Laura Kusto, Vice President & Global Hotel Practice Lead
After two years of abnormal travel activity, the thought of planning your 2023 transient hotel program may seem intimidating.
Where do we begin? More importantly, where do we go? There is so much to unpack here, so let’s dive in.
We are currently facing a complex situation. We’ve had two years of mixed-bag approaches to rate negotiation and renewals. Topics of cleanliness, environmental, social, and governance (ESG), safety, and security are now incorporated into your hotel strategy. Topping it all off are the unfavorable current market conditions–nearly all global hotels are busy, short-staffed, and struggling with supply chain issues. In short, as buyers you need to:
- Clean up and re-set programs for the last two years
- Develop a succinct approach to obtaining information beyond hotel rates and amenities when selecting hotels
- Efficiently convey compelling business value to catch each hotel’s attention and secure a competitive rate
- Prepare to monitor all hotel spend (not just at preferred properties) systematically throughout the year as market conditions will continue to fluctuate and evolve given world events
In this five-part blog series, you’ll be hearing from various industry experts within BCD Travel and Advito Hotel Solutions. They will break down how buyers can strategically move through the chronological phases ahead and begin 2023 with a competitive hotel program and a repeatable monthly process to ensure it remains relevant for travelers.
It’s time to rip off the band-aid and face a couple of hard truths. First, your spend isn’t at 2019 levels, and due to high demand, staffing shortages, and supply chain issues, you are going to need more spend than in 2019 to catch the hotel’s attention. Second, the 2020 program you sourced at the end of 2019 had non-competitive rates in it before Covid-19 hit because it was too big. There’s never been a better time to reduce and diversify your hotel program. Once you understand these challenges, you are ready to gather up your 2022 YTD data and look at your current spend volumes through a new lens. Place a high value on the cost of your resources to process each RFP. The key is to only source static rates where you have maximum leverage and save yourself (and the hotels) time next year by securing dynamic evergreen rates in secondary markets. Prior to hotels bidding, send the first offer to set the anchor and secure as much leverage as possible in this market where the hotels have a clear pricing advantage.
It’s the same pre-Covid but with a few twists. The process hasn’t changed much, but how you execute it has. First, since we know it’s a seller’s market, leverage the chain relationships where you have them. Start by communicating with your top chains prior to the RFP and emphasize brand loyalty and partnership where you have evidence. It’s important to target each chain specifically and individually – one blanket approach across all chains will be overlooked. Second, send hotels the rate you want before they send the first bid. This anchors the negotiation to a value acceptable to you. Skip this step and you’re leaving money on the table. Third, BCD’s negotiated rate programs, like the Global Hotel Program (GHP), and the Small to Medium Enterprise (SME) Rate Program, offer our clients a huge value – if you haven’t looked at your agency’s rates lately, now is the time to take a fresh look and add those rates to your program instead of sourcing your own in your secondary and tertiary markets. Fourth, when sourcing dynamic rates, make sure you aim for evergreen, so those rates do not need to be renegotiated next year. This is a new, but not unheard-of, approach. Expect some hotels to require a brief explanation on why evergreen rates are good for both of you. Finally, start factoring in sustainability. Start gathering metrics if you’re not already measuring the environmental impact of your hotel program and how your partners can contribute to your overall strategy.
Managing your hotel program isn’t just about what hotels you have in the program and at what rates – it’s how you’re actively managing those rates and engaging with your travelers on what is important to them. You’ve got to be monitoring your rates regularly for competitiveness and availability. A key theme this year is that it’s a seller’s market. With that said, hopefully, you’ve secured some great rates. But if not, you’ll want to negotiate them to appropriate levels post-RFP or remove them. Outside of rates, what do your travelers see? You need to look in your online booking tool (OBT) and start by making sure the preferred rates are competitive vs. everything else in the market. Don’t expect your travelers to stay in the OBT if the rates don’t look competitive. They will lose trust in the OBT and book elsewhere, taking away your ability to provide duty of care. Another great way to improve your OBT is by implementing merchandising in the booking tool. Business travelers are like any other digitally savvy shopper, they’re looking for an engaging and intuitive booking experience. Use banner messaging to influence their purchase behavior at the point of sale and rate targets that guide travelers to what rates are competitive, anchoring them to a lower price. Help them make smart buying decisions in the booking tool and you’ll build the trust needed to keep them there. Finally, continue to grow and evolve your approaches on the various ESG criteria and keep your travelers in the know of what changes you’re making. This is another great way to build trust and adoption of your preferred booking channels.
Data analysis for traditional hotel programs has historically involved an annual comparison of the booked rate vs. negotiated rate based on 6-months of data. The new, modern approach takes into account additional metrics and is evaluated more frequently. Today our clients are looking at trending on a monthly basis. In addition to considering booked vs. negotiated rates, they’re also comparing these discounts to the standard/best available rates rather than just the actual availability of that negotiated rate. This enables our clients to both hold hotels accountable for what has been negotiated and ensure that when markets soften, rates remain as competitive as possible. Plus, these clients are able to measure actual savings throughout the year, unlike the traditional approach where savings are merely forecasted based on prior year volumes.
If the past two years have taught us anything, it’s that what happened last year isn’t necessarily what will happen in the year ahead. The next blog in our series, “How to map out your 2023 preferred hotel program strategy,” is coming soon!