In a complex negotiating environment with some hoteliers
eager to push for dynamic pricing agreements but also keen to protect market
share amid potentially softening 2025 leisure demand, many corporate buyers
succeeded in holding 2025 corporate negotiated hotel rate increases to
low-single-digit percentages year over year, insiders told BTN.
Following a few years of sharper increases following the
pandemic-era demand wipeout, many buyers emphasized in negotiations with
hoteliers the need to keep costs in check in 2025, insiders said, and in many
cases were able to do so. Though some chains again pushed clients to adopt
dynamic pricing structures in 2025 agreements, with varying degrees of fervor,
some backed off as negotiations continued while others waited in the wings with
static deals to lure disaffected clients.
The new deals set the stage for a thorny 2025 landscape in
which hoteliers have been heartened by corporate demand but remain closely
observant of the potential effects on the economy of federal policy.
The median U.S. 2025 negotiated rate, including last-room
availability, for users of Cvent's transient hotel request-for-proposals
platform increased about 2 percent year over year, Cvent VP of product management
Brian Sullivan said. "International markets are in some instances higher,"
he added. "India, Brazil and Japan are in the high single digits."
That figure roughly squares with some projections made
before RFP season concluded, including travel management company CWT's
forecast of a 2.2 percent year-over-year increase in average daily hotel
rates, fellow TMC American Express Global Business Travel's assessment that
2025 corporate rates would increase at a slower
rate than prior years, and Marriott International's professed
target of negotiated rate hikes in the "mid-single-digit" range.
"It obviously depends on each individual client
situation and every market is different, but the rate increases that we saw
were much more moderate than the last few years," said Partnership Travel
Consulting SVP Bob Brindley.
What's Behind It?
Buyers' relative success in limiting 2025 rate increases
stems from hoteliers' assessment of a tricky market in which leisure demand
softened in 2024, especially in lower tiers, leaving questions for this year,
as well as many buyers' renewed focus on rate after a few years of hotel recovery
from the Covid-19 pandemic depths.
Although buyers weren't particularly interested in
increasing the share of lower-tiered properties in their 2025 programs, their
focus on rate did included search for lower-priced properties in the same tier,
said Tim Wagner, SVP of procurement consulting and supplier relations for corporate
lodging platform HRS.
For clients looking for cost containment, "we are not
compromising quality, and we are basically staying on the same star rating"
or hotel tier, Wagner said. "We stay in the same segment, and we basically
then find a better price point and leverage our negotiation power to find
alternatives that are in quality the same to improve the program, especially on
savings this year."
Most major hotel chains have similar outlooks on 2025
demand, said American Express Global Business Travel VP of global hotel Simon
Fishman: low single-digit percentage-point growth year over year for leisure
travel, with "very robust meetings and events travel and decent, moderate
corporate demand overall." How those hoteliers have handled those market
conditions in relation to 2025 corporate rates differed, however, he said.
Most chains, Fishman said, fell into one of three categories
of negotiating strategy in RFP season. "You've got some chains very much focused on [revenue per available room] growth. "RevPAR growth can come in two ways, but when you've got decent occupancy, it generally means they are defending their base and keeping rates as high as possible. Some chains have been focused on overall share gain in the market, trying to get a couple of points of growth at the expense of someone else."
The third category, Fishman suggested, is less homogenous.
Those chains' "strategy is less clear. And that has translated to a more
tactical approach of just going after what they can get," he said.
A Dynamic Situation
How those chains manage those forces often is reflected in
their approach to dynamic pricing. The pricing strategy that allows hotels to
adjust the corporate rate based on demand for years has been pushed to business
travel clients with varying degrees of success; some buyers have incorporated
at least some dynamic elements into their agreements while others have refused,
insisting on static negotiated rates.
This year, Fishman said, hotels' approach varied. "What you've seen is some of the largest hotel chains in the world
have been trying to perform a move away from static rates towards dynamic [corporate
negotiated rates], crucially with non-last-room availability," he said,
referring to hotels' practice of restricting the availability of a negotiated
rate in times of high demand. (In agreements with LRA, hotels must offer the
corporate client the negotiated rate if there is any availability.)
Sources indicated Marriott International has been the large
hotel chain most insistent on securing dynamic rates in agreements, with some
other large chains eager to include them, if not as adamant.
Still, there's little evidence that hoteliers have persuaded
buyers at large scale to adopt additional dynamic pricing arrangements in their
2025 deals. Cvent's Sullivan said that of the RFPs that were submitted through
the company's platform, 85 percent accepted negotiated rates were fixed,
slightly down from 2024 levels.
"We've actually seen that level off," Sullivan
said. "That's actually down from 86 percent last year, but
it's up a couple percent from two years ago, so it's basically staying roughly
the same. … You hear a lot in the industry about how suppliers are pushing hard
for dynamic rates. They've got a bit of leverage but buyers are clearly—in our
tool anyway—resisting that in many instances and we're seeing a lot of
negotiations culminate in fixed rates."
Still, hoteliers' ability to drive dynamic rates varies by
market, Sullivan said, noting Europe is "a little more aggressive"
with regard to securing dynamic rates than North America, Latin America and Asia,
“which are heavy, heavy fixed markets for us.” Even within the U.S., Sullivan
pointed to high-occupancy cities like Boston and San Francisco as more likely
to include dynamic rates than Atlanta, Dallas and Austin, Texas.
Nevertheless, Partnership's Brindley said, "hotels
definitely are still pushing more and more to dynamic discounts compared to
static rates, and we saw that effort increase this year." But whether
hotels were able to secure those deals was a different story, he said.
Buyers with "a large number of room nights and
demonstrated production were negotiating very, very good rates, and typically
those were still LRA rates," Brindley said. "If it was a market that
was smaller where maybe they haven't had a preferred hotel before and had a
[limited] number of room nights, then hotels were typically coming back with
either dynamic discounts or NLRAs, and if the client didn't want to go in that
direction, then that eliminated those hotels from the program."
Brindley said that although some of his clients were open to
dynamic arrangements, he hadn't necessarily seen that number increase in recent
years. "Some clients just do not want it," he said. "They feel
that it gives too much pricing power to the hotel."
Some hoteliers successfully lured such buyers with deals
that eschewed dynamic rates, Fishman said. "We've seen some chains have
looked at that and taken that as an opportunity to … try and pick up some of
that business, give the assurances, give the static rates out, even if it's not
ideal for their overall revenue management strategy, but really to gain market
share," he said.
In markets where occupancy was such that static rates
weren't available from preferred hotels, Fishman said, buyers often sought and
secured secondary deals.
HRS' Wagner, who suggested the chains that pushed the
hardest for dynamic rates lost corporate travel share for 2025, said buyers on
the whole had pushed back against hoteliers' efforts.
"Travel managers really do not like dynamic rates
because especially for large-volume destinations, they don't have planning
security, they don't have guaranteed availability, they don't have good
compliance, and the price is definitely also not better," Wagner said.
"Especially on large destinations and mid-volume
destinations, we don't see a trend towards dynamic rates."
Policy Pursuit
Securing optimal 2025 hotel deals isn't just a matter of
negotiating with suppliers, as a comprehensive travel policy can help guide or
direct travelers to choose preferred hotels or those that are under specified
daily spending caps.
Such policy language can be a delicate balance between a
desire to concentrate volume and accommodating some traveler preferences, but
Brindley suggested some buyers are moving to solidify their programs.
"A number of clients really want to tighten up the
compliance of the program and make sure people are booking the preferred
property, and if they're not booking the preferred property, they better be
getting a rate lower than the preferred rate," he said, adding that adoption
of hotel reshopping tools, which can automatically cancel and rebook travelers
to take advantage of lower hotel rates that come available, help to reinforce
that policy message.
"Clients have seen a benefit to that," Brindley
said. "They're able to not only drive more bookings to their preferred
suppliers but also they're making sure they're catching outlier rates before
it's too late."