By order of size, airfare, hotels/lodging and meals comprise the three biggest business travel expenses. Today’s article focuses on ways to reduce hotel/lodging costs.
Hotels are willing to negotiate lower rates with business travelers – they just need to realize a reciprocal benefit for doing so. This article outlines what you need to enter into successful negotiations with hotel/lodging suppliers, get your business travelers on board and continue monitoring the program for long-term success.
Information
It all starts here. In a best case you are using a travel program sophisticated enough to retrieve historical information. If you are working with a Travel Management Company (TMC), they should be able to assist you in pulling the information you need. As a last resort, you can reach out to hotel/lodging suppliers for historical information. Even if they do supply you with usable historical information, you will have to consolidate different supplier information manually. There may also be inconsistencies across formats making consolidation difficult. If you are not using a Travel & Expense Management system and you are not working with a TMC, your best approach may be to rectify one (or both) of those situations first. Hotels do not offer reduced rates based on rhetoric or anecdotal evidence.
Let us continue assuming you have access to the required information. Pull three to five years of data. Consolidate data based on suppliers, locations, stay durations, time of year or any way you see having value. Pulling three to five years of data affords you the opportunity to spot trends.
Suppliers. This tells you the total spend with specific suppliers. Your hotel/lodging spend may be fragmented across multiple locations. This demonstrates how much you spend across the entire supplier network affording you the opportunity to negotiate a more favorable rate for ALL locations.
Locations. Suppose you find that 80% of all spend happens in just three cities. Those three cities share a hotel chain with a large presence in each. Does that sound like an opportunity to negotiate a lower rate with that particular hotel chain? If your travel is scattered across multiple cities, identify the hotel chain with the most consistent presence across each and negotiate for better rates with them.
Stay durations. Longer stay durations equal lower costs for hotels. If travel patterns require hotel stays of at least five days there is an opportunity to convert that into lower rates. Hotel stays that carry over weekends present another exceptional opportunity to negotiate lower rates. Hotels have a captive audience with business travelers during the week and charge accordingly. To the contrary, many hotels struggle to fill vacancies on weekends. The fact that you have employees staying over weekends gives you a negotiating advantage.
Time of year. Seasonal, tourist dependent locations have no problem filling vacancies during the summer, holiday or event that makes them a desirable destination. What about the rest of the year? How about the situation where you perform maintenance work for one of these locations during the off-season? Do you think local hotels would be clamoring to put up two or three of your technicians for a few months?
You have poured through 3-5 years of data. You have analyzed the data internally and/or with the help of consultants. You devised a plan for negotiating with hotel/lodging providers. Either directly or with the help of a consultant, you negotiated lower rates. What comes next?
Travel & Expense Policy
You just put a ton of work into securing lower hotel rates. How do you ensure that your business travelers patronize suppliers with favorable rates? A great step towards achieving that goal is writing that requirement into your Travel and Expense policies. If you are working with a TMC, automating the process is much easier. They can program the requirements you specify into the booking process. If an employee attempts to book outside policy, those transactions are marked as exceptions. Will there be exceptions? Absolutely! Exception codes placed on transactions will tell you a lot. You want to make this process as easy as possible for your travelers. You want them out selling and servicing clients – not explaining why they booked the hotel they did and filling out paperwork.
Tracking, Reporting and Analyzing
You negotiated lower rates. You wrote the requirements into your policies. Now what? You need a system that tracks your performance, provides timely reporting and provides the right details for proper analysis. You need to develop Key Performance Indicators (KPI’s) that measure compliance, effectiveness and cost savings. How much hotel/lodging spend is outside policy? How much have you realized in savings? How many exceptions are there? Analyze exceptions to determine root causes. Maybe the supplier you negotiated with does not have sufficient vacancies to ensure availability. Maybe the exceptions are only happening in one market/locality.
You need this information timely. Monthly at a minimum. The further out poor behavior or lackluster performance goes, the more it is costing the company.
One Last Word - Ancillary Services
Most people focus on room rates. Rightfully so – it represents by far the largest portion of lodging spend. What about the ancillary costs associated with hotel stays? Internet? Parking? Laundry? The biggest one? Meals.
Why not include these elements into the negotiation process. If your travelers average 3+ days per stay look into getting free internet, parking and laundry. Everything is up for negotiation. You would be remiss if you did not at least discuss eliminating or reducing charges for ancillary services.
Meals. People travelling in groups tend to go out. People travelling alone – not so much. This may be an opportunity. If people travel and stay whole weeks (alone) selling or servicing clients/customers, they may be interested in a program that guarantees meals at reasonable prices. Everything is worth discussing. Prices can only come down.
Hotels are willing to negotiate lower rates with business travelers – they just need to realize a reciprocal benefit for doing so. This article outlines what you need to enter into successful negotiations with hotel/lodging suppliers, get your business travelers on board and continue monitoring the program for long-term success.
Information
It all starts here. In a best case you are using a travel program sophisticated enough to retrieve historical information. If you are working with a Travel Management Company (TMC), they should be able to assist you in pulling the information you need. As a last resort, you can reach out to hotel/lodging suppliers for historical information. Even if they do supply you with usable historical information, you will have to consolidate different supplier information manually. There may also be inconsistencies across formats making consolidation difficult. If you are not using a Travel & Expense Management system and you are not working with a TMC, your best approach may be to rectify one (or both) of those situations first. Hotels do not offer reduced rates based on rhetoric or anecdotal evidence.
Let us continue assuming you have access to the required information. Pull three to five years of data. Consolidate data based on suppliers, locations, stay durations, time of year or any way you see having value. Pulling three to five years of data affords you the opportunity to spot trends.
Suppliers. This tells you the total spend with specific suppliers. Your hotel/lodging spend may be fragmented across multiple locations. This demonstrates how much you spend across the entire supplier network affording you the opportunity to negotiate a more favorable rate for ALL locations.
Locations. Suppose you find that 80% of all spend happens in just three cities. Those three cities share a hotel chain with a large presence in each. Does that sound like an opportunity to negotiate a lower rate with that particular hotel chain? If your travel is scattered across multiple cities, identify the hotel chain with the most consistent presence across each and negotiate for better rates with them.
Stay durations. Longer stay durations equal lower costs for hotels. If travel patterns require hotel stays of at least five days there is an opportunity to convert that into lower rates. Hotel stays that carry over weekends present another exceptional opportunity to negotiate lower rates. Hotels have a captive audience with business travelers during the week and charge accordingly. To the contrary, many hotels struggle to fill vacancies on weekends. The fact that you have employees staying over weekends gives you a negotiating advantage.
Time of year. Seasonal, tourist dependent locations have no problem filling vacancies during the summer, holiday or event that makes them a desirable destination. What about the rest of the year? How about the situation where you perform maintenance work for one of these locations during the off-season? Do you think local hotels would be clamoring to put up two or three of your technicians for a few months?
You have poured through 3-5 years of data. You have analyzed the data internally and/or with the help of consultants. You devised a plan for negotiating with hotel/lodging providers. Either directly or with the help of a consultant, you negotiated lower rates. What comes next?
Travel & Expense Policy
You just put a ton of work into securing lower hotel rates. How do you ensure that your business travelers patronize suppliers with favorable rates? A great step towards achieving that goal is writing that requirement into your Travel and Expense policies. If you are working with a TMC, automating the process is much easier. They can program the requirements you specify into the booking process. If an employee attempts to book outside policy, those transactions are marked as exceptions. Will there be exceptions? Absolutely! Exception codes placed on transactions will tell you a lot. You want to make this process as easy as possible for your travelers. You want them out selling and servicing clients – not explaining why they booked the hotel they did and filling out paperwork.
Tracking, Reporting and Analyzing
You negotiated lower rates. You wrote the requirements into your policies. Now what? You need a system that tracks your performance, provides timely reporting and provides the right details for proper analysis. You need to develop Key Performance Indicators (KPI’s) that measure compliance, effectiveness and cost savings. How much hotel/lodging spend is outside policy? How much have you realized in savings? How many exceptions are there? Analyze exceptions to determine root causes. Maybe the supplier you negotiated with does not have sufficient vacancies to ensure availability. Maybe the exceptions are only happening in one market/locality.
You need this information timely. Monthly at a minimum. The further out poor behavior or lackluster performance goes, the more it is costing the company.
One Last Word - Ancillary Services
Most people focus on room rates. Rightfully so – it represents by far the largest portion of lodging spend. What about the ancillary costs associated with hotel stays? Internet? Parking? Laundry? The biggest one? Meals.
Why not include these elements into the negotiation process. If your travelers average 3+ days per stay look into getting free internet, parking and laundry. Everything is up for negotiation. You would be remiss if you did not at least discuss eliminating or reducing charges for ancillary services.
Meals. People travelling in groups tend to go out. People travelling alone – not so much. This may be an opportunity. If people travel and stay whole weeks (alone) selling or servicing clients/customers, they may be interested in a program that guarantees meals at reasonable prices. Everything is worth discussing. Prices can only come down.
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