Corporate travel buyers for large companies this year have witnessed enhanced receptivity among travel suppliers to structure pricing agreements-with hotels leading as the most flexible with which to negotiate. Though buyers running mature travel programs have found consistent success at the negotiating table with hotels this year, they continue to find the least success in that area when it comes to traveler compliance.
Download a PDF of the full 2009 Large Market Benchmarking Report here, including all data, charts, stories and large market buyer profiles.Advito vice president of business solutions Bob Brindley said a "combination of factors" cause hotel compliance to lag other travel sectors.
Business Travel News' large market survey found that 62 percent of the respondents' hotel transactions comply with preferred vendors, falling on the high end of the 30 percent to 70 percent range of hotel compliance generally witnessed by Brindley. "Part of it is it's a more diverse buy, and you're dealing with so many more individual hotels when making a decision, versus the airlines," Brindley said. "Another part, hotels typically only provide discounts in markets where you hit a threshold of 50 to 200 rooms a year to qualify for a negotiated rate. So, the percent of spend you have for the little markets is not going to have any compliance, because there's no preferred property. Another part too, less hotel business is booked through agencies than air business."
While lagging other travel spend categories, hotel compliance has improved in recent years, according to travel management consultant Carol Ann Salcito, president of Norwalk, Conn.-based Management Alternatives. "Historically, corporations were happy if they got better than a 35 percent compliance rate," Salcito said. "Today, I know a number of companies still happy with that, but the majority are in the 60 percent to 70 percent range."
Ingersoll Rand director of strategic sourcing Thomas Barrett agreed that the many hotel options in any given city make it difficult to achieve 100 percent compliance with preferred hotels. "I don't think it can ever get to 100 percent. There are always dynamics that make that challenging," Barrett said. "When we're visiting a client and they're the 900-pound gorilla locally, we may use their rate."
Though there is room for higher traveler compliance, hoteliers this year were more than happy to oblige buyers in negotiations. An astounding 98 percent of respondents to the
BTN large market survey said their preferred hotels have been more receptive in negotiating pricing this year, with the remaining 2 percent claiming that there has been no change.
It's no surprise, however, that a deep drop in demand continues to spur a hotel buyers' market, in which many major cities have seen double-digit percentage year-over-year rate declines.
Though large market buyers reported finding more success in negotiating hotel rates than any other supplier category, Barrett said hotels don't always covet the high hotel volumes that come with a large market company, especially when occupancies are such that they can sell that corporate-discounted inventory at a higher, published rate. "Putting more people into a hotel does not necessary get you a better rate," Barrett said. "One hotel told me that if I reduced my business by 200 room nights, they'd still give me the same rate. They said, 'You're killing me because I can't upsell to the others.' Essentially, their average room rate was lower because we were overbooked at a discount."
Estée Lauder executive director of global travel and meeting services Cynthia Shumate said what matters more than the size of the program is the discipline and management of that program. What good is a large market client, Shumate asked, if it "doesn't have policy, senior level support, guidelines or a process with the agency?"
"From a supplier point of view," she added, "a client who can manage and communicate to the traveler base who are our preferred suppliers, the expectation from a policy point of view and the process that will support the bookings, has value to the supplier over a client that doesn't have that kind of control."
Large market buyers have found a markedly different level of flexibility from airlines in structuring deals when compared with hotels. While 45 percent of respondents said carriers have been more receptive, 24 percent said they have been less receptive, more than in any other supplier category.
Advito's Brindley said carriers have varied in their flexibility based on client behavior, but generally have been quick to cut programs or reduce discounts on accounts that are underperforming. Still, carriers have been willing to be more competitive for accounts that continue to drive marketshare-even if overall volumes are declining.
While working with carriers has been more a matter of delivering marketshare, Brindley said large volumes could help in that quest during times of overall declining travel. "Especially in these really large programs, it could be that they have a number of global carriers that are supported by a number of regional carriers. It could be a matter of dropping one regional carrier or it could be shifting your carriers to find room for one of your entrant carriers' alliance partners at the expense of another alliance. It doesn't have to be huge shifts, but if you can build the case to streamline your program or drop carriers to drive some additional share to your top carriers, I think in this environment, they're more than happy to work with you."
While many buyers pointed to successes this year in negotiating with preferred suppliers, many also continue to focus cost-savings efforts on compliance and other internal actions.
During an Association of Corporate Travel Executives Executive Forum in New York this month, Deborah Stanton, MasterCard Worldwide CPO and group head of global procurement and corporate services, said the company has "ratcheted up our compliance activities. Now there are more controls."
Stanton said MasterCard has achieved 90 percent compliance in a number of travel spend categories, but maintaining those numbers through awareness initiatives and cost-savings reporting remains a high priority. "The continued focus on compliance, even if you are at high levels, is what you talk about and what you advertise," Stanton said. "You always can have the cost-savings metrics and speak to cost savings and cost avoidance."
After the low compliance with hotel, respondents to the survey found the least amount of compliance with preferred airlines, with respondents noting that 77 percent of air transactions are with preferred carriers. Buyers said they found the highest compliance rates in the survey with expense tools, reporting that 97 percent of transactions went through the proper channel. Such compliance, Salcito said, is an easier feat than other categories. "Just give people the tool, and they'll use it if they want to get paid," she said.
Rental car compliance also gained high marks, with 94 percent of transactions made using the company-preferred suppliers. Several factors have driven rental car compliance success, including generally lower preferred rates, perks like collision damage waivers included in rentals with preferred suppliers, the fact that there is less traveler loyalty to rental car companies than air or hotel providers and one other simple reason: "There are so few rental companies these days," Salcito said.