Room for Savings: Optimizing Hotel Spend - Carlson

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