Online-originating agencies are promoting discount merchant model hotel rates to corporate travel buyers as an alternative to traditional consortia rates—their latest attempt to reshape hotel pricing to capture a greater share of the managed travel market. Similar to moves made by Marriott International and American Express—effective as of January—the online agencies' approach eschews fixed consortia rates in favor of dynamic pricing.
"Like traditional consortia rates, these rates are ideal for cities where I only have five or 10 room nights a month," said Akamai Technologies manager of travel and meeting services Terry Sullo. Akamai has used Expedia Corporate Travel discounted rates "almost exclusively" this year and, based on first-quarter data, is saving money, she said.
Travelocity Business this month began offering special rates for Best Western International hotels, designed for buyers seeking the equivalent of consortia rates in a range of destinations. "The site is not only used by major accounts but by unmanaged and lightly managed travel programs, which don't have negotiated rates," said Hubert Tupay, Best Western director of corporate and travel agent marketing. "We're trying to facilitate these companies booking our hotels by giving them a discounted rate through this channel."
As part of the new TBiz agreement, accounts with significant volume in a market will be able to book negotiated rates on the site. "A corporate account might have a negotiated rate with 10 of our hotels. We will load those rates into Travelocity Business' password-protected site, so the account's travelers can access them," Tupay said. In other cities where the account's travelers go, but where they have no negotiated rate with Best Western, the rate that pops up on the site still would be a discount rate, comparable to a consortia rate. As an added sweetener, the special rates do not carry any of the cancellation restrictions that have characterized many merchant model programs
(BTN, March 15). "If you're the CFO of a small company and have a lightly managed travel program or no managed travel program at all, you now can know how much money you're spending and what hotels your travelers are using. Plus, the rates are discounted," Tupay said.
Paving the way for this new approach to consortia pricing, Marriott has abolished fixed consortia rates, opting instead for a more fluid approach in which rates could change daily, based on local market conditions
(BTN, Nov. 10, 2003). American Express also has adopted dynamic pricing, claiming that the high degree of volatility in the market necessitated such a step
(BTN, Dec. 8, 2003).Buyers typically use consortia rates when they do not have sufficient room night volume in a market to warrant a negotiated rate, with small or midsize hotel programs relying on them most heavily, considering their limited leverage.
In cities where they can negotiate a lot of volume, buyers are likely to continue to negotiate their own rates, according to Harriet Washburn, director of national sales and account management for Orbitz for Business. "In those cities that are secondary and tertiary and they have less volume, buyers increasingly are relying on merchant rates the way they would consortia rates. Otherwise, travelers are likely to go outside the travel program to a public site to find equivalent rates. That undermines the credibility of the managed program and keeps people from buying through the designated buying source."
Most buyers will have at least some cities where they have the volume to negotiate a preferred rate. In the remainder, they can rely on other rates, which are discounted, if not as heavily as negotiated rates. "Whether it's merchant or consortia or preferred rates, the booking is important. We're building a supplier marketplace, allowing customers from small, mid and large [companies] to take advantage of different supplier discounts," said Matt Hulett, president of Expedia Corporate Travel.
As a result of using ECT's discount program, Cambridge, Mass.-based Akamai no longer specifies which hotel travelers must book in a certain city—as it had with traditional consortia rates—only that the hotel must be bookable through ECT's discount program. Travelers perceive it as a benefit. "Rather than require you to use a hotel in an area we decided is convenient, you can use any hotel listed that's convenient for your business trip," Sullo said. "This way, we're not trying to peg where everyone is going. Instead, they can select the most appropriate hotel for their trip. Even in cities where we have 75 or 100 nights a month, which is decent volume for a midsize account, the online discount rates make sense."
In addition to direct savings, there are administrative savings, since Sullo does not have to monitor marketshare to preferred hotels as she did previously.
Orbitz for Business is trying to cover all the bases. In addition to its Orbitz Saver merchant rates, the site offers three other sets of rates: hotel companies' Internet rates, client-negotiated rates and its own more traditional consortia rates that include inventory from Hyatt Hotels and Utell Hotels among others. "In most instances, the merchant rates are going to be a less expensive option than our consortia rates," Washburn said. "Nobody wants to spend more money than they need to. However, these rates usually come with restrictions, though those restrictions are easing."
The online agencies' overall pricing strategy is to appeal to every program, regardless of size. "We've negotiated a number of distinct discounts that are really attractive to even large Fortune 500 clients and for buyers who don't have volume in certain markets," said Ellen Keszler, president of Travelocity Business. "We can complement their programs with the discounts we bring."