Op-Ed: Mandating Hotel Usage Is The Next Move

Hotel costs typically comprise the second largest portion of T&E expense. The best way to lower average hotel rates is to increase the number of room nights at a limited number of hotels. However, corporations for years have struggled with the inability to move travelers to the company's preferred hotel list. Given plummeting stock prices, mass layoffs, overall travel cutbacks and declining hotel occupancies, perhaps companies should consider mandating the usage of preferred hotels.

Creating an effective hotel program of any size requires time, effort, energy and tenacity. Fortunately, the tools and services needed to support the hotel solicitation process are sophisticated and numerous. The National Business Travel Association's hotel committee members have invested great effort to develop and garner acceptance for its newly released modular RFP format. Some companies retain a full-time employee dedicated exclusively to hotel program strategy. Companies electing instead to outsource their program management can choose among many industry experts and specialized consulting groups offering a broad range of tailored solutions. Whatever the methodology selected, the potential savings warrant the investment—provided, of course, that travelers use the program properties whenever possible.

Why, then, are most travel policies lax when it comes to directing use of designated hotels? Mandated usage of designated payment system, travel agency, car rental company, airline and online booking tool is quite common. Yet, the Executive Summary of the American Express Survey of Business Travel Management 2000-2001 reported "the low incidence of hotel requirements in travel policies among respondents." Why is there such reluctance to mandate usage of specific hotels? Let's revisit the standard excuses:

• Your travelers are partners or principals, brokers or traders, VIPs, sales wizards, rainmakers—all accustomed to "freedom of choice." In fact, they may regard the perquisites associated with hotel programs as part of their compensation. If conventional wisdom about the slowing economy and accompanying cost reduction pressures are not sufficient incentives for increased compliance, design a tiered program that includes at least one of the most desirable deluxe or luxury properties in any location where you are imposing mandated usage. Facilitate enrollment to the frequent stay programs of the hotel brands in your program.

• Travelers can't be held to a mandate during sold-out periods. Consider negotiating for a guaranteed block of rooms based on estimated usage for peak or sold-out dates. The mention of a mandated program is such a refreshing concept to most hoteliers that they are readily amenable to discussing blocked rooms during anticipated heavy periods in exchange for guaranteed consistent volume. There are other quantifiable benefits to guaranteed availability or blocked space at your preferred hotels. Think of the productivity gains in not having the counselors, travelers or travel arrangers call every hotel in the city. You essentially are eliminating "scalper" rates or having to book the presidential suite at rack rate. Finally, and perhaps most importantly, you are facilitating the unimpeded conduct of business by ensuring the availability of accommodations when and where your travelers need them.

• Travelers need different hotels than those selected by the corporation. A typical large, multinational corporation easily may use thousands of hotels in a calendar year. Often, travelers select nonpreferred hotels because they are closer to the customer or the business meeting/event than the preferred hotels.

This last point highlights the biggest challenge in embarking on a mandated hotel program: Location usually dictates hotel selection. Travelers can have a myriad of reasons for visiting a particular destination and may, as a matter of practicality, require different properties on different visits. This circumstance underscores the impossibility of mandates in every location. It does not, however, preclude the opportunity to mandate usage of preferred hotels in destinations where you can ensure that the locations of the preferred properties always are appropriate. Your travelers' needs always include hotels in convenient proximity to plants, offices, headquarters and major customers or suppliers. A mandate also can work well in major cities with condensed downtown business districts, such as in Boston, Chicago and San Francisco.

For 2001, my company introduced a mandated hotel policy in our headquarters city. Travelers are permitted their choice of three properties where we hold blocked rooms to ensure availability during sold-out dates. Our agency supports the initiative wholeheartedly; the counselors relish the ease of booking. Travelers who bypass the agency and book hotels through other means are monitored through customized reports from our card provider. The policy, our global hotel program directory and blocked space request forms all are posted on the corporate intranet and accessible to employees worldwide. Even our travelers originating outside of the United States are compliant. Perhaps they appreciate the convenience of having suitable hotels pre-identified and always available on their frequent trips to our world headquarters. The program has been so successful that we plan to expand the policy mandate and limited hotel strategy to selected other cities, beginning in 2002 with Boston and San Francisco.

During my relatively brief tenure as a travel manager, I am a veteran of two hotel RFP seasons and preparing for a third. The first was somewhat like the "sound and the fury:" enormous work, small returns. Despite best efforts to leverage our significant volume, travelers diluted the impact by using too many hotels at our top destination. The second season was notable because we introduced to our hotel partners our commitment to mandate usage at a very limited number of designated properties. We were met with skepticism, albeit we naively attributed the response to our particular previous performance rather than our hotel partners' disappointing experiences with like commitments in general.

This year, we are looking forward to the hotel negotiating process. We now bring to these negotiations our demonstrable success in exceeding committed volumes. Given the softening of the economy, we are well positioned to capitalize on the emerging buyer's market.

Every travel manager should consider a fresh perspective and more directed approach for the upcoming hotel RFP season. Permit me two caveats: Expect to be greeted with skepticism based on others' inability to deliver, and don't promise hoteliers the benefits of a mandated policy unless you are resolved to follow through. Successful precedents are too few, and those of us who have embarked on this path can ill-afford to have our credibility undermined by others' undelivered commitments.

Harriet Washburn is vice president of travel for Chicago-based Aon Service Corp., a Corporate Travel 100 company.