Room for Savings: Optimizing Hotel Spend - Carlson

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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 Source: CWT Travel Management Institute 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 Hotel 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. Source: CWT Travel Management Institute 24% 3% Total savings: - = Overlap Net savings 21% 27
Page 1: Room for Savings: Optimizing Hotel
Page 4 and 5: Contents Introduction Overview ....
Page 6 and 7: Research objectives This CWT resear
Page 8 and 9: Figure 1: Breakdown of surveyed com
Page 10 and 11: Key findings in brief The research
Page 12 and 13: changes. In addition to providing t
Page 14 and 15: A complex market The complexity of
Page 16 and 17: A lack of global standards to defin
Page 18 and 19: Complex pricing Hoteliers use diffe
Page 20 and 21: Figure 10: Rates remain fairly cons
Page 22 and 23: Figure 12: Most corporate hotel boo
Page 24 and 25: Data on hotel spend is however, not
Page 26 and 27: How to calculate your company’s t
Page 30 and 31: Many organizations have yet to opti
Page 32 and 33: GDS auditing It is important to ens
Page 34 and 35: 1. Consolidate data Travel managers
Page 36 and 37: Figure 27: Combined TMC and credit
Page 38 and 39: Figure 28: Recommended data fields
Page 40 and 41: Hotel category: not the most import
Page 42 and 43: “No-frills” booking When it com
Page 44 and 45: In fact, travelers often draw on th
Page 46 and 47: A number of differences between the
Page 48 and 49: SUMMARY Understanding traveler need
Page 50 and 51: 2. Ask travelers to use serviced ap
Page 52 and 53: Figure 41: Recommended rules for bo
Page 54 and 55: Figure 43: Rates are on average 18-
Page 56 and 57: Figure 46: In a rate benchmarking e
Page 58 and 59: 5. Mandate booking at least two wee
Page 60 and 61: 6. Address extra charges Travelers
Page 62 and 63: SUMMARY An optimal hotel policy cov
Page 64 and 65: 4. Optimize the preferred hotel pro
Page 66 and 67: Identifying properties and location
Page 68 and 69: Considering local market conditions
Page 70 and 71: Figure 59: One company could save 6
Page 72 and 73: Figure 61(continued): The share of
Page 74 and 75: Figure 63: Hotel stays of at least
Page 76 and 77: Deciding between existing preferred
Page 78 and 79:
Figure 69: Companies that retain at
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SUMMARY Key points for optimizing a
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5. Negotiate effectively Negotiatio
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Chain-wide agreements, as the name
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Chain-wide deals tend to offer smal
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There is, however, a risk associate
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Despite this reticence, 40 percent
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Figure 83: Another company’s ARR
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Last-room availability A last-room
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LRA is common in corporate contract
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Benchmark rates. Companies commonly
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Companies can consolidate volumes i
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Leverage city caps. Experience sugg
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Consider renegotiating flat rates d
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Buyers should use the full range of
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Hoteliers’ performance. A hotelie
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Ensure your travel management team
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6. Improve traveler compliance The
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Understanding why travelers book ou
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The survey also indicates that trav
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Explain the stakes. Price-conscious
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Figure 112 shows how an OBT can be
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Require travelers to book their hot
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Investigate the reasons for noncomp
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To ensure that the agreed condition
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GDS rate squatting. Regular GDS aud
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Rate audits pay A rate audit conduc
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Tracking traveler compliance Compan
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SUMMARY Tracking performance: Compa
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Appendices Glossary The following i
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For more information about how CWT
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