Rate Loading: Raising A Ruckus W/ Hoteliers

Buyers are using their leverage in the upcoming room rate negotiations to pressure hotels into ensuring approved rates will be loaded accurately and clearly into the global distribution systems. One buyer even is stipulating that, as a condition for securing his business, hotel revenue managers sign guarantees that rates are loaded as promised.

Buyers' new aggressive stance is driven by the need to realize the savings they feel they've worked hard to negotiate, but also is the result of the upper hand buyers know they command this bid season, widely considered the first buyer's market since 1996.

"If they're going to hold our feet to the fire over any issue this year, it's going to be rate loading, because there's no point nailing down a great rate if their travelers can't book it," said one hotel national sales manager.

"Hotels have a responsibility to get rates loaded, make them available and do it on a timely basis, but they also have a responsibility not to squat on the GDS with rates that the buyer hasn't approved," said Wendy Nathan, travel manager for Johnson & Johnson and outgoing chairman of the National Business Travel Association's hotel committee.

Greg Herrera, corporate travel manager at Raytheon Co. in Long Beach, Calif., is ready to hold hotel revenue managers accountable. "In our negotiations this year, we're having the revenue manager sign off on the agreement. This way, the revenue manager understands and stands by what the terms of the agreement are."

An alternate problem has been hotels loading so many rates for various room types that the negotiated rate, while loaded, gets buried. "This is much more of an issue now that online booking tools have become so prevalent," said Althea Heagy, manager of the hotel program at Computer Sciences Corp. in El Segundo, Calif. "We're unhappy about it and are using the negotiations to make that known. Travelers don't have the patience to look for our negotiated rate, nor should they. They see a non-smoking king rate at a hotel they know is a preferred property and they grab it. The problem is that the rate is $149. We have a rate at that hotel and it's $119."

The only alternative for buyers is "to keep nudging the hotels to load the rates and, at the same time, not clutter the system with extraneous rates," said Yasuo Sonoda, travel manager at Macromedia in San Francisco. "Either you or your agency has to keep babysitting them until the job gets done right. It's unfortunate, but it depends on how much of a pest you're prepared to be, and the bid season is when you're most likely to have their attention."

Herrera said his frustration was in direct proportion to the amount of time he invests in managing requests for proposals. "We go through the long dance every year. We sign the agreement, and then the rates that I've agreed to aren't the rates in the GDS and I've spent the whole year chasing it," he said. Raytheon's program uses 750 hotels worldwide.

Heagy agreed that the confusion over rate loading had the potential to undercut her program's effectiveness. "We complain to the hotels, and all of a sudden they're realizing we go through this laborious five-month process. But I don't have a comfort level going forward because of the rate loading confusion," she said. "It makes you realize you've gone through this whole thing for nothing." Computer Sciences' travel program includes 1,000 hotels.

Similar to Heagy, Herrera has found other rates listed by his preferred hotels, but his own rates are not just buried, they're missing. "Every other rate will be loaded," he said, speaking at last month's NBTA convention in Salt Lake City. He may have negotiated a standard room rate, but will find more expensive deluxe room or concierge level rates in the system, as well as the general corporate and consortia rates that also are more expensive.

Herrera said certain chains do a better job than others. "We have a lot of meetings with our suppliers, not to beat them up but to help educate them about some of the best practices that are out there," he said.

"Right now, it's getting the hotels to realize what their clients are asking for," Heagy said. Computer Sciences this month held its bidder conference, attended by its national hotel chain representatives. One of the key presentations at the session was devoted to rate loading expectations.

"You'd think it would be in hotels' best interest to get the rates into the GDS, so whether it's online or through the agency, travelers can book the property," said Cyndi Perper, global commodity manager for travel at Invensys in Berkeley Heights, N.J.

Too often, however, hotels don't see complying as being to their advantage, especially if travelers don't understand that multiple rates at a hotel aren't necessarily all negotiated rates. "It may not be in their best interest to load the negotiated rate or to bury the rate, if other rates in the system are higher," Macromedia's Sonoda said.

Hotel companies also load rates differently. Some do it centrally, while others load at the property level. A lot of chains also pre-load. "This year, I've convinced all my preferred hotels not to pre-load, because these rates somehow mysteriously can stay in the system," Heagy said. "I call it 'accidentally on purpose.' "

The present system, where rates typically don't get loaded until the end of the year, is a recipe for disaster, according to Andrew Menkes, CEO of Partnership Travel Consulting in Princeton, N.J. "There just isn't sufficient time at that point for rates to be entered into the system successfully. The only remedy that makes sense is to start the process earlier."

Despite efforts at Cisco Systems to move the process up, it has remained an end-of-the-year rush. "We tried to get the hotels to negotiate, and load the new rates, in keeping with Cisco's fiscal year, but we couldn't make that happen," said Mike DiFilippo, the company's former global travel manager in Huntington Beach, Calif. "They were too locked into a calendar year model. Because typically it's not until close to the end of the year that hotel owners are prepared to sign off on the new rates, loading the rates just has to wait."