Increased hotel demand has added a new wrinkle to many buyers' persistent rate-loading concerns. Some buyers who have paid a premium to secure last room availability provisions have instead paid higher rates due to the existence of inappropriate room rates, activated upon the sell-out of the agreed-to room category, in global distribution systems.
Buyers with non-LRA rates, meanwhile, face the possibility of negotiated rates falling out of the GDS when hotels reach pre-arranged occupancy levels, short of sell-outs.
The National Business Travel Association hotel committee this month addressed rate-loading concerns when it released a long-awaited white paper on the topic. The committee recommended that buyers not simply blame hotels for rate-loading errors. Instead, buyers need to factor rate loading into the process from even before the start of the annual request for proposals process, assign accountability on the part of both the travel management company and the hotels involved and then work with those accountable to create an agreed-upon timetable to ensure that the correct rates get loaded on time.
"Everyone talks about rate loading as a stand-alone process that occurs in December, but that's a serious misconception," said hotel committee chairman Brian Nichols, hotel and ground transportation manager for Deloitte Services LP. "Rate loading actually is the final phase of the request for proposals process that starts between June and August. Actions taken from the summer all the way through the end of the year will affect the outcome of the rate loading. It's anything but a stand-alone process."
Rate loading is the responsibility of both the hotel and the buyer, according to former hotel committee chair Wendy Blaney, who is director of corporate travel for Cendant Corp. "It's the buyer's responsibility to get the program started far enough in advance that the hotels have time to load rates, but it's the hotel's job to make sure everything is accurate, that the rates are loaded correctly and that the hotels know their proper GDS codes, which isn't always the case," Blaney said.
Buyers typically have LRA for the one class of rooms at the hotel for which they have a negotiated rate. With demand high, that room class may sell out, leaving no rate active in the system. In response, many hotels have loaded rates for classes of rooms and suites that are not covered by the LRA rate and are higher than the negotiated rate. Increased costs are incurred as agents, who under time pressure to complete the passenger name record, see a rate loaded for the preferred hotel, regardless of class of room, and book it. "Different hotels have different definitions of LRA and how these rates get loaded," Nichols said.
Buyers with non-last room availability rates can see their rates fall out of the GDS on nights of high demand as more hotels start to close out room categories to all but rack and corporate rate paying customers. "A number of hotels have begun yield- managing their inventory, so that once a certain percentage of rooms has been booked the GDS won't display rates other than rack or corporate," said Jo Ann Baynes, president of Uversa International, a third-party RFP provider that last month entered a partnership with Topaz International to conduct rate-loading audits. Uversa will provide scrubbed data that includes all relevant GDS codes, which Topaz will use to verify that the correct rates are loaded. Hotels have a different code for each GDS with which they work
As with LRA, rates loaded in the GDS also can be affected when hotels impose minimum length of stay requirements, which they have started to do. For example, the GDS may not show a negotiated rate for a Tuesday night, but will show a rate for a Monday to Wednesday booking.
The shortage of rooms in key cities on peak nights is only expected to grow more severe through 2006, said Bjorn Hanson, head of the hospitality and leisure practice at PricewaterhouseCoopers. "Demand this year is forecast to increase at roughly 4 percent, while the supply of rooms is forecast to grow at less than 2 percent," he said.
The NBTA white paper includes a checklist, which breaks down the rate-loading process into four stages: pre-RFP, RFP execution, rate verification/initial audit and ongoing audit. The paper also includes a rate-loading instruction template that buyers can use to communicate their own rate-loading codes. Lastly, a vendor resource list includes TMCs and third-party RFP providers that can assist in auditing rates.
"Buyers tend to think that errors in rate loading are due to technological issues, but that's not always the case," Nichols said. "Most rate load failures are due to a lack of communication and/or the timing of when buyers complete the process."
In the pre-RFP stage, buyers need to work with their TMC to assign responsibility for different tasks. "Find out who will be providing audit services, troubleshooting and ongoing management of the process," Nichols said. "It's key to establish that somebody has that responsibility and that the agency is providing that service."
One travel buyer's team asks the appropriate hotel chain senior executive to sign off on the timeframe to which they mutually agreed. "This is a case in which we're talking about forcing ownership and accountability," the buyer said. "At the same time, we talk about realistic consequences, meaning what happens if the rates aren't loaded accurately by the agreed-upon deadline."
The logical consequence is that uncooperative hotels would be removed from the program. "That kind of penalty is often threatened, but rarely carried out, which is one of the reasons rate loading has become such a chronic problem," according to the buyer. "Hotels see it as an empty threat. They know there isn't likely to be any real consequence. Year after year, you have the same problem."
To ensure that the white paper would have hotel buy-in, the committee submitted a draft to the major hotel companies and some smaller chains, requesting feedback, according to Nichols. An advisory committee comprised of people from GDSs, third-party RFP providers and travel management companies participated.
"You need to work collaboratively with hotels," Nichols said, "to ensure each is held accountable for their role."