Hotel Compliance Rising But Lagging

Traveler compliance with preferred hotel programs, though improving, still trails other policy aspects, and buyers are reporting emerging challenges in recent months as competing hotel deals that beat negotiated rates tempt travelers to book outside the program.

"Compliance with preferred hotel programs is still not what it needs to be," American Express Global Advisory Services vice president Frank Schnur said. "Travel managers need to be even more vigilant in communicating the value of their programs."

Preliminary research for Business Travel News' 2009 Corporate Travel 100 benchmarking report shows that hotel program compliance is on the rise to an average of 67 percent, up from 59 percent two years prior. Similarly, preliminary data for an upcoming study of large-market travel buyers indicates that most are in the 50 percent to 69 percent range in terms of hotel compliance, with few showing levels above that range.

Buyers should be aiming higher, said Erin Barth, vice president of global procurement services at JPMorgan Chase, who addressed hotel compliance this month during a session at the Association of Corporate Travel Executives' Global Education Conference in Washington, D.C. "A really great number is between 70 and 85 percent, and anything that's above that is pretty significant," Barth said.

Kimberly Wolfe, who heads global supplier relations for Accenture and reports 80 percent global compliance with her hotel program, said during the same session that it would take extreme measures to push it much higher. "Unless you're mandating and not reimbursing the travelers, you're not going to get 100 percent," Wolfe said.

Few consultants or buyers advocate such an extreme strategy, but Amex's Schnur said the trend among his clients has been to strengthen hotel policy language. Once buyers begin negotiating 2010 hotel programs, demonstrating strong compliance might be one of their biggest bargaining chips.

"It's going to be more important than it has in the recent past," said Bob Brindley, vice president of BCD Travel consulting unit Advito. "In the past, hotels didn't have that much space to sell. In this environment, they would rather get more support from fewer customers."

A down economy can help buyers improve compliance numbers. "Travelers will be trying to do the right thing for the company bottom line," Schnur said. "There's an increased willingness to listen to what the departments are saying."

Bruce Finch, director of global travel and workplace sustainability programs for Autodesk, said the company is working to consolidate travelers to one or two hotels in its key cities and communicating to travelers that the aggregate savings are better than the spot-buying savings individual travelers might find.

"We still have folks who are looking for a bargain," Finch said. "A lot of them are trying to do the right thing and see an opportunity to save a couple of bucks, so they migrate in that direction."

Policy communication is necessary because travelers might not be aware of value-adds, such as included Internet fees or breakfast, that come with a preferred property, consultants said. In addition, too much traveler deal-hunting could hurt upcoming negotiations if buyers do not reach agreed-upon volumes, Advito's Brindley said.

"Spot buying should be encouraged, but it should be encouraged at your preferred hotels," he said.

Some buyers allow the spot buying but have enacted controls around it. JPMorgan's Barth said her travelers are allowed to use hotels with a better rate with pre-approval.

Many buyers, like Finch, also are consolidating their hotel programs to fewer vendors to maximize volume and negotiating ability at those hotels. Advito's Brindley said the strategy is to increase the number of hotels in the solicitation list but cut the number of hotels in a city to drive marketshare.

"It was hard to do in 2007 and 2008, because in some markets, to get availability, you needed more hotels in the program to get decent rates," Brindley said. "Now, with demand dropping, you don't want too many hotels in the program."

Travelers with an attachment to a hotel that has been dropped from a preferred program might have difficulty adjusting. Barth has seen an uptick in travelers trying to negotiate their own private deals with their favorite hotels.

"That's a little more of a concern right now," according to Barth. "We're trying to track and absorb that as we go."

Debra Reid, U.S. travel services manager for Shell Oil Co., said her company is exploring reducing its hotel vendors this year and will rely on data to see that travelers are complying, she said.

"That's where the compliance reporting comes in," Reid said. "If you're not following our program, then you need to deal with your line manager on that."

Many buyers are reexamining the way they measure and report hotel compliance, Advito's Brindley said.

Simply comparing hotel stays in preferred properties against those outside does not give an accurate picture of compliance, buyers said. Group bookings, for example, that are negotiated separately or involve specific conference properties can skew the numbers.

Many buyers said they prefer to focus on activity in their top cities to measure compliance.

"We really judge our compliance on our top cities and also include spending at our approved chains. Our program is very vast," Accenture's Wolfe said, noting a recent glance at her airline program showed 6,500 citypairs. "We don't have hotels negotiated in some of the markets where people go."