Room for Savings: Optimizing Hotel Spend - Carlson

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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 Source: CWT Travel Management Institute Based on a survey of travel managers (85 responses)
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 Source: CWT Travel Management Institute Based on transaction data 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
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Room for Savings: Optimizing Hotel
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Contents Introduction Overview ....
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Research objectives This CWT resear
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Figure 1: Breakdown of surveyed com
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Key findings in brief The research
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changes. In addition to providing t
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A complex market The complexity of
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A lack of global standards to defin
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Complex pricing Hoteliers use diffe
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Figure 10: Rates remain fairly cons
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Figure 12: Most corporate hotel boo
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Data on hotel spend is however, not
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How to calculate your company’s t
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2. Twenty-one percent savings throu
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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
Page 80 and 81: SUMMARY Key points for optimizing a
Page 84 and 85: Chain-wide agreements, as the name
Page 86 and 87: Chain-wide deals tend to offer smal
Page 88 and 89: There is, however, a risk associate
Page 90 and 91: Despite this reticence, 40 percent
Page 92 and 93: Figure 83: Another company’s ARR
Page 94 and 95: Last-room availability A last-room
Page 96 and 97: LRA is common in corporate contract
Page 98 and 99: Benchmark rates. Companies commonly
Page 100 and 101: Companies can consolidate volumes i
Page 102 and 103: Leverage city caps. Experience sugg
Page 104 and 105: Consider renegotiating flat rates d
Page 106 and 107: Buyers should use the full range of
Page 108 and 109: Hoteliers’ performance. A hotelie
Page 110 and 111: Ensure your travel management team
Page 112 and 113: 6. Improve traveler compliance The
Page 114 and 115: Understanding why travelers book ou
Page 116 and 117: The survey also indicates that trav
Page 118 and 119: Explain the stakes. Price-conscious
Page 120 and 121: Figure 112 shows how an OBT can be
Page 122 and 123: Require travelers to book their hot
Page 124 and 125: Investigate the reasons for noncomp
Page 126 and 127: To ensure that the agreed condition
Page 128 and 129: GDS rate squatting. Regular GDS aud
Page 130 and 131: Rate audits pay A rate audit conduc
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Tracking traveler compliance Compan
Page 134 and 135:
SUMMARY Tracking performance: Compa
Page 136 and 137:
Appendices Glossary The following i
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For more information about how CWT
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