Steep declines in average daily rates and hotel occupancy in
2009 helped establish fertile ground for buyer negotiations in 2010. Yet many
organizations exerted resources securing hotel rates and policies they will
never fully enforce. Worse, nearly one-third of companies lack a hotel policy,
though hotel expenses often represent 35 to 40 percent of a total travel
budget, according to findings from Egencia's recent Global Travel Executive
Survey.
Companies that fail to implement or enforce hotel policy do
so to their own detriment. With business travel showing signs of recovery, now
is the time to take control of hotel programs.
To do so, organizations need a deliberate and logical plan
that includes employee education, policy enforcement and preferred supplier
relationships—practices that yield cost savings.
Travelers must be made aware of hotel policy before they can
follow it. In Egencia's survey of 433 travel buyers, only 32 percent of
respondents encourage compliance by proactively informing employees of travel
policy, so improving communication can help educate travelers.
Communication should be tailored for each audience. Support
from senior leadership also helps. A message from the CFO conveying the
financial imperative of the program, for example, will drive additional
savings.
Enforcement has a dramatic effect on the travel program
bottom line. Less than 29 percent of travel executives give verbal reprimands
to travelers booking out of policy. Twelve percent send e-mail notifications
and 12 percent do not enforce policy at all, the survey said.
One of the most effective ways to encourage compliance is
pre-trip approval, in which an employee manager is alerted when travel is
booked. Alternatively, notifying an employee's direct manager if he or she
books out of policy—for example, booking a hotel at a non-preferred
property—allows the manager to review the travel itinerary and reason for
noncompliance, and then choose to approve or deny the request. A good rule of
thumb is to only approve travel for non-preferred properties when the rate is
15 to 20 percent lower than the preferred rate.
Tactics for enforcing travel policy are best supplemented
with technology, such as self-booking platforms. They highlight best-in-policy
options, steer travelers toward preferred rates and establish such pre-trip
approval procedures as sending e-mail notifications to managers when an out-of-policy
purchase occurs.
These tools drive enforcement at the point of sale, which
can increase compliance for travelers who haven't fully synthesized the travel
policy. Key in driving compliance is to use a multitiered approach, leveraging
several communication channels to distribute policy information. Policy
compliance allows companies to fully leverage traveler volume to negotiate
deeper discounts with preferred suppliers.
When approaching preferred suppliers:
• Understand market-specific dynamics. If a certain property
is new to the market or has less corporate contracts in place, they may be more
open to better deals.
• Strict policy management and support of negotiated rates
is key. Show the supplier your ability to meet these agreements.
• Include amenities with the rate whenever possible. Make sure
to notify travelers when amenities are available so they use them.
• Consolidate wherever possible to increase leverage.
Consider including both full- and limited-service hotels in the program.
• Negotiate such terms as late checkout.
• Consider independent hotels. They do not have to fund
expensive loyalty programs and thus may have better rates.
• Leverage your travel management company's preferred rates,
which can offer greater discounts and flexibility to market conditions.
These recommendations can help companies realize greater
cost savings and unlock the full value of carefully drawn hotel programs.
This story originally appeared in the July 12, 2010, issue
of Business Travel News.