After air spending, hotel represents the second-largest chunk--between 30 percent and 50 percent--of a typical corporate travel budget. As those budgets tightened, travel buyers in the past two years intensified their focus on the supplier category: mandating use of preferred suppliers, consolidating purchasing, leveraging the supply base, auditing rate loading and negotiated rate availability, and renegotiating one or more times midyear. But are buyers still lacking visibility to large pieces of their hospitality spend?
Yes, according to Lanyon chief commercial officer Mike Boult, who built the Total Hospitality technology suite to address the major shortcomings identified in many aspects of even the most well-managed hotel programs:
- Accurate and complete historical demand data of reservations made via agency and consumption via credit card
- Access to negotiated rates
- Knowledge of available rates lower than those negotiated
- Ability to quickly and easily negotiate rates for short-term or ad-hoc projects and engagements
- Ability to capture meeting sourcing
- Ability to capture and manage meeting attendee data
- Ability to electronically manage meeting contract terms
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Lanyon spent the past year dissecting the challenges of comprehensive hotel category spend management, validating them with dozens of clients and using $10 million in funding to expand its existing tools into a complete technology platform to solve the problems, Boult said.
Many of the problems also have been identified by other solution providers and in a 140-page Room For Savings: Optimizing Hotel Spend report issued last year by Carlson Wagonlit Travel's Travel Management Institute. The report concluded that "companies can save 21 percent of their hotel spend by adopting best practices," pinpointing practices within program and policy structure, negotiations, traveler compliance and performance tracking.
"Optimizing hotel spend" topped the 2010 priorities described by 60 percent of 169 travel manager respondents to a CWT survey conducted from September through November 2009. And rate auditing has emerged as a new business practice for CWT, BCD Travel, Sabre, Lanyon, Hotel Solutions, eCommission Solutions and others.
Beyond transactions, Boult said, corporations must corral and manage elusive spending on training and meetings and projects and engagements. "Companies focus on transient; it becomes their fixation and investment. The market has been conditioned to believe that if I do a nice job negotiating rates on the transient program, I'm done until next year. In fact, for many companies, the transient spend is actually the minority of the hotel spend." In consulting firms, for example, travel due to engagements or projects (perhaps to new destinations) is often unknown spend. Preferred properties and rates are rarely sourced. Globally, Lanyon estimates that companies spend $50 billion a year on such short- and long-term stays.
Deltek Inc. global travel procurement senior manager Karoline Mayr said her company has "struggled with inefficient processes to locate, communicate and finalize accommodations" for travelers. Deltek in January became the launch customer for Lanyon's engagements and projects product "to provide better service for our internal users, streamline negotiations and communications with suppliers and achieve greater savings through a competitive bid- ding process," she added.
"We have a configurable request form that would sit on an intranet," Boult said. "If you are part of an engagement or project team, you fill out five pieces of information and it will send the request to the travel office. They will then use the Lanyon tool to source properties within hours, not weeks, so when you're ready to start traveling to those offices, you can access a temporary rate negotiated just for you. It's a fun new project designed for way more than what I imagined."
Why Hotel Remains Elusive?
Even the best-run transient programs, Boult argued, are sabotaged by ongoing industry practices and problems. Despite advances in hotel folio, credit card reconciliation and database management, Boult noted nothing has changed. "I actually feel like there's suspended animation," he said. Data continues to be "garbage," as hotel names vary so much between the global distribution systems, booking sites, expense reporting systems, credit card feeds, corporate accounting systems and even the hotel chains' own systems.
When a booking report lists a hotel name one way and a payment report lists it another, few "match it, normalize it. Two different reports say almost entirely different things," Boult said. The agency report details the number of nights booked and rate, which would be helpful to match to a hotel credit card feed and total spend, but few are actually getting the hotel folio that would allow that to happen. "The truth for most compa- nies is when they ask hotels to tell them what they spent. To ask suppliers to tell you how much you spent defies the logic of how best to manage suppliers," Boult opined.
Negotiation Myths
"Many companies that I've visited, the notion of consolidation is anathema," Boult said. "The idea that they have 20 hotels in midtown Manhattan tells me it's not a consolidated program; it's a directory of every supplier you could sign with. Because it's all done on a handshake, nod and wink, there are no commitments, contracts or anything other than best efforts. The hotel gives you a price, and you're happy to have them in the program. But there's not really much notion of directive selling or marketshare."
For many managers, the next stages of hotel spend management are defined by Boult as the "four levels of hell" as buy- ers attempt to get negotiated rates correctly loaded, available, competitive and authorized. First, companies must work with hotel contacts to get their negotiated rates loaded into a hotel computer reservation system and then the global distribution systems. "Most hotels have fully manual processes, and it's be- ing done between Christmas and New Year's."
As it conducted 10 million audits across multiple GDSs for clients last year, Lanyon found a bevy of errors. "Four out of 10 rates aren't even loaded into a system. If they are loaded, they're loaded high, low, with improper currency codes or wrong seasons," Boult said. "We have a unique perspective in that we have 230 hotel brands as clients and see the torture they go through to load the rates. It's to the point that they're actually investing in our Rate Auditor product to check themselves."
Typically, after three or four attempts, hotels "manage to get 95 percent right" by April. That also is when many companies start checking GDSs to find squatter rates--rates not authorized by a corporation yet loaded into a GDS with the hope of gaining some business. "We have some programs that have as many authorized as unauthorized hotels," Boult said.
At hotels that have been accepted into programs, buyers frequently complain that their travelers can't book the negotiated rate as revenue managers closed inventory. Even buyers who have negotiated last room availability experience this.
To identify such instances, Lanyon this spring introduced a product called Rate Availability to scan forward for the next 45 days to show when the corporate rate is available and, when it is not, which rate is available.
In a new product offering, Lanyon enables clients to find rates available online that beat their negotiated rates. All advance purchase, nonrefundable, restricted and specialty rates, such as government and AAA offerings, are eliminated. "We have 150 consumer Web sites and all of the hotel Web sites, and we scan them" to identify bookable rates that are lower than negotiated. "Some say, 'My negotiated rate includes all these amenities, like parking, WiFi, breakfast.' Newsflash, so do most of the rates you can get online," Boult said.
What About Meetings?
While there are multiple stand-alone solutions available to source meetings and register attendees as well as book their travel, Lanyon decided that "if you're going to help customers manage all other hotel spending, why not provide them with meeting sourcing technology that sits on the same platform?" Boult said. "If you're going to negotiate a meeting, wouldn't it be nice to know that you spent $120,000 in the last six months on transient or had three engagements at a property?"
Lanyon developed both a traditional meeting request for proposal as well as a fixed-budget RFP in which planners can identify their price point and ask hotels to describe what they could get for that cost.
Planners can search properties in Lanyon's global database of 107,000 properties and view virtual tours of hotels and meeting rooms through a deal struck with VFM Leonardo. Lanyon already manages content for 230 hotel chains. Included in the content are negotiated rates that hotels ask Lanyon to publish to meeting sites.
For real-time, small-meeting bookings, Lanyon teamed with Worktopia to deliver a co-branded version within the Lanyon platform.
Regarding attendee management, Lanyon hired Cardinal Communicators to design a next-generation registration tool to be released in July. Cardinal's Rodman Marymor and Stephen Chang started creating RegWeb in 1996 and later sold it to StarCite. "They wanted to take another run at it, to have a do-over," Boult said. "Maybe in the year 2010 you can use all sorts of modern technology and have something that feels Googlesque that you don't need a help desk" to use.
Boult initially "made offers to a couple" attendee management product providers, and "then I realized what I would be acquiring: the same 10-year-old problems. We took a different approach. We found the company that started doing this in 1996 and should have filed for a patent but didn't.
The vast majority of meetings are planned by occasional planners who don't use the tools often enough to quickly build registration sites, Boult said. Cardinal is tasked with designing the next-generation tool that is "easy to use, configurable and takes users step-by-step" through the design of a registration site. The tool also includes "session management" to allow planners and attendees to manage multi-session meetings and appointments, including one-to-one meetings during an event.
Listening to complaints from procurement executives about early meeting tools, Boult said, Lanyon has "digitized the contract process." Contracts will be stored online, but key dates--such as when a cancellation clause kicks in or the last date to release rooms in a block without penalty--would be identified to alert buyers of the opportunity to manage the contract.
Also built into the tool is a meeting catalog in which elements of a meeting--files, videos, meeting agendas or data--can be housed to reuse across meetings or across various elements of one meeting. "If you've done 90 percent of the work already in the sourcing, just bring it across to attendee management," Boult said.
What About Reporting?
To capture room nights, booking data and hotel expense records to audit, reconcile and provide more complete reporting of all hotel spending, Lanyon partnered with TRX. Customers will be able to send agency and credit card data, as well as meeting folio feeds, to TRX reporting tools that also will take in Lanyon feeds. "We worked with TRX to develop a normalization process to scrub the data to provide both historical and ongoing reporting" across all hotel spend categories, properties, chains, cities and geographic regions.
Pricing for the Total Hospitality platform is all-inclusive and based on spending managed through it, according to Boult. The model is similar to the way "most indirect spend management tools are priced," but not so much in travel. "Savings pay for the cost of the platform. As you manage more spend under that platform, it fully pays for the cost. We think it's the right approach, but we're not arrogant enough to say this is the only way we'll price."
Corporations will pay a subscription fee based on what they expect to manage through the platform and can reconcile mid-year based on actual spend under management. Subscribers can use any or all of the modules as much as they want. Lanyon has talked to agency partners, but at press time, Boult said, they were unsure of the pricing model.