Oracle Corp.senior director of global travel, meetings, sourcing, data and card solutions Ralph Colunga has led a pioneering travel program revamp that targets a thorough global consolidation and 40 percent reduction in overall travel operating expenses by year-end 2008. Last month, during the Association of Corporate Travel Executives conference here, he explained to delegates how the growing company has tackled lodging needs for more than 70,000 travelers.
For Oracle, constructing a hotel program meant capitalizing on economies of scale by replacing four, distinct regional programs with a global one that covers the 140 countries in which it operates. But it also meant tracking its hotel spending, establishing a "best-in-class" supplier management program, providing safe lodging options for travelers and making the program more visible in order to cultivate policy compliance.
"Across the whole procurement group, there are three guiding principles," Colunga said. "We focus on simplifying, standardizing and automating our practices wherever we possibly can."
A relatively new facet is the "global leakage program," which relies on data from the company's general ledger, travel agency (Carlson Wagonlit Travel), corporate card (American Express) and travel suppliers to identify "rogue spend" on non-preferred suppliers or via unauthorized booking channels. The idea is to build program compliance, move market share and establish leverage with preferred suppliers.
With that goal in mind, Oracle has established three "key" global hotel partnerships and, during the past 18 months, removed 500 independent properties from the program, Colunga said.
With assistance from outside firm Direct Connections, the company begins its yearly request for proposals process in June or July (though Colunga noted that Oracle has some two-year agreements in place). Among other things, it requires bidders to provide "accurate and complete" information, offer last-room availability, avoid minimum room-night commitments and "extraordinary" rate increases, adhere to Oracle's supplier code of conduct and make provisions for accurate data feeds in order to report room nights back to the company on a monthly or quarterly basis.
"Hotels should bid a confidential, best and final net, non-commissionable rate inclusive of complimentary high-speed Internet ... complimentary breakfast, parking and shuttle service to local Oracle offices and also accept American Express as form of payment," according to a sample Oracle letter to 2008 program bidders. "Room bids are to be based on two types of rooms--standard and executive/club floor access. If these two categories of rooms are sold out, it is Oracle's expectation that our preferred rate be honored for any inventory available."
Oracle asks hotels to provide rates that are "significantly lower than your consortia rate and lower than your competitor's rate."
The company also disallows local negotiations, but values local input. "We do reach out to local communities to see which hotels we should add or leave out on an annual basis, and the reason why," Colunga said. "Not that we are going to do it, but we want to understand the dynamics that are happening in all the markets we serve, and use the local communities and our most frequent travelers to help us determine which properties best meet our business needs."
Oracle aims to contract with "like-minded suppliers," Colunga said. "We make sure suppliers understand our strategy and really want to participate in that type of program, and understand the commitment they are going to have to make to us."
But that shouldn't mean a hotel would lose money by securing Oracle's business. "I firmly believe that all suppliers have to make a profit," Colunga added. "It is how much profit you make that is in question and on which you will negotiate." That, he said, helps to breed trust and foster transparency in the relationship. But he noted the challenges inherent to global hotel dealing: "It is difficult when you have franchise operations and different owners, and all of them have different ideas in terms of what they want to achieve as it relates to rates and their return on investment."
Oracle's goal is to complete negotiations by early December and have rates loaded by early January, Colunga said. He acknowledged that the timing "often" slides to late January or early February, and that "squatters" complicate matters. On that front, Oracle goes after squatters "quite aggressively" and uses Direct Connections to audit rates.
To enrich hotel relationships--as well as those with other types of suppliers--the company established "formalized governance" and a managed supplier partner program. That program aims to develop "objective classification criteria," standardize global supplier management and position Oracle as the "customer of choice."
Colunga referenced a best practice assessment conducted by a third party in which "the Oracle travel team scored highest in almost every category," as compared with scores given to other clients by travel suppliers. But, he added, "We don't know it all. We need to learn from suppliers just like they need to learn from us."