GUEST BLOG: Does the hotel sourcing process ever end?
It would be great to think that, having been through the
process to RFP hotels, evaluate the bids, renegotiate on all the key elements
of value to your organisation, and communicate the final decisions to all
concerned, that the work was done and we could move on to something else.But the fact still remains that we
have really only just begun. There is still a widespread belief that savings
are generated once lower rates are renegotiated with hotel suppliers and rates are available to be booked
at the negotiated rate once negotiations are finalised but the reality is all
too often quite different.
only create theplatformfor savings to accrue to the
business. Actual savingsonly occur when room nights are booked
at the lower, negotiated rate. Contracting
a rate does not automatically ensure the correct rate is loaded or available to
be booked by travellers
As hotels are responsible for
loading the accepted negotiated hotel rates at property level, and agencies are
responsible for loading the GDS access security link tables, no one person or
group has control over the entire process.
errors are costing corporations an estimated EUR5bn each year in additional
expense. A client with
EUR30m in spend can spend an additional EUR1.5m per year due to Rate Integrity
issues. Corporate buyers
are aware of the need to conduct rate audits, but the vast majority conducts
just one rate audit per year. Even
those that audit more than once do not then continuously monitor rates
throughout the year.
contracted with LRA (Last Room Availability) can be completely and correctly
loaded, but may still not be available to be booked.
NLRA (Non Last
Room Availability) rates give no guarantees that the rate will be honoured and
allow the hotel to increase the rate at will. Millions of EUR are
invested in annual rate negotiation processes, yet billions of EUR in value do
not materialise. So what’s the solution?
There are a numberof compliance measurement and support
tools to ensure that the hard work put into rate contracting is turned into
concrete savings for the organisation.
An initial audit of the GDS is imperative to ensure that all
negotiated pricing has been completely and correctly loaded by all hotels in
every applicable CRS. The
problem is that a rate loaded correctly today may not be visible to the bookers
by the time they need to book. From
time to time individual properties may decide to withdraw negotiated inventory
or submit higher than agreed negotiated pricing without your knowledge. You therefore need to follow up with
additional Rate Availability Reporting that will keep checking that your
preferred properties are offering the negotiated terms at the point of
sale. That will keep a
check on what is being displayed in the GDS – but you also need to keep an eye
on non-GDS inventory! You
can also get reports that compare the negotiated rates at your preferred
properties against the public that is being offered directly through online
travel agency (OTA) and/or hotel supplier websites. Your travellers may well be checking
these alternative sites themselves and if lower rates appear to be available,
this threatens to undermine the integrity of the whole rate sourcing process.
And if you still
aren’t sure there’s any quantifiable RoI in on-going reporting, take a moment
to review the findings of the following analysis. The table below (Table 1) shows the
potential cost exposure, for a current Lanyon client, in the event that
contracted rates are not honoured. Based
on analysis of a single Rate Availability Report, the potential cost exposure
across the full year is significant and shows how essential it is to maintain
on-going compliance management.
itself, won’t generate the savings – strategic programme management will. This is why, if the final stage of the
procurement process – implementation – does not happen, the sourcing process
remains just that – a process without a purpose.
This blog was written by Jean Squires at Lanyon, who are exhibiting in the Business Travel Tech Zone at the Business Travel Show on 4-5 February 2014. For more information please contact Jean directly at Jean.firstname.lastname@example.org. To register to attend the Business Travel Show please visit www.businesstravelshow.com.