Room for Savings: Optimizing Hotel Spend - Carlson

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