Buyer frustration over the availability of lower-than-negotiated hotel rates on various Internet sites has escalated during the past two months as buyers get ready for the bid season that will determine 2003 rates.
Fueling buyers' indignation is the fact that 2003 has every indication of truly being a buyer's market, the first since 1996. Given the present economy and other market conditions, buyers should have the opportunity to negotiate significantly favorable rates with one proviso—that there's some assurance they can deliver on their volume projections. Consequently, room nights booked on an external Web site, regardless of how low the rate, have become a deterrent since buyers don't typically get credit for those stays
(BTN, April 22)."Going into negotiations for 2003, we're looking for the negotiated rates from our preferred hotels on any given night to be no higher than the rates available on the Web sites for those nights," said Kevin Maguire, travel manager for Tokyo Electron America in Austin, Texas. "Right now, we're facing a situation where travelers are going on the Web and finding rates as much as $40 a night lower than the negotiated rate for the same room at the preferred hotels. It undermines the credibility of the travel program. Finding lower rates on the Web has become a kind of game. Travelers understand the discrepancy, but just don't perceive travel policy to be their problem."
Internet sites include such independently run consolidator sites as hotels.com (formerly Hotel Reservations Network), Expedia, Travelocity and the lodging industry's own Hotel Distribution System, as well as hotel companies' individual branded sites, such as starwood.com and sixcontinents.com.
Considering that they do not get credit for Internet bookings, buyers plan to use that as a defensive tactic in negotiations. "When hotels want to use their reservations data as leverage in negotiations, we'll respond by insisting that the hundreds of room nights booked at these properties on the Web be included and, therefore, count toward negotiating the rate," said Wendy Nathan, manager of travel services at Johnson & Johnson in New Brunswick, N.J., at a recent industry meeting.
In the absence of hard data, buyers have devised their own reporting tools to document this usage. "I've prepared a spreadsheet of Web rates that our preferred hotels have used, so I can present it in the upcoming negotiations," said Yasuo Sonoda, travel manager at Macromedia, a San Francisco-based software developer. "Granted, it's going to be hard to identify exactly the number of Web bookings our travelers have made, but I'm going to come up with as much evidence as I can in order to get some credit for these stays."
Maguire acknowledged that tracking usage was an issue. This spring, Tokyo Electron went to a nonreimbursement mandate in its program for hotel as well as air. "Travelers are required to stay in the preferred hotels, but the rate booked wasn't addressed in the policy change," he said. "The issue with Web sites generally is that travelers aren't asked and so don't identify themselves as Tokyo Electron travelers. Therefore, it's difficult for us to get credit for the stay. Consequently, we're considering requiring travelers to identify themselves this way as a condition for being reimbursed. This should make it easier to track these stays." In addition, the hotel company- branded Web sites are more likely to help identify these stays, if the buyer already has a preferred vendor relationship with that company.
As buyers have leaned more on their travelers to book only with the preferred hotels at the negotiated rate and simultaneously leaned more on hotel companies to get credit for these stays, they've gotten into some tense discussions on both sides. "Even though the travel policy is clear, travelers typically don't understand the nature of our negotiated rate agreements with the hotels," said Bill Davidson, manager of corporate travel and meeting services for International Sematech in Austin, Texas. "They're aware of rate, but that's it. They don't understand there are things like thresholds built in that we have to adhere to."
When Davidson has conversations with travelers, they tend to get the point quickly enough. "And when the spread between negotiated and Web rates is nominal, it's a quick discussion. But when the difference is significant, it can be hard for, say, a budget manager to buy-in when we can be talking about hundreds of dollars in savings for a business team on a single trip," he said.
Booking Web rates also has taken on a new security dimension post-Sept. 11. "When travelers book through an unauthorized channel, not only don't we get credit for the stay, but we have no way of tracing where the traveler is staying in case of an emergency," said Rick Wakida, global travel manager at OpenWave in Redwood City, Calif. "So the need for compliance dovetails with the need to know where our people are."
Buyers expressed concern at the amount of time travelers are spending on the Web sites, searching for bargain rates. "Sure, it's a time issue," Sonoda said. "One or two travelers is relatively minor, but as it becomes more widespread, the company has to ask if this is how it wants people spending time."
Travelers either not booking a preferred hotel—or no hotel at all—through the agency or online booking tool typically get an exception report generated by the system. "This, in itself, can help improve compliance," Davidson said. "But in terms of time, it's an extra burden the traveler has to go through."
Often, travelers have tried to come up with lower rates at non-preferred hotels, so they can justify booking them. "It might be because they're in the frequent guest program at the other hotel and want their points," Wakida said. "Or it could just be that they have a preference for the other hotel."
Ironically, Sonoda said so far it was not frequent travelers who were most likely to seek out Web rates, but those who travel occasionally. "They're the ones who have the time to search for what they consider to be deals."
What travelers haven't always appreciated is that buyers have spent time researching the hotels in the program and have chosen to include them for reasons that go beyond simple considerations of rate. "A company's purchasing department buys computers, for example, after doing careful comparative analysis so that its employees don't have to do the research," Wakida said. "The hotel program is no different."
As buyers gear up for the 2003 bid season, they intend to take full advantage of this year's market opportunity. "If it's really a buyer's market, you want to make sure your compliance is there, so you can use that as leverage to get the best deals," Davidson said.
Hotel industry consultants agreed that the pressure on compliance has risen. "Compliance has definitely gone up the food chain this year," said Peter Kressaty, vice president of business development for the Carino Collection, a New York-based hotel representation firm.
The development may signal new buyer scrutiny on hotel programs overall. "Most of our companies have tapped out on air savings and compliance on air programs is good. But we have these huge amounts of spend on hotels," said Johnson & Johnson's Nathan, speaking at the National Business Travel Association's annual convention this month. "The hotels are frustrated because they want to get the volume of business and we get frustrated because we just can't seem to rein in that compliance."