Room for Savings: Optimizing Hotel Spend - Carlson

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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 Source: CWT Travel Management Institute Based on transaction data 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 Source: CWT Travel Management Institute Based on transaction data
Seven steps to optimize hotel spend > Negotiate effectively 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
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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
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GDS auditing It is important to ens
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1. Consolidate data Travel managers
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Figure 27: Combined TMC and credit
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Figure 28: Recommended data fields
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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 82 and 83: 5. Negotiate effectively Negotiatio
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 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
Page 132 and 133: Tracking traveler compliance Compan
Page 134 and 135: SUMMARY Tracking performance: Compa
Page 136 and 137: Appendices Glossary The following i
Page 138: For more information about how CWT
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