Providing Shelter: State of California Leaned on Travel Management for $40 Million Covid-19 Lodging Program

The complexities associated with managing travel for the state of California are immense. Business partnership and travel manager Bill Amaral has navigated those complexities for seven years, implementing new payment and employee reimbursement processes across 270 state agencies and getting a travel booking channel mandate from the governor to drive compliance.

Cut to 2020: The state needed emergency lodging to house healthcare workers and the homeless during the Covid-19 crisis. Amaral took the reins.

The state of California doesn't have a managed hotel program, though establishing a formal program has been on Amaral's drawing board for several years. Instead, the state currently relies on courtesy rates extended by hotels to government travelers.

The Covid-19 crisis called for more control. "The purpose of the program was to keep healthcare workers safe and allow them to self-isolate from their families to make sure they weren't exposing anyone to infection," said Amaral. The program also needed to support healthcare worker mobility, allowing California to house medical staff traveling to Covid-19 hotspots from other counties or even other states. Providing shelter for the homeless individuals exposed to Covid-19 was also a priority to prevent spread among that vulnerable population.

To meet the need, Amaral knew California needed a formal program and fast. "I had gotten the assignment to look for 18,000 to 22,000 room nights in 21 counties. We didn't have the resources to source something like that. It had to be done immediately and the pandemic was expanding," said Amaral. He reached out to hotel solutions provider HRS for help. "I had not worked with them before but was familiar with HRS through the Global Business Travel Association, BTN and other industry events," he said.

Within days he had a proposal that he "pushed up the food chain" and the path was set. HRS would conduct a flash sourcing exercise, load rates and integrate content to California's TravelStore agency booking tool, integrate payment and deliver streamlined reporting.

What the team didn't know as they embarked, however, was that Covid-19 would not be so easily contained. What started as an order for 22,000 room nights in fewer than half of California's counties exploded to a need for 434,000 room nights across all 58 counties within weeks.

"We initially were looking at a smaller footprint," said HRS director of sourcing for the Americas Lexi Benakis. "We stood up the RFP and got everything into the tool. As we were going through the process, it expanded. We sourced about 2,000 properties in a week's time."

At first, the team was concerned. "The response rate wasn't as high as we had hoped in the first day or two," said Benakis. HRS got more creative with its outreach, going direct to hotels and to hotel management companies with the RFP. With layoffs and furloughs in the hospitality industry, much has been made during the Covid-19 crisis of the potential that hotels simply won't be able to respond to RFP requests. For this project, at least, that theory didn't prove out. HRS tracked an 85 percent response rate. "In the end, the 2,000 hotels were excited to have the business and they really worked with us through an intense process to make it happen," said Benakis.

And it wasn't the case that California accepted whatever bids came through. Location—often around hospitals and medical centers—was a critical component as was hotel health and safety protocol and a realistic minimum expectation for available amenities and services.

"[We looked at] cleaning routines and new protocols, contactless housekeeping, contactless food delivery. We looked at whether linen refresh could be contactless, elevator cleanliness; and how HVAC systems were configured. Were they shared throughout the entire hotel or controlled in each room? We went through a lot of containment questions. We also asked about virtual payment; or contactless check-in." Confirming the virtual payment capability was a critical element for California.

As the scope of the program expanded, sourcing exercises grew in turn, with HRS loading rates and incorporating new hotels on a rolling basis. "Within two weeks we had the first round of properties loaded and bookable," said Benakis. It helped that the hotel solutions company had asked willing hotels to give their best and final offers in the first bid. With cratering demand throughout the hotel industry, market dynamics clearly favored the buyer.

"The state told me to get the best deal," said Amaral, who fully leans into the responsibility of squeezing all the value from taxpayer dollars and who estimated the program would reach $40 million in hotel spend before it was done.    

On the other hand, the deal had to be fair. "Our goal wasn't to go out and say drop this to nothing," said Benakis. Benchmarked against the pre-Covid-19 market, hotel rates were down 40 percent for this sourcing exercise, giving California the ability to house that many more healthcare workers, aid the homeless and help prevent infection.

Responsibility Is a Two-Way Street

While HRS took the lead on the sourcing exercise, Amaral worked on the program parameters and implementing with TravelStore, the state of California's agency of record. Anyone reaching out for housing had to qualify to participate. That meant pulling agents back from leave and training them quickly, since self-booking was not a part of the program.

"We reallocated staff to vet the guests, based on how they answered the questions from the agent script," said Amaral. For example, they had to be working in a location where there were Covid-positive patients. Once they were booked, Amaral made sure all guests were educated about their end of the bargain: All participants had to follow the rules to prevent infection as well.

"We took some of [the hotel safety protocol] and converted it into a guidance document for the guests," he said. "We outlined what type of contact the guests could have with the hotel staff; no additional guests were allowed; and down to that level of detail. We have a responsibility to do everything we can to keep all parties safe, including the staff of our hotel partners, so all these elements were important."

As for auditing the hotel, Amaral is relying on the guests for feedback. "We are sending them surveys throughout their stay—upon check-in, at the midpoint, and on check-out—to ensure the hotel is doing its part," said Amaral. 

With all the new—and previously unvetted—program participants, auditing payment and spend information was also critical to reduce risk for the state of California.

"We audit every single folio," said Amaral.

To that end, the virtual card program that Amaral set up two years ago served the state well, allowing detailed spend management and expediting reconciliation processes.  

"One of the benefits of the HRS program was that the state of California was able to leverage the existing Citibank virtual card program that was already established. The state of California then worked with HRS to coordinate payment integration," said Amaral.

HRS provides a daily booking report that the state of California matches to its monthly Citi statement. The program uses five virtual card number accounts to rotate based on available credit. HRS provides each hotel with the payment instructions at the time of reservation. After check-out, HRS chases the folios. The state audits each folio for accuracy and to ensure only room and tax are charged. It is then matched to the charge on the Citi statement. VCN account data is provided to Citi so the reconciliation process is seamless. Finally, the state uses the data to create a “claim schedule” through the state’s financial system to generate payment.

This is the reason every participating hotel was required to accept virtual payment. "It wouldn't work any other way," said Amaral. "We couldn't expect people to put these charges on their personal cards and wait for reimbursement," especially since healthcare workers could be staying for extended time periods. Amaral was quick to note that all incidentals were put on personal cards.

Managing State Finances

The Covid-19 pandemic has revealed many financial weaknesses as it has torn across the U.S. in the last four months, including the fragility of state budgets to deal with emergencies of this magnitude. Shepherding taxpayer funds, reducing risk exposure and protecting state finances has always been a priority for Amaral. This emergency lodging program was not an exception.

The Federal Emergency Management Agency was committed to reimbursing 75 percent of the $40 million program. But the state needed to present detailed data on every stay, with taxes broken out, to qualify for reimbursement.

"The federal requirements are strict," said Amaral. "We have to match to the booked data, and it goes to comptroller to get paid. Then we send reporting to FEMA to get [reimbursed]."

HRS said it was in talks with several states to power similar programs, but a spokesperson for the company said California proved a great partner because of Amaral's foundational work with virtual cards and his comprehensive understanding of payment and reporting.

For Benakis, the process was eye-opening for a different reason and shows what is possible when industry partners can break down barriers and really come together: "We did what would traditionally be a 16-week sourcing project in two weeks, with rates loaded and available," she said, adding that the experience changed her expectations going forward. "We don't need to get so bogged down in 'we've always done it this way.'"

For Amaral, establishing a hotel program and shining a spotlight on what a formal program can achieve has laid a path to creating a bona fide hotel program for the entire state of California.

"We have the attention of upper management now. California has $100 million in transient lodging [annually]. We need to manage it well and we need the technology to support it," said Amaral. "Setting up this program in a crisis, brought everything into alignment. Everyone now sees what the end result could be. There are always pains to kick off something this large, but I know myself and my management. They couldn't be happier."