The 2023 hotel request-for-proposals season was fraught with challenges. For many suppliers, it started too late and resulted in rushed response times. Travel buyers often felt the pinch of hoteliers' selective business choices and cited exercises in frustration from properties that engaged with an initial rate but made negotiations so difficult that partnerships were contentious from the get-go.
Through the arduous journey, both sides learned some lessons, but panelists at Tripbam’s BamCon conference in Dallas last month exchanged some pointed remarks, and it was clear from the tenor of conference conversations that frustrations remain as economic uncertainties loom and leisure travel demand—and margins—still outpace business travel.
Negotiation Strategies
Both suppliers and buyers had grievances around negotiation choices. For suppliers, the late start added pressure to turn RFP responses around. And whether a negotiation tactic or not, there was some willingness among hoteliers to wait in the hopes that buyers could achieve more clarity around anticipated travel.
“I think a lot of folks were wondering if [they] go later, more of a strategy sort of appears on their side … because if you have a promise of volume, it makes life a little easier through the [RFP] process,” Marriott International global account executive Dave Alston said. According to hotel executives at the conference, however, that clarity didn’t materialize for a lot of buyers, which added a lack of data to tight RFP lead times, compounding the challenge to craft strategic replies.
From some buyers’ perspective, leading an RFP response with an intense rate hike didn’t strike a note of partnership. “Raising the rate shouldn't be the tactic. The tactic should be the conversation,” an audience member added. Panelists agreed that in a perfect world this would be standard practice, but the demand for such conversations will have to be more targeted and backed by strong volume data, suggested Tripbam EVP of hotel solutions David Mollov.
The challenge facing global sales executives, he said, “is to help provide these solutions, and what's really difficult about the RFP process [is that] it’s really hard to have strategic conversations when you're going through 1,000 hotels.”
Hot Leisure Fuels Static Rate Strategy
One backhanded benefit of the pandemic for the supply side was that more buyers were willing to accept dynamic rates in an environment where rates generally were on the downturn. As rates heated up coming out of the pandemic—largely in response to leisure travel demand—that shift to dynamic looked less advantageous to buyers. Yet, clawing back a static rate status quo for the corporate market has been more difficult as hotels “are being a little bit more selective” about which pieces of business should earn that rate, according to Hyatt Hotels Corp. global sales director Susan Bingham. To which a buyer in the audience responded, “It would be nice, in that situation, just [to] say that … as opposed to making us go through this incredibly ridiculous negotiation period.”
Buyers also commented on a potential disconnect between global sales organizations and local market realities, often directed by hotel management companies—with the former setting overall strategies to attract the corporate market, but the latter looking at the situation differently on the ground.
“There's a lot of friction, especially for those of us who share our business markets with leisure cities,” said the buyer. “I don't think the ownership groups this year are going to find a lot of value in working with managed travel when they can charge leisure rates and get tons of money from leisure. So how do you anticipate that conversation going? ‘We'll communicate with them and tell them how it's going to go’ is usually not how that works.”
Hotels for years have pushed dynamic rates, and executives have defended the reticence of some franchisees and the global sales team to reengage fully in a static rate environment. First and foremost, they have said, many corporates still don’t have the proven volumes to earn that rate. Plus, an uncertain economic outlook doesn’t help.
“What we were hearing from the [franchise] hotels and just seeing throughout the process was, if they were offering this dynamic [rate], it was because of anticipated travel,” Bingham said, referring to that lack of clarity from buyers during the RFP process. According to Bingham, even when buyers can’t guarantee volume, prospective hotel partners “still want to offer you something, so here's what we can offer you.”
Hybrid and Flexible Pricing Solutions
Looking ahead, several hotel executives said they foresee the RFP process evolving with more customers fashioning “hybrid” programs that utilize various pricing solutions—dynamic, rate cap and static—based on the region, market, economic situation and travel purpose, if possible.
“You can apply the 80-20 rule very easily—all those RFPs are not necessary,” panelist and Accor executive director of business travel Michael Laumanns said. In some instances, he said, “clients have decided to let us run the process on their behalf because they determined that the RFP management plays a lesser role in their value proposition.”
Not many buyers would likely go that direction, but easing the RFP process overall has been among Tripbam’s central value propositions as a platform that enables auditing for dynamic rates and performance metrics that can show delivery of contract terms. The supply side, which once kept providers like Tripbam at arm’s length, have warmed to the platform for its potential to shift the RFP process to a more evergreen renewal process that requires fewer resources and back-and-forth negotiations. Some buyers have also seen value in real-market rate visibility.
Hotel executives remain hopeful for “an open-style RFP with an evergreen sort of solution,” according to Alston, so partners are not “dreading the launch of the traditional fixed price transient RFP.” Toward that end, hotel executives “worked really hard with our partners over the pandemic to create dynamic pricing models that made sense,” even when “rates were all over the place,” Bingham said.
The panelists agreed that in times of economic uncertainty or not, a well-planned program benefits all parties—but in order to achieve this, no matter the market, there needs to be flexibility.
“That's where it really comes back to us being committed to that partnership that we have with our customers, to come up with hybrid pricing approaches and to have that flexibility," said Choice Hotels director of travel partnerships AngeLis Davidson. "Flexibility, collaboration and regular communication is key.”