R.I.P. to the Hotel RFP

Posted in Blog

By Chelsea Franklin, Marketing & Communications Manager, Advito

The days of the annual Hotel RFP process are numbered. Many are ready to say goodbye to the process because of its cost and its tremendous time consumption. And because it’s all for an activity that is considered tactical rather than strategic. Ready to take its place is a new approach to hotel category management, which relies on long-term contracts and employs ongoing, real-time analytics. This new approach is already saving some companies millions in hotel spend.

In a GBTA-sponsored webinar, “R.I.P. to the Hotel RFP: Laying an Unpopular Process to Rest,” four travel industry experts addressed why current sourcing methods are outdated and the exciting advantages that a new approach provides. “The time is ripe for change,” said Tim Nichols, global supplier leader for travel meetings & events at Ernst & Young LLP. “Innovation is long overdue.” (GBTA members can listen to the webinar recording here.)

Steve Reynolds, founder & CEO, TRIPBAM, Inc., outlined a new approach:

  • Companies will sign long-term, evergreen contracts with hotels that will include a mix of flat rates, dynamic discounts by property — plus agency and chain-wide discounts, and daily monitoring.
  • Companies will limit their program to hotels where they have 100 room nights or more, for example.
  • Hotel and brand performance will be monitored in real time. LRA (Last Room Availability) and LQR™ (Lowest Qualified Rate relative to the market) will become the two key performance metrics.
  • If data indicate an issue exists, the company (or its consultant) will contact the hotel representative.
  • If a resolution cannot be reached or if the market has changed, the company or hotel can opt out of the contract and a new RFP can be issued. Instead of negotiating hundreds of RFPs annually, an organization might explore a few each month.

This type of innovation eliminates the need for annual RFPs and audits – along with the staff and/or consulting time to support these activities. It simultaneously enhances the value of the hotel program, increases ROI and produces more accurate measures. One company utilizing these techniques over less than a nine-month period was able to save an average of $32.20 per night on 35.52K rooms booked for a total savings of $1,068,243.

These changes are akin to applying a “financial portfolio approach to hotel category management,” said April Bridgeman, managing director of Advito. “You would never set up a financial portfolio for retirement, walk away from it and deal with it once a year,” she explains. It is managed on an ongoing basis. “If you act on data real-time, you drive more value.”

Moving away from the annual RFP season will enable consulting firms like Advito to help clients focus on more strategic activities to drive discounts or pricing approaches, tools to drive traveler behavior changes, supplier communication and working with third party suppliers to leverage the power of technology. “Consultancies who are looking toward the future,” she says, “have already prepared for this shift.”

Killing the RFP also produces advantages for hotel suppliers. Gus Vonderheide, vice president of global sales for Hyatt and a member of GBTA’s global board, said that five years ago, customers didn’t want to talk about changing the RFP process. “Today, they want to know if they are good candidates. There is an upside to this from both sides of the coin,” he says. “We’re hitting a home run with this concept.”

For more information about eliminating hotel RFPs and this new approach to managing your hotel category, register now for one of our upcoming webinars, “Dynamic Performance Management: The missing and most valuable piece in Hotel Sourcing”. Or, email us at advice@advito.com.

 

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