17 experts advise on what’s to come this year. Spoiler: Data factors big.
The Innovate Conference for the Advancement of Business Travel offered business travel executives the opportunity to articulate priorities and recommendations.
Ask parties on both sides of the negotiating table what they
think about the annual hotel RFP season, and more often than not, they'll say it's
an inefficient, outdated process. But that doesn't mean everyone's ready to change
A recent GBTA study of 161 travel managers found 66 percent were
satisfied with the RFP process. While satisfaction may seem like a good thing, satisfied
people don't see a reason to innovate. And innovation is exactly what many say the
industry needs. "I've been in the travel industry for a little over 20 years,
and it feels like we talk about the same issues for decades," said Yapta CEO
James Filsinger. "We are continuing to rely on systems and processes that have
been in place for decades that worked effectively and efficiently 20 or 30 years
ago. We have not brought or adopted innovation into the process."
The BTN archives are filled with prognostications of changes
to the hotel sourcing process—to be ushered in either by shifting market conditions,
new technologies or bold strategies deployed by a handful of powerful travel buyers.
Consider this declaration from then Worldhotels Americas VP Tom Griffiths in May
2009, a time of high volatility in the hotel pricing market: "The days of issuing
a simple, one-year request for proposal in September that would be accepted in October,
loaded in November and available in January ... are gone. Companies and hotels are
going to be looking at ways to maintain the greatest degree in flexibility, both
in the way of availability and pricing, even as the market comes back. … The old
days of 'seasons' is long gone. Every month will be a new season."
Overcoming complacency is crucial at the start of any change process, and it often requires a little bit of surprise, something that grabs attention at more than an intellectual level. You need to surprise people with something that disturbs their view that everything is perfect."
Almost a decade later, though, the industry is still keeping
largely to a season, only now it starts even earlier. Despite new technologies that
give companies greater visibility into their hotel data and the value of their negotiated
rates, the one-year contract of static rates is still king when it comes to hotel
OK, Why Is The Industry
While there's a temptation to point fingers, many buyers and
suppliers, some of whom declined to be named for this story, don't place blame with
any one stakeholder.
The Buyer Side. If the same group of people complains
about something but then 66 percent proclaim satisfaction, it's not satisfaction.
That's resignation. "I learned a long time ago, from an old boss of mine, that
people or companies or programs change for two reasons: pain and urgency,"
said David McDonald, an independent global travel and procurement professional.
"When you think about the annual hotel RFP season, it's not painful. That is,
it's painful because it's work and it's lengthy and it's tactical, but it's not
painful to the point that everyone hates it so much that they want something new."
The near-constant turnover of the RFP cycle—gather data, send
out bids, negotiate, negotiate again, negotiate once more, sign a contract, check
the rate loads, check the rate availability, start all over again—means that smaller
programs with limited resources have little time to dream up alternatives on their
The rise of sourcing partners that can negotiate on behalf of
travel buyers has alleviated some of the pain of RFP season; according to the GBTA
study, those who rely somewhat on a TMC for hotel negotiations report even higher
levels of satisfaction, 75 percent. But by McDonald's formula, removing some of
the pain consequently removes a trigger for change.
Some buyers, though, have managed to embrace newer solutions.
Steven Schoen, Siemens director of mobility services for the Americas, procured
two-year agreements for about 75 percent of his hotels last year. That means he's
already nearly finished as the 2018 RFP season approaches. Others—like Unilever's
Yvonne Moya and Microsoft's Eric Bailey, Marta Rodriguez Martinez and Julia Fidler—are
deploying proactive approaches to sourcing that put the desires of the travelers,
rather than the suppliers, at the center of the decision-making process.
We are continuing to rely on systems and processes that have been in place for decades that worked effectively and efficiently 20 or 30 years ago. We have not brought or adopted innovation into the process."
The Hotel Supply Side. The hotel industry is fragmented—far
more so than the airline industry. Consider the limited power for change that Delta
Airlines, for example, would have if each of its planes were owned by any party
other than Delta. In the hotel space, hundreds of companies each have a growing
number of brands, and those companies typically franchise to hundreds of thousands
of private owners or ownership groups.
Major hotel companies have rolled out systems for managing revenue
and on-property operations, but hotel technology systems still lack uniformity from
property to property. That means any creative initiatives a buyer and salesperson
dream up around pricing—say, a corporate dynamic rate discount that has a built-in
cap—may not be feasible to enact.
MGM Resorts International chief sales officer Michael Dominguez
said the hotel industry needs to change the way it does business. "We are so
far behind the speed of change that we cannot keep up. We say we're innovative;
but we're innovative in product. We need to start being more innovative in process."
Hotel owners, he added, likely will adapt if the larger hotel company really decides
to make a change. "When hotel companies want something, they get it done. You
don't have owners around the country that want to pay marketing fees and all of
the fees they pay for loyalty programs," he said. They do it because hotel
brands require it.
The Data Problem. Hotel data is bad. Not just because
it's too often inaccurate but also because it's incomplete. And that lack of visibility
not only can paralyze procurement professionals exploring alternatives but also
can ensure that they continue in ineffectual pursuits out of habit.
Buyers and hoteliers scrapped for decades over contracted last
room availability, only to find via new data sources like Tripbam and Yapta that
revenue management practices were blocking negotiated rates and that LRA contracts
"weren't worth the paper they're written on," as Tripbam founder and CEO
Steve Reynolds told BTN in 2015.
Data consolidation tools like Carlson Wagonlit Travel's AnalytIQs,
American Express Global Business Travel's Premier Insights and Omega World Travel's
Omegalytics have afforded corporates better views of their hotel spend. Yet, with
line-item invoice data still a rarity, corporates continue to spend a significant
portion of the RFP season negotiating for amenities they can't be certain their
"We had a customer panel and I asked, 'What percentage of
your travelers eat breakfast at the hotel?'" said HRS head of corporate sourcing
for the Americas Jeff Hillenmayer. "Everyone said, 'I don't know.' So if we
don't know, why are we negotiating it?"
Additionally, buyers and hotels continue to make room-night commitments
even though marketshare data isn't tracked or standardized on both sides of the
negotiating table. Instead, Reynolds said, when it's time to renegotiate, buyers
and hotels have to play an annual game of Whose Data Is Right?
[Dynamic rates] do reduce workload and drive efficiencies. However, there isn’t currently a very valuable way to know if it is actually getting the same sort of value and market picture that the fixed-rate model is."
Alternative RFP Models
While hardly exhaustive, the following models range from tweaks
on the current model to a radical overhaul of the procurement process.
The Off-Cycle Model. This remains an annual process, but
buyers shift their bidding process away from the typical July/September/August start
dates. Haemonetics global category manager for travel, fleet and card services Sharon
Fogarty is in her third year of going off cycle with her RFP process, which now
follows Haemonetics' April-to-March fiscal year. "It makes it so much easier
for my hotel partners, as well as for myself, because it's a quieter season,"
she said. Hotel negotiations for her program now begin in January or February, and
from hoteliers, she gets better benchmarking data, service and initial bids. Hilton
executive director of business travel sales Maria Chevalier said clients have had
great success going off cycle, and it's a practice Hilton is encouraging more corporates
The Hybrid Model. This is still an annual process. Buyers
use data to identify their top markets based on spend or volume and then secure
static, negotiated rates only at top hotels in those markets. In secondary and tertiary
markets, buyers adopt some mix of chainwide discounts, agency rates and rates found
through hotel rate shopping tools. Though this model has become well worn, many
sourcing professionals maintain it's still one of the best options for corporates
because it allows for flexibility, it shortens the procurement season by limiting
the number of property negotiations and it protects programs from rate spikes in
important markets during periods of high occupancy. "From our perspective in
working with a variety of clients, there's room for all of the rates that can be
negotiated out there," said Advito senior director and hotel practice area
leader Marwan Batrouni. "There isn't a one-size-fits-all approach. Fixed rates,
dynamic rates and chainwide agreements can live happily together."
The Airline Model. This means multi-year agreements in
which almost all dynamic discounts are calculated as a percentage off the best available
rate. From the hotelier perspective, static negotiated rates constitute a backward
pricing model, while dynamic pricing would better reflect real-time market conditions.
Additionally, dynamic rates would mean throwing out the annual RFP process and moving
toward longer agreements. For corporates, hoteliers' guarantee that dynamic rates
will benefit both sides isn't good enough to give up the assurance of static rates.
"[Dynamic rates] do reduce workload and drive efficiencies," Hillenmayer
said. "However, there isn't currently a very valuable way to know if it is
actually getting the same sort of value and market picture that the fixed-rate model
is. Not getting the entire market picture could hurt the corporations."
The Long-Term Service-Level Agreement Model. This long-term
contract, tracked and measured monthly, includes several service-level metrics that
can trigger renegotiation or termination by either party. McDonald posed the question:
"Why would you basically hit reset from zero and negotiate every agreement
for every rate for every year for every property? The reality is: Unless something
has fundamentally changed in your business, the movement of hotels in or out of
your program could be a max of 10 to 15 percent of the hotels you had the year before."
According to the GBTA survey, travel buyers typically drop just 12 percent of their
hotels from the prior year. Yet each year, the process of sending out lengthy RFPs
is repeated. "It seems so silly for both sides to have to go through this process
each and every year," said Coach senior manager of global travel Rosemary Maloney.
"The current state of the 150 questions that have to be filled out each year—[the
hotel] should only have to fill that out once. The hotel doesn't move away from
the fire station."
Reynolds believes the solution is to negotiate only as often
as key metrics make necessary. For instance, a buyer could require that their negotiated
rate—dynamic or flat—generate at least 20 percent in savings, not including amenities,
when compared to the lowest qualified rate, which excludes rates corporates wouldn't
use, such as nonrefundable. The buyer would also require that the discount be available,
via last room availability, at least some percentage of time. Hoteliers, in turn,
could require that a discount be renegotiated if it goes above 30 percent of the
lowest qualified rate for an extended period of time. It could also demand some
marketshare commitment from the buyer.
This model isn't just about rates and savings. Reynolds said
long-term SLAs also could include metrics like traveler sentiment and satisfaction
measures or safety and security ratings. The catch? Reynolds' model does depend
on an independent intermediary to measure the savings and marketshare metrics, a
role he'd like Tripbam to occupy (see sidebar: Tripbam Wants to Be the Hotel
However, McDonald did suggest a similar model, independent of
Reynolds' proposition, in which buyers negotiate for a set list of amenities via
a long-term agreement and reevaluate only price.
Launched in 2000, Prism drove the adoption of market share-based
airline contracts, providing data transparency that allows both buyers and suppliers
to assess discount programs and monitor account performance. Among those familiar
with both the hotel and airline industries, a common complaint is that there's no
Prism for the hotel side.
Tripbam founder and CEO Steve Reynolds is looking to solve that
problem. Working on behalf of both corporates and hotel companies, Tripbam for Hotels
would act as an unbiased intermediary, tracking whether hotels are making negotiated
rates available and whether corporates (which wouldn't have to be Tripbam clients)
are meeting marketshare commitments.
Unlike Prism, Tripbam also would deploy its existing technologies
to keep each side in line. For instance, if a corporate isn't meeting its marketshare
commitment at a certain hotel, Tripbam would send a message to travelers prompting
them to switch to the preferred property—or it could rebook travelers automatically,
depending on company policy—but only if the rate is better.
To make the system work, Tripbam first has to get
a number of major hotels onboard. Reynolds is bullish about making that happen but
admitted that the fragmentation of the hotel industry means it could take much longer
to get off the ground than Prism did.
This All Could Be Irrelevant
Yes, the corporate travel industry is extremely slow to change.
Yes, this article did begin with a decade-old anecdote about how everything would
be different and nothing would be the same. But new developments around analytics
and artificial intelligence really could prove disruptive to the hotel procurement
Consider this: Organizations are constantly in flux. Clients
change, teams change, travel patterns change. Yet, current hotel contracts are static
and negotiated based on events and behaviors that have occurred in the past.
What if travel buyers, rather than pulling reports to get snapshots
of data, could access continuous data streams and market dynamics in real time?
And what if online booking tools and the agent desktop portals could use that data
to encourage booking behavior that optimized travel programs to meet their contracts?
Jay Richmond, Amadeus IT Group head of business travel for North
America, thinks the technology is here to wire that sort of supplier data into the
current hotel search and shopping infrastructures. But to make that effective, automation
needs to step in. "The human element of doing [a supplier] assessment is quite
a high cost," he said. "If that could be automated, now you're constantly
knowing that you are managing your supplier spend to the best goals of your company."
If these advancements occur and travel buyers are
able to access real-time program data and can guarantee market share or spend to
suppliers, then sitting down to negotiate won't be the headache it is now. And if
both the buyer side and supplier side can agree to hotel contracts that enable flexibility
for both market dynamics and changing business needs, there won't be a need to negotiate
every single year. In that scenario, the annual hotel RFP season would no longer
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