Ride with him: the rise of continuous sourcing
This is the time of year when, traditionally, travel buyers put the finishing touches on the annual program of preferential hotel rates that they have been patiently negotiating since the summer. But few buyers are playing this game for 2022. “I have not negotiated a program since 2018 because I negotiated 2019-2020 as a two-year program. 2020 I continued and this year I am doing the same, ”says Richard Eades, Global Head of Travel & Meetings at BP.
The immediate reason for the decline in the hotel request for proposal process is the drop in bookings caused by the coronavirus, leaving buyers without reliable data on which to predict their volumes for the coming year.
But even putting this major issue aside, the RFP is losing favor, as hotel buyers approach a strategy often referred to as continuous sourcing. The term is defined in different ways by different business travel professionals, but the common thread connecting these different interpretations is that, in the words of Tripbam’s Managing Director for Europe, Peter Grover, “it is definitely not. no longer a single, completed process. “
The first phase of continuous supply for many buyers has been to negotiate double rates with preferred hotels: a static corporate rate plus an agreed percentage discount on the hotel’s best available rate. The BAR discount prevents “our travelers from going on booking.com and seeing a lower rate than what we are offering them,” said Clare Francis, Category Travel Manager at Willis Towers Watson.
In 2021, 90% of the rates booked by Willis Tower Watson travelers at preferred properties were discounted BAR rates, as low occupancy levels drive prices down. “That will change when occupancy levels return,” warns Francis. “The hotels have a lot of money to recover.”
Yet even though fixed rates will become more important once the market recovers, Francis is among the buyers who expect to negotiate less such rates in the future, and on a more ad hoc basis rather than on a one-off basis. a single annual shot.
François cites multiple reasons for wanting to change. The first is the heavy workload of trying to negotiate simultaneously with 500 hotels in 50 countries. Then, the accommodation needs of his business may change between the launch of a call for tenders in the summer and its conclusion in December. Office moves, new projects and the general volatility of the post-Covid world may all demand faster action than is possible thanks to a juggernaut rate program that only changes once every 12 months.
Eades agrees. “If I see a city in the first quarter where we’re suddenly moving a huge amount of business, we don’t wait for the tender,” he says. “We just opened a huge hydrocarbon plant in Humberside, so I’m watching this closely. This is a non-negotiated area where we use our chain-wide discounts, but there might be times when it might make sense to enter the market and come out with a favorite hotel or two.
We have static tariffs in 90 percent of our program, but we’ll probably only need 50 percent in the future because we also have a price cap for the city.
Other objections Francis cites to traditional tendering are the cost of hiring third parties to handle the workload and that “some of the questions we want to ask our suppliers now are very different from what we are asking. ‘they were ten years ago, as about sustainability and diversity. . This different approach will allow me to focus more on these issues.
Francis expects to end up with fewer fixed rates and fewer providers. “We have static tariffs in 90% of our program, but we’ll probably only need 50% in the future, because we also have a price cap for the city,” she says.
Grover says the trend for companies to downsize their preferred program properties is widespread, with some eliminating up to 75% of hotels “because they can’t commit the same volumes as in the past.”
Inevitably, however, buyers find they have cut too savagely in some places. Through continuous supply, they can quickly identify and fill these gaps by submitting a fixed rate proposal to competing hotels to accept or decline. “We know what offer to make at the hotel because we know what other guests are paying them,” says Grover. “If they accept, the rate is automatically loaded into the reservation tool.
Another aspect of continuous supply could almost be better characterized as non-continuous supply. Buyers, including Eades, are increasingly finding that cities where they have low booking volumes can be perfectly served without special rates. Instead, they put a cap on the price travelers can pay and rely heavily on chain-wide discounts or “consortium” rates negotiated by a travel management company, agency. online travel or other intermediary.
Swiss Hospitality Collection senior sales consultant Bettina Käfinger said the increased adoption of consortium rates poses problems for hotels when middlemen push them to offer the same rates to all of the middleman’s customers. This holistic approach allows hotels not to discriminate between clients who have delivered volume to the property and those who have not. “They have to be fair to their customers with whom they have worked for many years,” says Käfinger. “This puts great pressure on prices. “
Käfinger cautions against other risks of deviating from fixed negotiated rates. In the case of consortium rates, she said, “the hotel doesn’t know which company is making this reservation. They only see the name of the consortium. Potentially, the TMC is accumulating the information, but the hotel does not know. He just sees the name of the TMC. This means that the hotel does not know how many nights were actually booked by the corporate client.
The other danger that Käfinger identifies with the consortium or the best available reduced rates is that less services may be included – most often breakfast.
Eades recognizes that there are still considerable advantages to fixed negotiated rates, such as the possibility in some cases to include late cancellation. But the secret, he says, is to match the right fare for each trip. “I’m booking maybe a few days in advance so I know I’m not going to cancel, and I also know I have a breakfast meeting so I don’t need the breakfast and so I can take the restricted fare, “he says.