Spot Buying Becomes A Norm - Business Travel News

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Spot Buying Becomes A Norm


June 25, 2009 - 07:24 PM ET

By Lauren Darson

As economic conditions remain challenging, some corporations are finding that their negotiated travel deals hold little weight. With published, widely available airfares and hotel rates falling--oftentimes below what an organization had secured with preferred vendors--many companies are instructing travelers to search for favorable prices and use corporate rates as a cap, according to panelists speaking here at the Business Travel Market conference.

Such spot-buy strategies have spread as negotiated rates become less advantageous. "Many opportunities for corporates now exist to correct the imbalance in pricing experienced in the last two or three years," said John Lewis Partnership travel manager Neil King. "Some travel requests are requiring a lot more work to book than in comparison to 12 months ago. There is an additional internal pressure to look for savings and to work differently, and to ensure that you are getting the best deal in the marketplace."

Spot buying may have unintended, long-term negative consequences, according to panelists, including tarnishing relationships with current suppliers.

"Those relationships won't survive if you go spot buying for everything," said HSBC chief procurement officer David Pritchard. "When things pick up again, are we going to be a good customer that the suppliers want to do business with? Take advantage of the current climate--there are some great deals around--but don't cut off your nose to spite your face. Make sure that you support [long-term] vendors through these times, and make sure that those vendors get a reasonable slice of that smaller pie."

"It's about identifying those suppliers in that marketplace that want to work long term," said King, noting the importance of relationships with suppliers as companies, not just with individual sales reps and account managers that may become victims of supplier downsizing. "We don't want to kick you now, and we don't want to be kicked in two years or three years time."

"It is far more important to sit down with your suppliers and talk openly about what you would need today, but also about what you would need tomorrow," said Huub Smeets, founding partner of consultancy Simacon. "There's value in there today. [Suppliers] need us, but maybe tomorrow they don't."

HSBC's Pritchard noted another concern about spot buying: "If you are booking cheap flights, do you know where your people are? If you are not managing where your people are going and how they are getting there, if there is an incident, you want to be able to find them."

Pritchard also cautioned attendees to pay attention to the fine print associated with cheaper, online deals. For example, he said that he has noticed cases in which travelers believed they had received attractive rates--especially on airline bookings--but quickly realized there were pricey additional charges tagged onto the published fares.

At John Lewis, the spot-buy strategy doesn't exclude preferred suppliers from consideration. King explained that he and his team actively scour the Internet for cheaper rates, but instead of directing travelers to simply book them, they ask suppliers if they would lower their rates to be competitive. Then, John Lewis' travel management company is directed to book the lowest rate available.

"Of course we want suppliers to be around for the long term, and there is always going to be some conflicts around the ways the relationships are managed and the way that customers buy," King said. "At the same time, when it does become good times again, the shoe will be on the other foot and the pressure will be back on us. It is about understanding each others' challenges, and it's finding that mutually beneficial solution that is sustainable for the future."

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