American Express Corporate Travel last week introduced hotel benchmarking as part of its new automated Rate Trax product, which was designed to verify that negotiated rates are loaded into the global distribution systems accurately and on time. Rate Trax benchmarks buyers' rates against GDSs' best available rates, as well as AAA rates.
With Amex's consortia rates no longer fixed and often changing daily, benchmarking hotel rates has become more difficult.
While other rate loading products, including TRX's Contrax, have been available to buyers for the past few years, the Amex tool is the first to offer the benchmarking feature. Amex outsourced the writing of the code for the new product.
In January, Marriott International joined Amex in moving away from fixed pricing
(BTN, Nov. 10, 2003). As a result, travel buyers have been scrambling to come up with accurate and efficient tools to determine whether their negotiated rates in a market are the best available on a given night.
Underlying buyers' benchmarking frustration has been the rise of third-party, merchant model Internet rates, which have brought a greater degree of transparency to hotel rates than ever before. The discounted rate, which also floats, frequently undercuts buyers' negotiated rate, though it may be available only at the property on that night.
"We absolutely see a need among our clients for more benchmarking tools," said Andrea Levine, vice president of marketing for American Express Corporate Services. "As pressure increases on travel managers to deliver the greatest savings for their companies, questions come up as to how well their hotel programs compare to what's available in the marketplace. Small, midsize and large-size clients tell us they want to have information about their sourcing programs, whether air, car or hotel, how well they stand compared to the industry, peers of their size and functional industry."
In the case of AAA rates, the benchmarked rate might be a leisure rate, but the comparative information still will be valuable. "It's important for companies to know in advance of their next negotiation or renegotiation with a supplier. It's information they want to have," Levine said.
"The pressure to get the best rate has gotten even greater because of the impact of the Web," agreed Yasuo Sonoda, travel manager at Macromedia in San Francisco. "What people don't realize is that the best rate, including merchant model rates, still is going to vary night by night and market by market, based on market conditions."
Discount Internet rates are not necessarily a substitute for negotiated rates. "You don't just need the lower rate to be available on one night, you need it to be bookable every night of the year," said Wendy Blaney, director of corporate travel and global procurement solutions for Cendant Corp., speaking at Corporate Travel World in March.
Buyers may have an upper hand in getting the best rate in their primary cities, if not their secondary destinations. "Even with a chainwide deal, you're going to have a better chance at getting the best rate where you have the most room nights and the most leverage," said Kari Knoll Kesler, sourcing specialist for travel, meetings and promotions at ING Americas in Minneapolis.
Consortia rates traditionally have been the measure with which buyers compared their negotiated rates. Buyers with small and midsize programs in particular would rely on consortia rates to decide whether it was worthwhile, depending on their volume, to have a negotiated rate in a market or use the consortia.
"For benchmarking purposes, buyers always used consortia rates," said Laura Thompson, hotel program consultant for Sabre Travel Networks. "If the proposed negotiated rate wasn't at least 10 percent lower than consortia, they wouldn't consider it a meaningful discount and would opt for the consortia. In the new consortia structure where rates float, it's a lot harder for buyers to benchmark effectively. Floating rates means benchmarking on the fly."
In the absence of fixed consortia rates, buyers are left with various floating rates. Amex's Rate Trax benchmarks against the GDSs' best available rate, but this measure may be questionable, depending on whether a hotel has chosen to load merchant content as well as published rates. "Some of the GDSs have merchant content mingled in with other rates in their system. Sabre, for example, includes merchant content," Thompson said.
GDSs, however, lack the ability to search for lowest hotel rates the way they search for lowest airfares. "You can find desired air segments and make sure there are no better rates available for those routes. With hotels, there are no GDSs that serve as a central reservation system in the same way. GDSs simply serve as a connection to the various CRSs," she said. "Because of this, the GDSs are unable to query and present best options to agents when they shop. That limits their use as a benchmarking tool."
"There's a lot of buzz about best available rate, but people have different definitions about what they're comparing their negotiated rate to and on what date," said Mario Sagastume, senior vice president of business development at Lanyon, which offers companies and hotels request for proposal support.
Still, buyers have the option of benchmarking against their own rates. "You can use hotel companies' CRSs to survey those chains' properties to find out the rates paid by your travelers," said Brian Langer, RFP Express vice president of sales and marketing.
Amex's Rate Trax is intended to address another chronic problem buyers face: ensuring that negotiated rates are loaded correctly. "Our research indicates that conservatively over 40 percent of rates are affected, that they're either not loaded at all or loaded inaccurately," Levine said. Rate Trax can audit rates across a company's whole hotel program or in select cities. The frequency of the audit also is determined by the client. Thompson and other hotel program consultants typically recommend that buyers conduct an audit soon after Jan.1, when rates for the new year take effect, and then follow up periodically, based on initial results.