What does the changing face of hotel rates mean for corporate travel programs?
By Laura Kusto, Senior Director and Global Hotel Practice Leader
It used to be that as a travel manager, you’d create your hotel program, and then you didn’t have to do much to manage it. That’s no longer the case. You can’t just “set it and forget it.” Instead, managing your hotel program is an ongoing challenge because your travel patterns change and the markets where you are traveling are also evolving on a daily basis.
On top of that, as you make the adjustments needed to keep your program current, you need to engage travelers to ensure they’re aware of these changes and are being guided to make booking decisions that will achieve savings. Here’s how you can better navigate this new landscape to improve corporate travel management and create an engaging hotel program that will deliver savings and instill traveler confidence.
The Changing Face of Hotel Rates
For hotel rooms, static rates used to be the norm. You’d pay a flat rate per room during the low season, and a higher flat rate per room during the busy season. That meant travel program managers could reliably predict their accommodation spend for the hotel properties business travelers used regularly.
It’s not like that anymore. This legacy static rate model is struggling to adapt to today’s business travel landscape, as demand is not static and travelers expect a seamless digital booking experience. There are fewer and fewer static rates as hotels seek to gain more control over their revenue and achieving 100% rate availability is challenging, even if you’ve got a last room available (LRA) rate Instead, pricing offers are trending towards dynamic, and the best available rate (BAR) can fluctuate daily, or even change multiple times on the same day, based on demand.
At the same time, hotels have become more inventive with room types and packages, to find more ways to optimize their revenue. A hotel might decide that anything above the 14th floor is a “high floor room,” and charge a premium even though it’s identical to the room one floor below.
And let’s not forget that cancellation policies are getting more stringent, too. Where business travelers could cancel a hotel room before a certain time on the day of arrival, many hotels have put a stop to that. Instead, there’s a 48-hour cancellation period. If something changes, and you have to cancel a trip suddenly, you could still end up paying for that unused hotel room.
What Hotel Program Changes Mean for Travelers
Travelers who are used to hotel programs where they can book any room at a prescribed rate and cancel late the day of arrival if they need to, may be confused by the changes.
For most, it won’t make sense that the same room is $100 a night today and $150 a night tomorrow, and they may not understand how preferred rates and rate targets work. Plus, it’s not always clear when a different room type actually offers something new or is just a cosmetic change.
The bottom line is that it’s now harder for travelers to know what the best option is when booking a hotel via your online booking tool. That makes traveler engagement more important than ever. When you educate and engage travelers, most will take the most cost-effective and efficient option.
How This Changes the Game for Travel Managers
Obviously, this changes the game for travel managers. To start, you have to be strategic about where you take the time to negotiate static rates, because if your leverage with a certain hotel or within a specific market isn’t strong enough, chances are the rate won’t be available when your travelers are trying to book it. Or, worse yet, you’ll be negotiating a non-competitive rate that will be made available, but when your travelers log into the tool to book it, they will see the preferred rate is much more expensive than others that are non-preferred and their confidence in your program will drop, driving your adoption down and encouraging them to book outside the tool.
Today’s travel managers have more data than ever before, and that data can help identify when it’s time to start negotiating dynamic rates. Some of the drivers to look for include your static rates going stale, the market rate dipping below your negotiated rate, or you’re in a low volume market where do you don’t have a lot of leverage. Of course, this means that when you negotiate the dynamic rate, it’s all about getting the best discount off BAR.
Then, to manage that spend, it’s important to give travelers a rate target within those markets. Rate targets need to be data-driven and set based on the average market rate (BAR) of the properties where your travelers tend to stay. It’s also important to update these to account for seasonality and market fluctuations.
Overall, these changes mean that hotel programs need to be managed holistically with attention on where travelers are going and how those markets are changing. Adjustments need to be made on an ongoing basis to account for dynamic pricing changes, and then travelers need to be informed of these changes as they’re in the booking tool in a way that drives informed buying decisions. Here’s how you can do that.
How to Improve Your Program and Engage Travelers
A good starting point is to assess your current program, looking at booked rate versus negotiated rate and also comparing to your average BAR rate in a market. This will help you figure out if your hotel program is working or if you need to tweak it.
Since everything is always changing, a more flexible approach to finding your ideal rates is a must. Dynamic Performance Management (DPM) helps you source and monitor rates, as well as assess analytics on market trends, so you always have the most up to date information for your program.
With DPM you effectively get bite-sized continuous sourcing, focused primarily on the markets and hotels driving the biggest savings potential, so your hotel program is always working optimally to deliver what you need. With the benefit of data, you can look ahead to see what your travel program will look like in the next month, or the next quarter. You can also make informed decisions regarding program size, preferred mix, rate targets and more.
The last piece of the puzzle for better corporate travel management is using Traveler Engagement to improve your messaging to travelers in the online booking tool. You can educate travelers about booking within rate targets, looking beyond complex room designations to see what’s available, what’s in policy, and what they actually get when they book.
With a more dynamic and engaging approach, travel managers can achieve savings and improve the adoption of hotel programs.
To learn more about BCD’s new hotel solution – Stay by BCD Travel – and get in touch with an expert, visit here.