By Eric Wynton, Managing Consultant, Hotel Spend Management
It’s never too early to start thinking about your hotel sourcing strategy.
In fact, if your hotel program runs from January to December, the time to start preparing for 2025 is right now. Here are the five essential strategies to incorporate in your 2025 hotel sourcing approach to ultimately drive value to your organization and enhance your traveler experience.
1. Look beyond room nights and spend
Given today’s market conditions, it’s time to expand the criteria you use to select which hotels to invite into your RFP process. Looking at historical market and property volumes, property tier level, location, and other traditional information isn’t enough to help you build a program that performs for your company and your travelers. It’s time to add to the list.
Understanding how well your current hotel program is performing is key to setting yourself up for success moving forward. It’s crucial to factor in rate availability performance in the current year, and whether your average booked rate (ABR) is performing well versus your expected average negotiated rate (ANR) and the best available rate (BAR). Consider how cohesive your property list has been in the past – do you have one hotel in the market that is significantly more expensive than the others? This can be confusing to travelers and keep you from achieving savings goals. Make sure traveler sentiment is part of your planning; unhappy travelers will influence your ability to maintain and increase compliance to the program. And finally, are you considering how a hotel ranks in sustainability metrics or how a specific chain fits into your diversity, equity & inclusion (DE&I) corporate goals? Make sure you include meaningful RFP questions related to sustainability that align with your company’s objectives.
2. Be prepared to switch suppliers
Based on these factors, consider if your current hotel partners are working for you in your program. Are there new entrants in your top markets that should be invited to the RFP rather than limiting it to the same properties you’ve worked with year after year? You will maximize savings by being willing to shift share to new properties that are eager for your business. Once the program is finalized, use merchandising tactics, like putting relevant banners directly in the booking path of the online booking tools to educate travelers about the new properties.
3. Focus your time and energy where it matters
The traditional approach has been to focus on the 80/20 rule – sourcing 20% of your hotels used to cover 80% of spend and room nights. This approach is questionable as to the return on your time investment. Advito’s reduce and diversify approach recommends you spend your time and energy on the top 10% of hotels that are going to drive the best returns, ensuring you have the best rates possible whilst still covering 65% of your room nights and spend. What’s the point of spending time and effort on hotels and markets where volumes dictate that you will rarely see a negotiated rate that is competitive and available? Instead, keep costs in check in those second and third tier markets by using market rate targets which provide travelers with guidance on the appropriate rate to book based on a combination of BAR and ABR trends, as well as promoting the use of discounted rates negotiated by your TMC, like BCD Great Rates, and business appropriate aggregator content.
4. Time sourcing differently
Moving away from the traditional calendar year hotel program to an off-cycle program can be more efficient and deliver greater savings. Suppliers are often more responsive outside of the peak sourcing season and may be more willing to negotiate several months into their own budgeting cycle. Additionally, leveraging Advito’s Quarterly Travel Price Index can help you align your hotel strategy with more accurate market projections. Consider negotiating your 2025 program for an additional 2-3 months to transition to an off-cycle program. You may need to do this in both 2025 and 2026 to create a program date range that makes the most sense for your organization, potentially aligning with your fiscal year.
If an off-cycle program is not feasible, and finalizing your calendar-year program before the holiday madness sounds like a dream, launch your RFP as early as July and leverage your supplier interactions at GBTA to level-set your expectations. Negotiations aren’t getting easier, and this approach ensures you’ll head into RFP season ahead of the curve and aligned with suppliers.
5. Dynamically manage your content throughout the program cycle
The annual sourcing engagement is a necessary evil, but the job doesn’t end there. Once in place, dynamically managing your program throughout the year ensures you are ahead of the game and proactively updating your program according to market conditions, hotel performance and organizational growth. Setting and forgetting your program leaves you open to poor rate availability and lack of competitiveness, leading to both increased cost and unwanted noise from your travelers.
Advito’s approach is to continuously manage and source your program throughout the year by challenging underperformers and realizing new opportunities to capture more savings in the here and now, not 12 months later when it’s too late. Dynamic Performance Management (DPM) also sets you up for success when the next annual RFP approaches by knowing which properties to focus on, reducing the effort needed and number of hotels to reach out to.
Don’t go back to the days when hotel sourcing was essentially repeatedly ticking the same boxes year after year and hoping for the best. Understand your travel program’s strengths and opportunities, challenge historic rates that aren’t netting the best results, and don’t hesitate to walk away from rates that don’t best serve your program’s success, traveler experiences, and company goals. Ready to get started? Reach out to us today.