 

example in terms of check-in/check-out 

processes. CWT analyses show that some 

companies have significantly longer stays on 

average (Figure 92) and can therefore 

leverage this fact in negotiations. 

Leverage attractive stay patterns. Hoteliers 

say they are willing to grant better rates to 

Figure 92: Some companies can leverage longer than average stays in negotiations 

Breakdown of hotel bookings by length of stay 

7 

15 

30 

8 

12 

17 

23 

9 

8 

14 

24 

7 

7 

13 

26 

6 

7 

12 

24 

6 

9 

10 

23 

7 

6 

9 

22 

5 

6 

10 

22 

4 

5 

9 

23 

4 

7 

8 

17 

3 

4 

7 

19 

6 

8 

13 

22 

5 nights 

and more 

4 nights 

3 nights 

2 nights 

19 

29 

40 

45 

47 

51 

52 

56 

57 

59 

64 

67 

52 

1 night 

AF Q AB AO AH F H V AJ AR AS All clients 

Company 

3.0 2.4 2.5 2.2 2.1 2.1 2.2 1.9 1.9 1.8 1.8 2.3 

Average number of nights 


Based on transaction data, 2008 

99

Leverage city caps. Experience suggests that 

hoteliers may take a company’s city caps into 

account during negotiations and try to align 

their rates so that they can be included in the 

program. This is illustrated in Figure 93, 

which shows the room rates obtained for 

comparable volumes at six hotels by 

companies with and without city caps. 

Figure 93: Hoteliers may lower their negotiated rate to align with a company’s city cap 

Note: The analysis includes company T, company F, company I and company H. Each comparison is for two companies with similar volumes of 

room nights. 


Conduct multiple negotiation rounds. 

Companies often find it worthwhile to 

negotiate beyond the hotel’s initial response, 

regardless of whether the hotel is an 

incumbent preferred property or a 

competitor. As an example, Figure 94 shows 

how one company obtained a further 6 

percent discount in the third round of 

negotiations. Conducting several rounds of 

discussions as necessary can reduce rates 

significantly. The two companies shown in 

Figure 95, for example, lowered their average 

negotiated rate by a further 3-4 percent in 

this way.


Figure 94: One company obtained an additional 6% discount after three rounds of 

negotiations 

Difference between initial offer and final rate negotiated 

by Company C at a preferred property in Paris 

22 

15 

-8% 

-6% 

US$ 

257 

220 

6% further 

discount gained 

in third-round 

negotiations 

Room rate 

without negotiations 

Initial offer 

(RFP response) 

Second-round 

negotiations 

Third-round 

negotiations 

Negotiated rate 


Figure 95: Hoteliers may cut rates significantly after several rounds of negotiations 

Difference between initial offer and final negotiated rate 

% 

0 

Company M 

Company H 

-1 

-2 

-3 

-3.8 

-3.3 -3.6 

-1.6 

-4.6 

-2.9 

-4 

-5 

-6 

-7 

Hotels in program in 2007 Hotels new to program in 2008 All hotels 


101

Consider renegotiating flat rates during 

the year if market conditions mean that 

better rates may be obtained. For example, 

one company asked its top 100 properties 

to propose new preferred rates in March 

2009 to take into account the global 

decrease in rates since the beginning of the 

year. Figures 96-97 show how 64 of the 

properties agreed to lower their rates by an 

average of 8 percent. Some hotels 

proposed substantially larger rate reductions 

of up to 30 percent. 

Figure 96: 64% of properties approached by a company in March 2009 agreed to lower their 

previously negotiated rates 

Number 

of properties 

Properties’ response to a request to renegotiate rates in March 2009 

(Company I’s top 100 properties) 

100 

16 

80 

20 

60 

40 

100 

84 

64 

64% of hotels 

renegotiated 

20 

0 

All hotels 

approached 

(company's top 

100) 

No response Response Refused to 

renegotiate 

Agreed to 

renegotiate 

Rates dropped 

by 8% on average 

(US$600,000 savings) 



Figure 97: Hotels that agreed to lower their negotiated rates in March 2009 did so by 8 

percent on average 


103

Buyers should use the full range of best practices 

when negotiating with their top-spend properties, 

but not necessarily with hotels that are 

earmarked for “light” negotiations. According to 

the research, a significant proportion of 

companies are missing important savings 

opportunities by failing to use the best practices 

described in this section. For example, 18 

percent never leverage spend on hotel 

amenities, as shown in Figure 98. 

Figure 98: Some best practices are rarely implemented by companies in hotel negotiations 

Best practices used during hotel negotiations for better terms and conditions 

Room nights/spend with hotel last year 

72% 

26% 

1% 

1% 

Year-over-year rate comparison 

70% 

26% 

3% 1% 

Potential room nights/spend at the 

property/destination 

59% 

32% 

7% 

2% 

Competitor hotel rate benchmark 

42% 

41% 

16% 

1% 

Length and quality of relationship with hotel 

34% 

52% 

12% 

2% 

Company's track record in meeting 

previous commitments 

34% 

49% 

13% 

4% 

Other local market conditions 

34% 

40% 

22% 

4% 

Additional spend on amenities 

14% 

30% 

38% 

18% 

Under-utilized 

best practices 

Average length of stay 

Arrival pattern 

(day of week) 

11% 

8% 

25% 

41% 

41% 

35% 

26% 

13% 

Advance booking behavior 

7% 

22% 

50% 

21% 

Always Usually Occasionally Never 




How to make the final selection? 

When making a final selection among hoteliers’ 

proposals, travel managers need to consider a 

number of factors: 

Total cost of stay. For a fair comparison, the 

total cost per room night should be 

considered, including room rate, amenities 

(some of which may be included in the 

negotiated rate), and the typical cost of 

transport between the hotel and the main 

business destinations. Hotels that are more 

conveniently located not only suit travelers 

better but may cost less when taxi charges 

are taken into account, as shown in Figure 

99. In addition, buyers should factor in the 

benefit of last-room availability agreements. 

Figure 99: The cost of transport can be significant and impact the choice of hotel 

Cost of stay including taxi fares – 2008 

(Traveler from Company H visiting the company’s office in Paris) 

Hotel C 

Company H 

US$ 

300 

250 

200 

53 

The most 

expensive hotel is cheapest when 

taxi fares are taken into account 

56 

Hotel A 

150 

100 

177 

199 

221 

50 

Hotel B 

0 

Hotel A Hotel B Hotel C 

Room rate + breakfast 

Taxi fare 


105

Hoteliers’ performance. A hotelier’s track 

record is important, as performance varies 

widely in terms of correct rate loading into 

global distribution systems (GDSs) and the 

application of LRA. When a new preferred 

hotel is under consideration, the buyer’s 

travel management company can share the 

experience of other clients of the hotel. 

Traveler behavior. The benefits of making 

changes to the program should always be 

considered in light of traveler behavior and 

the ability to steer travelers toward other 

hotels. Some “new” properties might already 

be popular with travelers and represent a low 

risk in terms of compliance, whereas others 

might be a less certain choice. For changes to 

bring the expected benefits, companies 

should be prepared to implement measures 

to improve compliance. 

discussions during the first few months of 

program implementation. The time taken 

varies, but a general idea is shown in Figure 

100. The most important point to note is that 

requests for proposals must go out sufficiently 

early for hoteliers and buyers to evaluate 

proposals and carry out several rounds of 

negotiations if necessary. At the same time, 

negotiating too early can deprive companies 

of valuable benchmark information. 

This timeline is typical of companies that are 

updating existing hotel programs. When a 

program has to be designed from scratch or 

completely overhauled, at least two years are 

required to achieve average performance. For 

best-in-class performance, a further two years 

should be allowed with the support of hotel 

sourcing and program optimization specialists. 

Green criteria. Although hoteliers’ green 

credentials can be hard to evaluate 

objectively, companies are increasingly 

interested in working with environmentally 

friendly properties. When two properties 

propose very similar conditions, green 

benefits can make a difference, particularly 

since travelers say environmental friendliness 

is an important consideration. 

Which timeframe and organization? 

Effective negotiations require careful planning 

and support from the right teams. The following 

points are worth considering: 

Plan in advance. Hotel contracts generally 

run for a calendar year. Negotiations therefore 

take place mainly toward the end of each year, 

with an intense period of auditing and


Figure 100: A typical timeline for designing and managing a hotel program 

Tasks 

April 

May June July Aug. Sept. Oct. Nov. Dec. Jan. Feb. 

March 

Preliminary 

planning 

Data consolidation 

and analysis 

First semester 

reporting dashboard 

Initial selection of 

hotels for RFP 

RFP release 

Negotiations 

Final selection of hotels 

& fine-tuning 

of program locally 

Publication of 

preferred hotel directory 

Program 

implementation and 

auditing 

Team activity 

Input from the company's local staff 


107

Ensure your travel management team has 

the right resources. Most companies find it 

useful to involve local teams at different 

stages of the hotel program such as 

identifying candidate hotels for the RFP, 

setting rate objectives and negotiating directly 

with properties if required (Figure 101). 

Travel managers who handle global 

programs generally call on one or two fulltime 

equivalents (FTEs) centrally and 0.5-2.5 

FTEs at a local level. 

Figure 101: Most companies involve local staff at different stages of the hotel program 



Work closely with a travel management 

company. TMCs can make the RFP process 

more efficient, notably by automating 

hoteliers’ responses (e.g., via Web-based 

tools) and processing the information 

centrally. Moreover, the TMC can provide 

support at every stage of the negotiation 

process, from contributing expertise on local 

markets and setting objectives to discussing 

terms with hoteliers and evaluating different 

proposals.


SUMMARY 

Key points for effective negotiations: 

Property-level negotiations are generally worthwhile for any hotel representing 

at least US$10,000 in spend. Under this threshold, companies can consider 

chain-wide deals. 

Although companies tend to prefer flat-rate deals with preferred properties, 

dynamic pricing agreements can bring savings if they are well monitored, 

especially in an economic downturn. On the whole, however, companies tend 

to prefer the predictability of flat-rate deals. 

Companies that negotiate last-room availability tend to pay lower average room 

rates over the year, even if the negotiated rate tends to be slightly higher. 

To negotiate most effectively, buyers should know the local market, consolidate 

room night volumes, benchmark rates, include amenities in negotiations, 

leverage city caps and attractive stay patterns, and conduct several rounds of 

negotiations as needed. Companies can also renegotiate during the year if 

internal or market conditions change to the extent that better rates are likely. 

For best results, companies should plan sufficiently in advance, ensure they have 

the right resources, and work closely with their travel management company. 

109

6. Improve traveler 

compliance 

The full benefits of a well-designed hotel 

program can be reaped only if travelers 

respect their travel policy. Unfortunately, 

compliance is often low when it comes to 

using preferred hotels and preferred booking 

channels. To improve compliance, travel 

managers can implement a number of best 

practices, ranging from implementing policy 

mandates to ensuring follow-up with 

travelers who book out of policy. 

Low compliance with preferred hotels 

and preferred booking channels 

Compliance with the hotel program is generally 

low. CWT analyses of nine companies’ booking 

transactions show that only 26-57 percent of 

bookings involve preferred hotels, while as few 

as 20 percent of transactions are made through 

preferred booking channels (i.e., corporate 

online booking tool or travel management 

company counselors), as shown in Figures 102- 

103. The fact that one company’s travelers used 

preferred booking channels for 94 percent of 

bookings indicates that high compliance levels 

are possible. Nonetheless, companies cannot 

expect 100 percent use of preferred hotels as 

no preferred hotel program can cover all 

destinations. 

Figure 102: The use of preferred hotels varies between 26% and 57% in a sample of 

9 companies 

% 

100 

80 

Bookings at preferred properties as a proportion of all hotel bookings worldwide 

43 50 52 55 56 59 66 67 74 

60 

40 

20 

0 

57 50 48 45 44 41 33 33 26 

AC AD N H I C M T AE 

Company 

Preferred 

properties 

Other 

hotels 

Program coverage* 

*Program coverage: the percentage of transactions that could be made at preferred hotels if available (i.e., the program offers at least one 

preferred property in the relevant city) 


Based on transaction data and credit card spend data for 2007

Seven steps to optimize hotel spend > Improve traveler compliance 

Figure 103: The use of preferred booking channels varies between 20% and 94% in a sample 

of 10 companies 

% 

100 

80 

51 

42 

Booking channel used 

38 

33 

27 

2 

25 

10 

16 

26 

14 

10 

6 

8 

60 

80 

9 

40 

20 

0 

15 

5 

L 

20% 

10 

39 

48 

10 

53 

67 

71 

B J I K E G H F D 

65 

58 

76 

86 

94% 

Company 

Corporate online booking tool 

TMC counselors 

Other booking channels 



111

Understanding why travelers book out of policy is 

key to improving compliance and identifying any 

required adjustments to the program. According 

to the CWT survey, travel managers and travelers 

explain non-compliance in different ways. Travel 

managers say the main reason for noncompliance 

with preferred hotels is travelers’ 

personal preference. Surveyed travelers, on the 

other hand, cite mainly practical reasons such 

as no preferred hotel being available at the 

relevant location or the hotel not meeting 

travelers’ needs (Figure 104). In the latter case, 

the main reason given is the distance from the 

place of business (Figure 105). 

Figure 104: Travel managers and travelers cite different reasons for booking outside the 

preferred hotel program 

+ 

- 

Importance 

Travel managers' view 

Traveler’s personal 

preference 

Cheaper hotels outside 

the program 

Traveler’s lack of 

awareness 

Did not meet 

traveler’s needs 

Compliance not a high 

management priority 

Lack of reporting tools 

to track non-compliance 

TMC not strictly 

enforcing the policy 

Preferred hotel data 

incorrectly loaded into GDS 

Travelers' view 

No preferred hotel at 

the location 

Did not meet 

traveler’s needs 

No rooms available 

Did not choose the 

hotel 

Preferred hotel directory 

serves as a guide only 

Cheaper hotels outside 

the program 

Rooms available only 

above authorized category 

Other 


Based on surveys of travelers (5,016 responses) and travel managers (101 responses)


Figure 105: Distance from the traveler’s place of business is the main reason a preferred hotel 

did not meet the traveler’s needs 



113

The survey also indicates that travelers who 

book non-preferred hotels are more priceconscious 

than other travelers and stay at 

lower-category hotels (Figure 106). Moreover, 

they are more likely to be domestic travelers, 

supporting the point made earlier (Page 71) that 

short-haul travelers are happy to stay in lowercategory 

hotels than long-haul travelers. Travel 

managers may wish to adjust their programs to 

include a greater number of lower-category 

hotels if necessary. 

When travelers book outside the preferred 

channels, they rarely use Web booking sites or 

hotels’ branded Websites, contrary to popular 

belief. Instead, they prefer to contact hotels 

directly by phone, email or fax (Figure 107). 

Figure 106: Travelers who book non-preferred 

hotels tend to stay at lower- category properties 



Figure 107: When travelers book outside preferred channels, they rarely use Web booking 

sites or hotels’ branded Websites 

Preferred booking channels 

Non-preferred booking channels 

Sources: CWT Travel Management Institute, CWT Hotel Solutions Group


Actions to improve compliance 

In addition to monitoring traveler behavior 

through relevant data, a number of actions can 

help improve compliance: 

Implement clear policy mandates. As seen 

on Pages 47-61, a clear policy is the 

cornerstone of effectively managed hotel 

spend. Travel managers must provide 

enough instructions so travelers know 

what to do in most booking situations, 

without burdening them with too much, 

potentially confusing information. Whenever 

possible, mandates, rather than simple 

recommendations, can make a significant 

difference to how often travelers use 

preferred hotels and preferred booking 

channels. 

Figure 108: Travelers who have easy access 

to their company’s hotel directory tend to 

book preferred hotels more often 

Ensure the travel policy and preferred 

hotel directory are up-to-date and easily 

accessible to travelers and travel 

arrangers. Travelers who say they can easily 

access their company’s hotel directory select 

preferred hotels more often than those who 

say they do not have easy access. Yet 

awareness of the preferred hotels is low 

compared to the travel policy: only 52 

percent of travelers say they know how to 

access an up-to-date hotel directory, 

compared to 74 percent who can easily 

access an up-to-date travel policy (Figures 

108-109). 

Figure 109: Only 52% of travelers say they 

can easily access their company’s directory of 

preferred hotels, while 74% say they have 

easy access to their travel policy 

Don’t know 

Non-preferred hotel 

Preferred hotel 

Don’t know 

Company does not 

have a preferred 

hotel directory 

No 

Yes 





115

Explain the stakes. Price-conscious travelers 

are often unaware of the full impact of 

booking outside the program and do so 

because they believe they can save their 

companies money. For example, when 

comparing room rates, they may not take 

into account the cost of amenities, which 

may be included in a negotiated rate. In 

addition, they typically do not realize that 

booking non-preferred hotels can reduce the 

discounts negotiated by their company and 

dilute savings in the longer term. 

Communicating the strategy behind the 

hotel program and sharing information on 

savings can be an effective way to increase 

compliance. Travelers tend to be particularly 

receptive to such information when they are 

under pressure to cut costs. 

Ensure that the hotel program and policy 

are communicated to a wide audience. As 

a large proportion of hotel bookings are 

made by travel arrangers on behalf of 

travelers (41 percent according to the CWT 

research), it is important to communicate to 

a wide audience within the company. This 

includes specific communications for 

employees who may make local bookings 

for visiting colleagues. CWT research shows 

that the use of preferred booking channels is 

significantly lower in such cases: 64 percent 

of bookings made on behalf of visitors, 

compared to 82 percent of other bookings 

(Figure 110). 

Figure 110: Booking channel compliance is lower when employees book local hotels on 

behalf of visitors 

Non-preferred 

booking channels 

Preferred booking 

channels (online 

booking tool or 

TMC counselor) 


Based on a survey of travelers and travel arrangers (303 responses)


Check that the online booking tool (OBT) 

is well configured. Fifty-five percent of 

surveyed travel managers report that their 

organization has an OBT. Among them, more 

than two-thirds are satisfied with OBT 

features, but there is room for improvement 

(Figure 111). For example, 23 percent of 

travel managers say their OBT set-up could 

be improved to encourage travelers to 

choose preferred hotels (e.g., by flagging or 

filtering out non-compliant properties). 

Furthermore, 36 percent would like to make 

the hotel section of their OBT more userfriendly 

(e.g., by showing preferred hotels 

and frequently visited sites on a map). 

Figure 111: Most travel managers are satisfied with key OBT features, but there is room for 

improvement 

Travel managers’ satisfaction with their online booking tool 

User-friendliness of 

hotel section 

8 

28 

56 

8 

Accuracy of rates 

8 

25 

61 

6 

Comprehensiveness of 

hotel information 

4 

21 

64 

11 

Ability to steer travelers 

toward preferred hotels 

8 

15 

64 

13 

% 

0 20 40 60 80 100 

Very dissatisfied Dissatisfied Satisfied Very satisfied 



117

Figure 112 shows how an OBT can be 

configured so the company’s primary preferred 

hotels appear at the top of the list when travelers 

make a search. If those hotels do not suit their 

needs, travelers can click on “more hotels” to 

view secondary preferred hotels or chains and 

the best available rates at other hotels in the 

TMC database (including properties that are not 

available via GDSs). The OBT can also provide 

information on any cancellation penalties and 

complementary amenities, as well as remind 

travelers of rate caps, authorized categories and 

other policy points. When customizing the OBT 

set-up, it is important to strike the right balance 

so that travelers are encouraged to comply with 

the preferred hotel program while enabling them 

to book at other hotels if necessary. 

Figure 112: Companies can make hotel booking easier for travelers by providing maps of 

preferred hotels near frequently visited sites 



Empower TMC counselors to enforce 

compliance at the time of booking. 

Depending on the level of involvement 

defined by the client company, travel 

counselors at the point of sale can 

recommend compliant options, engage in a 

pre-trip approval process, take a noncompliant 

booking and file a non-compliance 

report, or refuse to make a non-compliant 

booking. They can also ask travelers to make 

their booking online if the company’s policy 

requires it. Today, many companies could 

benefit from granting more authority to 

traveler counselors. Fifty-seven percent ask 

the TMC simply to provide a policy reminder, 

compared to only 22 percent who require 

them to notify management of noncompliant 

requests or ask for authorization, 

and 5 percent who allow them to refuse 

non-compliant bookings (Figure 113). 

Figure 113: 84% of travel managers empower the TMC to promote compliance during the 

booking process 



119

Require travelers to book their hotel at 

the same time as transportation 

whenever possible. Most air travel (which 

is used for 70 percent of trips) is booked 

through an online booking tool or TMC 

counselor. Requiring travelers to book rooms 

at the same time can therefore be an 

effective way to increase the use of preferred 

booking channels, which in turn tends to 

increase the use of preferred hotels. 

Ensure follow-up with non-compliant 

travelers. Only a minority of travelers say 

they have to justify non-compliance: 12 

percent of those booking outside the 

preferred channels and 48 percent of those 

booking a non-preferred hotel (Figure 114). 

Yet a large majority of travelers say 

companies are right to ask them to stay at 

preferred hotels and use preferred booking 

channels (84 percent and 89 percent 

respectively, as shown in Figure 115). Most 

travel managers say non-compliance 

generates a response (e.g., an email 

reminder to travelers) and some invoke 

tough measures such as withholding 

reimbursement of expenses or invoking 

disciplinary action (Figure 116). 

Figure 114: Most travelers say they do not have to justify non-compliance 

No 

Unlikely 

Probably 

Yes 


Based on a survey of travelers (1,884 responses / 580 responses)


Figure 115: Travelers acknowledge companies are right to ask them to use preferred hotels 

and preferred booking channels 



Figure 116: 69% of travel managers follow up on non-compliance 

Most likely measures taken when a traveler breaches policy without reasonable justification 

No measures are taken 

31 

No 

measures 

Traveler is flagged in an exception report and asked 

to respect policy by the travel management team 

22 

Traveler is flagged in an exception report and asked 

to respect policy by his/her manager 

Traveler is flagged in an exception report without 

further action 

19 

18 

Mild 

measures 

Travel expenses are not reimbursed 

Disciplinary measures are taken 

3 

7 

Harsh 

measures 

0 10 20 30 40 

Travel managers (%) 



121

Investigate the reasons for noncompliance. 

It is important for travel 

managers to find out (e.g., through traveler 

surveys) if travelers are booking hotels 

outside the program for legitimate reasons 

and investigate whether the program should 

be adjusted to better meet travelers’ needs. 

SUMMARY 

Improving traveler compliance: 

Although no hotel program can cover all traveler needs, there is plenty of room 

to improve compliance with preferred hotels and booking channels. 

Travel managers believe travelers’ personal preference is the main reason for 

non-compliance, while travelers cite mainly practical reasons, such as distance 

from the place of business, that indicate adjustments to the program may be 

required. 

Best practices for improving compliance include implementing policy mandates, 

keeping the policy and program up-to-date and easily accessible to travelers, 

communicating to a wide audience (both travelers and travel arrangers), 

configuring the online booking tool optimally, enforcing compliance at the time 

of booking, asking travelers to book hotels at the same time as transportation, 

empowering TMC counselors at the point of sale, ensuring follow-up with noncompliant 

travelers, and reviewing the hotel program regularly.

Seven steps to optimize hotel spend > Track performance 

7. Track performance 

Generally speaking, performance tracking is 

underdeveloped in the business travel 

industry, which partly explains why hotelier 

performance and traveler compliance often 

fall below expectations. Best practices include 

GDS rate audits, LRA audits, compliance 

monitoring, and the use of key performance 

indicators. 

Tracking hotelier performance 

A well-negotiated program loses its value if 

hoteliers do not deliver what they promise, 

particularly in terms of room rates. Surveyed 

traveler managers are only too aware of this fact. 

While they rank “ability to meet commitments” 

as the most important feature of their 

relationship with hoteliers, they also say it is the 

feature with which they are least satisfied 

(Figure 117). 

Figure 117: Hoteliers’ effectiveness in meeting commitments ranks low in terms of travel 

manager satisfaction 

Hotelier performance rated by travel managers 

2.5 

Satisfaction 

2.0 

Closeness of working 

relationship 

Expertise/ 

knowledge 

Effectiveness of negotiations 

Quality of reporting 

Effectiveness at delivering 

the agreed level of service 

Responsiveness 

and flexibility 

Ability to meet commitments 

Importance 

Unimportant: 

Nice to have: 

Important: 

Essential : 

Satisfaction 

Very dissatisfied: 

Dissatisfied: 

Satisfied: 

Very satisfied: 

0 

1 

2 

3 

0 

1 

2 

3 

1.5 

2.0 2.5 

3.0 

Importance 

Lowest satisfaction scores 



123

To ensure that the agreed conditions are being 

met, companies should monitor hotelier 

performance throughout the year and identify 

any improvements that need to be made. In 

particular, it is worth focusing on three main 

areas: 

Rate loading in global distribution 

systems (GDSs). An initial CWT audit of five 

companies’ programs revealed that only 50 

percent of negotiated rates were loaded 

correctly, while a further 10 percent were 

loaded incorrectly and were on average 15 

percent higher. This result is common and 

such GDS rate loading errors can add 

approximately 5 percent to overall hotel 

program costs. When monitored and 

discussed with hoteliers, however, results can 

improve dramatically. In this analysis, regular 

rate audits gradually raised the percentage of 

correctly loaded rates to 77 percent. Ideally, 

an audit should take place at the beginning 

of the year to ensure the new terms and 

conditions are applied, and be repeated 

several times until most errors have been 

eliminated (Figures 118-119). 

Figure 118: In an initial audit of 5 companies’ programs, only 50% of negotiated rates were 

loaded correctly into the GDS 

Loaded 

rates (%) 

100 

GDS audits for 5 companies, 2008 

(Companies X, AE, G, D & AK) 

80 

60 

60 

75 

67 

83 

77 

Rates loaded 

Rates loaded correctly 

40 

50 

20 

0 

1st audit 2nd audit 3rd audit 



Figure 119: An analysis of one company’s program shows poor GDS rate loading can add 

more than 5% to hotel program costs 


125

GDS rate squatting. Regular GDS audits can 

also help companies manage the problem of 

rate squatting, which occurs when GDS 

codes intended for a company’s preferred 

hotels are used by non-preferred properties. 

Rate squatting occurs, for example, when a 

hotel uploads rates after an agreement has 

expired or when a chain uses a preferred 

provider code for individual properties that 

are not included in its contract with the 

company. 

TMCs use robot technology to scan GDSs 

and flag squatter rates. In this way, a CWT 

study of two global companies’ transactions 

made via a GDS showed three squatter 

hotels for every preferred hotel. Furthermore, 

squatter hotels accounted for 4-5 percent 

of their 9,000 bookings. Further analysis 

revealed that a large share of those 

transactions involved a small number of 

squatters: in one case, nearly half of the 

rogue transactions involved 7 out of 50 

squatter hotels. In the same example, 

squatter rates were on average 21 percent 

higher than the average rate paid at preferred 

properties in the same city, as shown in 

Figure 120. It can pay therefore to identify 

rate squatters and work with hoteliers to 

resolve such problems. 

Figure 120: One company paid on average 21% higher rates at squatter hotels vs. the average 

rate paid at preferred hotels 

Difference between average rates paid at the top 7 squatter hotels and preferred hotels 

(Company G - November 2008) 


City 

City covered 

by program 

Number of 

transactions 

ARR paid at 

squatter hotels 

(US$) 

ARR paid at 

preferred 

hotels (US$) 

Price 

difference 

(%) 

A 

B 

Krakow No 5 182 - - 

London Yes 

15 342 238 44% 

C Milan Yes 9 244 249 -2% 

D 

E 

Milan Yes 6 170 249 -32% 

Oslo Yes 14 339 253 34% 

F 

Rivas- 

Vaciamadrid 

No 8 104 - - 

G 

Average room 

rate (weighted by 

number of 

transactions) 

Zurich Yes 6 259 214 22% 

293 243 21% 

* In cities covered by the program 



Last-room availability (LRA). To obtain an 

LRA clause in their rate agreements, 

companies generally pay a premium of 5-10 

percent compared to non-LRA rates. This 

premium pays off, as companies obtain 

rooms at their negotiated rate more often 

and subsequently pay a lower average room 

rate over the year, as explained on Pages 92- 

94. Nevertheless, some hoteliers perform 

better than others on their LRA 

commitments. A CWT analysis of one 

company’s rates at seven preferred hotels in 

the same city (1,605 transactions) showed 

that one hotelier offered travelers the 

negotiated rate (or less) for as many as 96 

percent of room nights, while another did so 

for only 53 percent (Figure 121). Regular 

auditing can help companies ensure 

hoteliers respect their LRA commitments, as 

well as identify problems such as low 

compliance (i.e., the traveler asks for a more 

upscale room type than authorized in the 

policy). An example of LRA audit results is 

described on pages 128-129. 

Figure 121: An LRA audit reveals that a company received its negotiated rate or lower for 

53-96% of room nights at a selection of 7 hotels 

100 

% 

Percentage of room nights billed at correct negotiated rate for 7 

hotels in Paris with which a company has an LRA agreement 

(Company H) 

20 

16 

10 

8 

8 

4 

80 

47 

24 

41 

60 

40 

11 

55 

84 

62 

80 

96% 

20 

0 

53% 56 

42 

51 

29 

30 

16 

6 

A B C D E F G 


Room rate < negotiated rate Room rate = negotiated rate Room rate > negotiated rate 


Based on transaction data (1,605 nights at 7 hotels) 

127

Rate audits pay 

A rate audit conducted by CWT for one company 

revealed that it was paying more than the 

negotiated rate for 34 percent of its room nights 

at a preferred property even though it had 

negotiated a last-room availability agreement 

without black-out dates. 

Twenty-four percent of its room nights were 

more expensive than the negotiated rate despite 

having been booked using the correct GDS code. 

Out of these room nights, 37 percent were 

standard rooms while 63 percent were cases of 

travelers paying for deluxe rooms instead of 

standard negotiated rooms (Figure 122). 

Although it is possible that no standard rooms 

were available at the time of booking or that 

travelers asked for an upgrade, deluxe rooms 

may have squatted the GDS code intended for 

the negotiated rooms. Such findings should be 

investigated further with the hotelier to ensure 

errors are corrected.


Figure 122: Audits showed that one company paid more than its negotiated rate for 34% of 

its room nights at a preferred property 

Results of LRA audit 

(Company N at a hotel in Paris) 

Hotels that provide LRA 

Room nights booked under 

the company’s code 

Room nights booked under 

another code 

Paid rate 

> negotiated rate 

Paid rate 

< negotiated rate 

Paid rate 

> negotiated rate 

Paid rate 

< negotiated rate 

24% 

of room nights 

55% 


10% 


11% 


34% 


Breakdown of incorrect rates 

Reason 

Recommendation 

Room nights 

booked 

using correct 

GDS code 

but more 

expensive 

than the 

negotiated 

rate 

(24% of 

room nights) 

Standard 

rooms 

(37% of room 

nights) 

Deluxe rooms 

(63% of room 

nights) 

Rate or tax incorrectly 

loaded into GDS 

Traveler asked for a 

upgrade 

Hotel closed its standard rate 

Unavailability of 

standard rooms 

Other reasons 

(breaching the LRA contract) 

Discuss with the 

hotelier 

Continue LRA audits 

Enforce the travel 

policy and discuss 

results with the hotelier 

Extend the program 

to ensure maximum 

availability 

Continue LRA audits 


Based on 14,962 room nights 

129

Tracking traveler compliance 

Companies need to track compliance to ensure 

the program and preferred booking channels 

meet travelers’ requirements, as low compliance 

may indicate a problem. They should also 

identify cases of non-compliance that could be 

avoided and, where necessary, implement 

measures to change behavior within the 

organization. Ensuring travelers respect the travel 

policy is essential for reaping maximum benefits 

from the hotel program. 

This said, only 47 percent of surveyed travel 

managers say they measure travelers’ use of 

preferred hotels. Even fewer (32 percent) 

measure the use of preferred booking channels, 

as shown in Figure 123. 

Figure 123: Only 47% of surveyed travel 

managers measure compliance with 

preferred hotels and 32% with preferred 

booking channels 


Based on a survey of travel managers (86 and 97 resopnses) 

No 

Yes 

Moreover, companies that track compliance with 

the preferred hotel program tend to measure 

simply the percentage of hotel bookings 

involving a preferred property or chain. This 

information provides a useful indication of 

traveler compliance. It does not indicate, 

however, whether travelers have booked the 

authorized room type. Similarly, this data fails 

to account for situations in which travelers 

booked at non-preferred hotels while following 

the rules laid out in the travel policy (e.g., 

respecting a city cap). 

To measure compliance effectively, companies 

should track the following performance 

indicators: 

Room nights booked at preferred 

properties and chains. 

Use of appropriate room types. This can 

be difficult to determine from the room rate, 

as hoteliers do not always apply the 

negotiated rate. In other words, a more 

expensive rate does not necessarily imply 

that the traveler has booked an upgraded 

room. 

Compliance with city caps when nonpreferred 

hotels are used (i.e., room rates 

respecting a specific price limit). 

Other rules such as not booking deluxe 

hotels. 

As discussed on Pages 32-36, it is challenging to 

obtain comprehensive data. Nevertheless, travel 

managers can work with hotel sourcing and 

program optimization specialists to produce 

reporting dashboards that serve as an essential 

indication of how well the travel policy is 

respected and which areas need to be improved.


Key performance indicators and 

reporting dashboards 

One of the challenges of data management is 

making sense of the mass of figures companies 

can receive from their different suppliers in a 

timely manner. Travel managers need to identify 

key performance indicators (KPIs) and ensure 

they are tracked regularly. To this end, a KPI 

dashboard can provide a user-friendly overview 

and highlight areas that require attention. 

Figure 124 shows a list of indicators companies 

find useful for tracking overall performance, hotel 

program design and sourcing, traveler 

compliance and hotelier performance. 

Many companies ask their travel management 

company to produce reporting dashboards on 

these key indicators on a quarterly basis. Some 

items, such as GDS rate loading, may require a 

different schedule. 

Figure 124: Sample reporting dashboard for hotel spend 

Overall 

Key performance indicator Scope Destination Freqency 

during the year 

Evolution of company’s ARR compared 

to market average 

Program coverage 

(% spend covered by preferred hotels) 

Company 

Company 

Top 

All 

Once 

Once 

Program 

design and 

sourcing 

Evolution of average negotiated rate compared 

to market average) 

Hotels offering LRA (%) 

Company 

Company 

Top 

All 

Once 

Once 

Rates correctly loaded into the GDS (%) 

Company 

All 

Four times 

Use of preferred properties 

(% room nights) 

Business unit 

All 

Twice 

Use of preferred chains 

(% of total room nights) 

Business unit 

All 

Twice 

Traveler 

compliance 

Use of city caps 

(% room nights at or below cap) 

Use of preferred booking channels 

(% room nights) 

Business unit 

Business unit 

Top 

All 

Twice 

Twice 

Advance booking (average number of days 

booked in advance of stay) 

Business unit 

All 

Twice 

Hotel category (% room nights booked in 

authorized categories) 

Business unit 

All 

Once 

Hotelier 

performance 

Application of correct negotiated rate 

(% room nights at or below rate) 

for LRA and non-LRA hotels 

Company 

Top 

Once 


131

SUMMARY 

Tracking performance: 

Companies should monitor hoteliers’ performance systematically to ensure rates 

are loaded correctly into GDSs and negotiated rates are available to travelers. 

Regular tracking is essential for ensuring the hotel program meets travelers’ needs 

and improving compliance. 

Key performance indicators and reporting dashboards help travel managers to 

optimize their programs.

Conclusion 

Hotel spend will be increasingly managed by companies as they seek further savings from their travel 

program. Best performers will build on a keen understanding of the hotel market and traveler 

behavior, bringing improvements in key areas such as data consolidation, travel policy, the preferred 

hotel program, negotiations, traveler compliance and performance tracking. 

Realizing they can spend nearly as much on hotels as on air transportation may encourage companies 

to allocate greater resources to hotel sourcing and expect a higher return on their hotel program. They 

will be helped by a buyer’s market in many major cities, as a weak economy lowers occupancy and 

encourages hoteliers to bargain hard for corporate business. 

Going forward, companies can expect significantly better conditions in terms of rates and 

complementary amenities. Moreover, travel managers will find it easier to secure sufficient room 

availability for their travelers in some high-demand markets. At the same time, companies should 

continue to ask hoteliers to help make travel more sustainable, and work with security experts to 

ensure the hotels they choose provide the right level of security for travelers. 

Corporate buyers can take full advantage of these opportunities to create more value by working 

with specialists in hotel sourcing and program optimization. As this report has shown, optimizing 

hotel spend offers many companies plenty of room for savings. 

133

Appendices 

Glossary 

The following is a list of key terms and 

abbreviations used in this document: 

Average room rate (ARR): the average of all 

room rates paid by a company or companies 

over one year 

Best available rate (BAR): the lowest room rate 

offered by a specific hotelier for each available 

room type on any given day 

Black-out dates: specific days on which a 

negotiated rate does not apply 

Chain-wide agreement: a fixed percentage 

discount off the BAR that applies at all hotels 

belonging to a chain 

City cap: a spend limit set by companies for 

hotel stays in specific cities 

Dynamic pricing: public rates that fluctuate, 

even daily, with supply and demand. A dynamic 

pricing agreement offers a fixed percentage 

discount off the fluctuating rate 

Last-room availability: an agreement that 

guarantees a company’s travelers will be offered 

the negotiated rate even if only one room of the 

negotiated type is available, except during blackout 

dates if applicable 

Negotiated flat rate: a preferential fixed rate 

offered to a company that usually applies for one 

calendar year 

Preferred hotel: a property (independent or 

belonging to a chain) with which a company has 

negotiated flat rates or a discount 

RevPAR: revenue per available room (or room 

yield), which is the most important indicator of 

hotel performance, taking into account room 

rates and occupancy 

Serviced appartment: furnished appartment 

accommodation offering hotel-style amenities 

such as breakfast and dry cleaning. 

E-folio: an electronically transmitted, itemized 

hotel invoice 

Global distribution system (GDS): a worldwide 

system used to book travel services, also known 

as a computerized reservation system (CRS) 

Hotel category: an indication of hotel quality 

(e.g., deluxe, first, standard or economy) 

Hotel program: a directory of preferred hotels 

with which a company has usually negotiated flat 

rates or a fixed discount off the public rate

List of companies researched in case studies 

Company 

Sector 

Headquarters 

A ................................ 

B ................................ 

C ................................ 

D................................ 

E................................. 

F................................. 

G................................ 

H................................ 

I.................................. 

J ................................. 

K ................................ 

L................................. 

M ............................... 

N................................ 

O................................ 

P ................................ 

Q................................ 

R ................................ 

S................................. 

T................................. 

U................................ 

V ................................ 

W............................... 

X................................. 

Y................................. 

Z................................. 

AA.............................. 

AB.............................. 

AC.............................. 

AD............................. 

AE.............................. 

AF .............................. 

AG ............................. 

AH............................. 

AI ............................... 

AJ............................... 

AK.............................. 

AL .............................. 

AM ............................ 

AN............................. 

AO............................. 

AP.............................. 

AQ............................. 

AR.............................. 

AS.............................. 

AT .............................. 

AU ............................. 

AV.............................. 

AW ............................ 

AX.............................. 

IT/technology/telecommunications 


Heavy industry/manufacturing 

Utilities 

Healthcare 


Banking/insurance/financial services 




Biotechnology 





















Professional services 










Government/not-for-profit 




Other 





North America 

North America 

Europe 

Europe 

Europe 

Europe 

Europe 

Europe 

Europe 

Europe 

North America 

North America 

Europe 

Europe 

North America 

Europe 

North America 

North America 

North America 

Europe 

North America 

North America 

Europe 

Europe 

North America 

Asia Pacific 

Europe 

Europe 

Europe 

Europe 

Europe 

North America 

North America 

North America 

North America 

Europe 

Europe 

Europe 

Europe 

Europe 

Europe 

Europe 

Europe 

Europe 

Europe 

Europe 

North America 

Europe 

North America 

Europe 

135

For more information about how CWT 

experts can help your company successfully 

optimize hotel spend, please contact your 

CWT sales or program manager or email us 

at tmi@carlsonwagonlit.fr 

All research published by the CWT Travel Management Institute 

is available on 

www.carlsonwagonlit.com 

136

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Copyright © 2009 CWT

Room for Savings: Optimizing Hotel Spend - Carlson

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