Monday, 13 January 2014

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.


Preferred rates only create the platform for savings to accrue to the business.  Actual savings only 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.

Rate loading 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.

Preferred Rates 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 number of 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.


Sourcing, of 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.squires@lanyon.com. To register to attend the Business Travel Show please visit www.businesstravelshow.com. 


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