Difficult Market Outweighs Advances: Negotiated 2006 Hotel Rates Loading Late Despite New Tech, Procedures

Despite technological advances and efforts by travel buyers and suppliers to facilitate the accurate and timely loading of negotiated corporate hotel rates into global distribution systems, travel buyers still are seeing some delays in loading 2006 rates due mainly to protracted contract negotiations.

Several business travel buyers, hoteliers and travel management company executives said that the rate-loading process is moving at a pace similar to years past, but point to new efforts and technologies that have increased the fluidity of the process and ironed out some key rate-loading issues.

Brian Nichols, National Business Travel Association hotel committee chair and hotel and ground transportation programs manager at Deloitte, said higher demand and higher rates have affected negotiations. "Some companies are still negotiating," slowing the process, he said. "They have taken a little longer because of demand. It's more involved this year."

As it stands, the rate-loading process is meeting expectations, according to Nichols. "General feedback is that both buyers and suppliers are following a more structured approach to the rate-loading process that's yielding improved results compared to past years," he said.

One month past the Jan. 1, 2006, rate-loading target, gauging the pace of the rate-loading process is crucial for both buyers and hoteliers. Maria Chevalier, vice president of hotel relations at WorldTravel BTI's Travel Procurement Solutions division, said she sensed that the process was similar to seasons past. "Overall, as far as the number of negotiated hotels, I didn't see a huge movement one way or the other, neither a significant increase or decrease in the number of negotiated hotels," she said.

Susan Beadle, director of corporate key accounts for InterContinental Hotel Group, said, "Between 75 percent and 80 percent of our clients have completed negotiations for 2006 and their rates have been loaded."

Travel and Transport, a travel management company based in Omaha, Neb., and a member of the global travel network Radius, works closely with hotels to guarantee that rates are loaded correctly and promptly. "We're in great shape," said Bill Tech, Travel and Transport's president and CEO. "Eighty percent of our hotel rates are negotiated by Radius and those were loaded in the fall and audited prior to Jan. 1. The remaining 20 percent we loaded ourselves are specific negotiated rates between our individual customers and specific hotel properties."

Chevalier said that most companies have now moved into the important phase of auditing rates to ensure veracity. "As it pertains to the audit itself, every year the hotels are getting a little better because they know they are being audited. Therefore, the first run results have improved slightly over last year," she said. Chevalier reported that her company is in the midst of their initial rate audit. "We've not seen anything first run over 70 percent accurate." WorldTravel BTI audits rates three times to avoid any inaccuracies, an approach, she said, that culminates with a 98 percent accuracy rate. Although some rates may not accurately be loaded as of yet, they are up on the GDSs, which allows companies to make travel arrangements in the new year.

Hoteliers voiced a similar sentiment to that of their counterparts: The rate-loading process is moving at a good pace. "It's been a traditionally normal year," said Kevin Kelly, executive director of sales for Hyatt Hotels & Resorts. "Everything has flowed very smoothly." Chevalier concurred: "The majority have remained within the traditional hotel procurement season and they pretty much have stayed on task."

RFP Express, a company that facilitates the request-for-proposals process, claimed that the process holistically has improved, but there are still portions that need attention.

"People are looking to technologies to solve problems," according to Brian Langer, vice president of client services at RFP Express. "Corporations are focusing more and more on rate loading. They want assurances that their rates will be loaded by a certain deadline and, if not, there will be penalties." These penalties, he argued, could be monetary or a loss of business for the hotel in question.

Choice Hotels International has streamlined rate loading by developing a tool that allows them to load rates in only three days. It took them three weeks on average last year. "Our negotiating rate-loading tool allows us to load rates for our 5,000 hotels more accurately and quickly," said Christine Chippindale, senior director of travel industry sales for Choice. "In addition, we've improved our correspondence." As a part of its new technology, Choice electronically notifies its clients once their rates are loaded.

Choice Hotels has taken on 25 new corporate clients this year, an 11 percent bump from a year ago. Still, 73 percent of its clients are either loaded or in the process. Interestingly, Chippindale said that the remaining 27 percent—59 clients—have still not made a decision on their hotel program. "We are waiting on confirmation," she said.

Nichols said buyers who began the process early and secured rates are at an obvious advantage: Their rates already have been loaded and either audited or in the auditing phase. Conversely, travel buyers who do not secure negotiated rates for their clients by the start of the calendar year are left to try and extend their 2005 negotiated rates or hoteliers often will preload initially offered rates, with the promise that the negotiated rate will be loaded once it is locked in. Even though the preloaded rate may very well be higher than in 2005, it is better than paying rack rate.

Nichols cited a lack of understanding on the buyers' side of their roles and responsibilities, along with the failure to finish the process in a timely manner, which often doesn't allow sufficient time for proper rate loading.

Hyatt's Kelly admits that the negotiating climate was a bit more difficult for 2006 as pricing structures altered due in part to the negotiating leverage currently wielded by hoteliers. "The negotiating season was a little more challenging," said Kelly. "In the past there might be one rebid, but there have been a few more this year."

The process of negotiating hotel rates can be contentious, but hoteliers and suppliers alike understand they are both trying to reach a common goal. IHG's Beadle said fostering amicable relationships with clients is an integral component to a successful program.

"Most of our clients have completed or are in the process of completing their hotel rate negotiations for 2006," she said. "For those who have not, we have conversations with our customers and with our hotels to agree upon the best course of action. If we all agree that preloading rates is the right thing to do, then we do so. Our goal is to be sure that travelers are not left without preferred rates to book this year."

One stumbling block in many negotiations is last-room availability. Traditionally, LRA is something buyers typically incorporate in their programs, however, in an attempt to deflect higher costs, many travel buyers removed it from their programs this year.

Kelly said that despite some obstacles, the process still has gone well because of the relationships that his hotel has forged with travel buyers. "Hyatt sensed that this year's negotiating process had a few more moving parts that needed to be sorted out," he said. "It's a partnership. If we start early, keep lines open and data flowing, then it's a smooth process."