Adding data from your expense management system to the travel
agency data you already use to power your hotel sourcing power may enable you to
negotiate double-digit discounts. Here are three tips.
1. Capture More of Your Spend
Most companies approach the negotiating process relying solely
on their travel agency data. That's a valuable source, but it has limitations. Enrich
it with data from your expense management system or you'll be negotiating with one
hand tied behind your back. That's because travel agency data will include only
those hotels booked through the agency or its booking tool. However, studies have
shown that on average, 40 to 50 percent of corporate hotel bookings are made outside
of the preferred travel agency.
This could be for perfectly legitimate reasons. Maybe employees
are attending a conference and there's a special room rate. Or, perhaps they're
visiting a multinational company that has fantastic rates at hotels near their main
offices. Most companies are fine with employees capitalizing on these kinds of discount
opportunities.
A more controversial reason is that many hoteliers have started
to offer better rates and amenities for loyalty program members, but only if travelers
book through the hoteliers websites. That lures employees to book outside the corporate
agency. Finally, some people may just dislike the user experience of the corporate
booking tool and won't use it. Whatever the reasons, this leaves a big gap in travel
agency data.
The other limitation of this data is that it represents only
the booked amount for the room nights, not the final hotel bill. Ancillary purchases,
though, are typically captured in the expense system after the trip. According to
benchmarks, those add an average of 15 percent more to the tab.
The upshot is that if you're looking only at data from your travel
agency, you're seeing only part of the pie. You might be negotiating with $5 million
of spend, for example, when you really could be negotiating with more than $7 million
if you were to complement that with corporate card and expense data.
2. Find Hidden Levers
Seeing the whole pie sets you up nicely. Many managers fixate
on getting discounts off the published room rates. But other bargaining chips also
can save money and may be more palatable to the hotel.
Most automated expense management tools let companies require
that employees itemize expenses so you can see how much a traveler spent at the
hotel on meals, room service, Wi-Fi, parking, the gym, laundry, conference rooms
and other ancillary services. You can identify what the most valuable levers are,
and that gives you more flexibility in the negotiations.
It's hard these days to get a 10 to 15 percent discount on room
rates unless you're a large corporation. If you can haggle with more levers, you
can say instead, "Can I get 5 percent off the rate and get Wi-Fi and breakfast
included?" If the hotel says yes, you've effectively gotten double-digit savings
on your hotel expenses.
3. Source When Others Aren't
Traditionally companies put out a big RFP to hotel companies
in the fourth quarter to negotiate contracts for the coming year. There's nothing
wrong with that, but a midsize business is not in a position of power when negotiating
with a busy property manager who's trying to land bigger fish. Obviously, you're
going to get less attention, and that could result in less value from the negotiation.
Try to adjust the timing of your RFP. If you ask around, you'll
find a decent number willing to field an RFP in the second or third quarter.
Also use your data to source throughout the year. It's likely
that opportunities will come up that you didn't know about during the annual RFP
exercise. Here, too, leverage both travel agent and expense management data to spot
those opportunities more quickly. For example, let's say you're a consulting firm,
and a massive project has just come up in Dallas that's going to last a couple months
with two dozen consultants on the ground. That could add up to a couple hundred
thousand dollars. Ideally you'd have a mechanism in your company to alert the sourcing
manager about the large travel expenditure, but that doesn't always happen. A busy
travel manager only looking at data every month or so might miss it.
Some travel tools and expense management systems
allow you to set alerts to bring those opportunities to your attention. This is
an exciting emerging feature. Here's how it works: If bookings or spending on lodging
in a particular city spike, you get a notification. Then you can investigate and
determine if the amount of spending is large enough to justify a negotiation.