HRS CEO Tobias Ragge discusses:
- The value of payment data
- The future of hotels' sustainability disclosures
- Weighing safety and security with savings and sustainability in hotel program decision-making
This month's announcement that HRS had agreed to acquire spend management platform Paypense was another signal that the hotel solutions provider is expanding its traditional value proposition beyond connecting the dots of complex corporate hotel programs. CEO Tobias Ragge sat down with BTN editorial director Elizabeth West at the Global Business Travel Association convention in San Diego to discuss that evolution, as well as the trends now affecting the managed travel industry. Some of those trends have played straight into the company’s hotel program expertise, but others are pushing the company in new directions. Edited excerpts follow.
BTN: You told me in a conversation during The Business Travel Show Europe in June that HRS was realizing that its entry point to client companies might no longer be the travel manager. Tell me more about that.
Tobias Ragge: The question is, “What do you want to achieve, and who’s the right stakeholder for this achievement?” We tend to look at travel as a category from the operational perspective, which was always run through the travel manager in the past. But travel has changed from a very transaction-driven industry, where it was all about booking travel and supplier relations, to more of a strategic dialogue on how to digitize processes and have broader frameworks that go beyond savings.
Payment is often a catalyst for digitization, but this gets into finance, accounting and treasury. So, this is why you cannot go to one party or another. When you are looking at the holistic map of a process—and we position our value proposition as procure-to-pay—you look at the stakeholders across that process, and often we find that we have to bring them together for the client company because they’ve been siloed internally. Does that include travel? Yes. But it does not only include travel. If we really want to take travel as a solution to a totally different level, it needs different dialogues.
BTN: Why do you consider payment a catalyst for digitization?
Ragge: Because it is the best data source, and it can drive program adoption. The [managed travel] industry has been built around booking. First through an offline agent, then it was replaced by the online booking tool, and then chatbots could help you as an evolution, but it was all the same idea. The biggest problem is that only 50 percent of the volume of any corporation goes through that booking channel. And if you go outside core markets like the U.S. and Europe, it’s worse. Payment can cover so much more territory; you can cover 70 percent of all the volume being conducted with the payment piece. And if you do it right, you can have an invoice machine that delivers level 3 data [on this].
In the past, working through booking tools where you have booking tool A and booking tool B in different markets or different agencies in different markets, you are getting data in different formats and you try to match it, de-duplicate. You end up with maybe 35 percent you can use.
BTN: What about the program adoption or compliance side?
Ragge: In the past, when we tried to connect spend management as a product with travel as a category, we solved via travel policies. People would update their policies and say, “OK, now we’re not spending €100 per night, we’re spending €95,” or whatever—no more business class, now it’s coach class. And people spend endless time defining these policies. … Then at some point, somebody [configures it] in the booking tools and they send those memos about booking out of policy, which nobody ever reads and cares about, if they're honest.
Paypense is more than just a wallet tool. You can basically program your spend management rules and any expenditure you do is working against these rules—and it's not just the travel expenditures now like air and hotel. It's everything you do while you travel—restaurants, taxi rides. In real time the rules engine can [trigger] the allowance for breakfast, for example. And you don’t need to collect any [receipts]; everything goes directly to the expense tool. So it takes a lot of the hassle out, which can drive adoption, and creates obviously the best-in-class data.
BTN: Do you see travel managers getting more involved in payments and understanding the role spend management plays in strategic travel management?
Ragge: It’s obvious we are running into a recession and inflation is going to last longer than we want. I think the CEO cares about cost management—and achieving compliant, managed spend in real time and organizing money flows. The C-suite cares much more about this than they do about what’s happening with a travel booking tool. Forward-thinking travel managers have gotten it, and they see they need to drive a different agenda. But now comes the challenge: How do we bridge internally with finance, accounting and get this together?
BTN: Another big concern for travel programs is sustainability. HRS is addressing this with its Green Stay Initiative, which was broadly praised when you rolled it out but also criticized for only being available to HRS clients. Did you ever open that program up?
Ragge: You see all these catastrophes everywhere through climate warming. And so I think that's just going to now jump priority in the corporate agenda. And the Securities and Exchange Commission [has proposed] requiring all of this [reporting] starting in 2023. So hotel companies are going to need to present transparent data. In the corporate landscape, early movers are saying, "If a hotel partner is not willing to provide transparency, they most likely will not be in our program anymore."
Part of our Green Stay Initiative is to support the supply side to understand that this is now mainstream, and they need to get all these data points together, and to help them distribute that information for their own sales channel. So we’re making it free of charge for everybody to distribute through their channels, and we’ll give others access to it. The industry is trying hard, but [hotel companies] sometimes have conflicts of interest when a property is paying them a lot of money to be a part of a franchise. … So even though they are moving in the right direction, they may not be as transparent as the corporate buyer would need them to be. And we can help provide that.
Looking ahead, I’m telling you it’s a matter of three to five years when you’ll have to show through smart contracts on every instance: Did you offset this? Can you validate? … Because there is a lot of greenwashing happening today.
BTN: Traveler safety and security is certainly another megatrend impacting travel managers. HRS this month announced an integration with Geosure. How are you activating that and providing value for the buyer?
Ragge: We always look at all kinds of data sets as augmentation layers to make better decisions, either for procurement people or for the traveler. Geosure provides another important buying criteria. We want to show for the buying process, if you need hotel partners in Lagos, Nigeria, for example, that there are neighborhoods that are safer than others, and you need to understand the tradeoffs when making hotel partnership decisions. Maybe the hotel location is farther from the office, but it is safer so you are willing to pay that extra ground transportation cost.
What we are building out on the procurement side is basically a decision machine. We call it a scenario builder, where the decision maker can just go in and play around with patterns of what's important for you, and seeing all the tradeoffs on savings, satisfaction, safety, security, sustainability. Security is clearly part of the algorithm to drive that.
BTN: Let’s hit on remote work. I know you introduced the concept of ‘long stay’ in your traditional tools. How else are you thinking about the impact of distributed workforce—and does HRS have any plans to address the larger picture?
Ragge: There's no company not [dealing with] remote work, in terms of policies where they're figuring out: "How are we going to organize this? What days should people come in? Who decides that?" That's where it starts, but what are the consequences? Companies are getting rid of real estate, but what other opportunities are there for people who may not want to work five days at home, and who deals with that question? I think this is really where travel and HR start to merge together.
But to that point, this is a huge opportunity for hotels. Because what is a hotel? A square-foot infrastructure that offers space to sleep, eat, work and meet. It’s all there. I think you will see, and this is stuff we are also working on, all of this [built] in one application. You have your classical meeting space. You have your full working spaces. You can book a desk by the hour. We're going to make a pay-for-consumption model and combine it with the payment application. It's so logical that [hotel bookings, remote work spaces, small meetings] all come from one source.
BTN: HRS is stepping into the larger travel industry to address housing needs during transportation disruption, which there is a lot of right now. What need did you identify, and how are you filling it?
Ragge: We’ve built these procure-to-pay platforms for the corporate community, but eventually you see there are other communities that might make use of them. Through the pandemic, we did a lot on the crisis management side of things because that was the only business you could really go after. So we thought about what industries deal with crisis on a normal basis—and that’s when we came to the transportation industry to say, “OK, there’s a lot of disruption in scheduling air, train crews and so on.” We found the segment has been served by very offline-type call centers with a very manual process with vouchers, etc. Very cumbersome. At the end of the day, they needed a procure-to-pay platform that was fully digitized with a payment application. You give the crew and passengers this application and say, “here you go, everything is paid for.” There’s no petty cash, no clumsy process and, for customers, no lines queuing up for a voucher with screaming kids. It’s all delivered to their mobile device.
At that point, it becomes a differentiator for the airline to say, "Hey, I'm very sorry, but here we created at least the best experience when handling this." And we are finding [Net Promoter] Scores go through the roof, and there’s even some gratitude from customers.
BTN: Who are your clients in this?
Ragge: We started with German rail and then went to Lufthansa and Norwegian. There’s huge interest. To be honest, without the pandemic, we probably wouldn't have looked at it. But when we really look at what HRS is and what we’re trying to do … we build procure-to-play platforms. We deal with basically anything touching infrastructure [around] lodging. Our job is to build and implement the technology that will digitize these value chains end to end.
BTN: You’ve taken a step back to see how HRS can apply its core skills to other problems. It strikes me that travel managers are facing a moment when they are being asked to do the same.
Ragge: All these megatrends are intersecting with travel. Travel managers have to decide if they want to become strategic and be part of these discussions and drive change for their organizations and raise their profiles. They won’t do it by themselves; they’ll need to find the right partners. If they don’t step up, they’re really just waiting for someone else to tell them what to do and they’ll stay in their operational role.