A New Strategy for Hotel Sourcing

KW-0815By Katharine Williams, Director of Marketing

It seems we just wrapped up hotel RFP season, but here we are again, just a few short months away. When thinking about your approach this year, perhaps it is time to consider a new strategy for the process. By adopting new technological solutions, you can help lessen the number of hours and time needed to craft a successful hotel program. As you prepare for your hotel sourcing exercise this fall, consider the following approach:

Traditional Sourcing for High Volume Markets

Depending on the size of your hotel program and volume in your top cities, traditional sourcing remains a good tactic for your top 30-50 markets, measured in terms of room nights and spend. Leveraging your room nights and spend with an individual hotel or shifting spend within a high volume market remain good tools to employ during the negotiations process. In addition, the following actions are recommended to optimize your traditional sourcing negotiations:

  • Evaluate the various data sources available. Merging information from various sources can compromise data and their interpretation, so the best way to assess the program is to select the source with the most complete data, a choice that can vary between different programs.
  • Obtain and evaluate traveler feedback. Through a survey or some other method, such as focus groups, solicit and review your travelers’ feedback. GoldSpring offers this service to clients through our SpringBoard Survey™ tool, which provides the information required to optimize your hotel program.
  • Expand your bid list. Adding more properties to your bid list is a good idea in general, but it is even more critical if you choose to introduce intelligence price tracking tools to the equation. Expanding the number of properties included in the traditional negotiations process for your largest markets ensures you have options if historical suppliers won’t adjust, or macro conditions are driving up rates in a certain geographic area.

Intelligent Price Tracking Tools to Drive Program Savings

Dynamic price tracking tools like tripBAM and Yapta’s RoomIQ allow you to set parameters by which the system continually checks for lower rates and automatically offers to rebook travelers. In coordination with traditional sourcing methods, these tools help ensure low rates in major markets and eliminate the need for traditional negotiations in lower volume cities. Although a departure from traditional sourcing methods, this strategy offers the following benefits:

  • Expect lower rates in key cities. According to tripBAM, New York, Chicago, Austin, Palo Alto and Atlanta realized the greatest frequency of savings, while New York, Tel Aviv, London, Washington and San Francisco had the greatest average savings per night. If these are among your top cities, take note.
  • Anticipate beating the negotiated rate. When shopping across a wide variety of rates, tripBAM reports that the negotiated rate was the best only 7% of the time. Compare that to the best available rate, which was the lowest 51% of the time, and the commission rate beating a negotiated rate at 31% of the time.

Things to Consider

Traveler education is key to adopting the plan above. Explaining why and how the system works is critical for successful implementation, along with executive level support. Some other things to consider:

  • Consider your company culture. Some more traditional travel programs may be less receptive to this technology than others. Utilizing a search for same hotel shopping (like for like) could be a solution for those reluctant to dive straight into a hotel cluster search. As reported by tripBAM, this tactic can still provide significant savings – 7.8% of the time a lower rate is found, and the average savings is $68 per night. Using this method, companies can also reference the rate data captured to improve their negotiated rate program in the future.
  • Implement the tool in stages. Once comfortable with a search for same hotel shopping (like for like), companies can expand the tool offerings. According to tripBAM, the majority of companies using the system for several months will shop the same hotel and consider a change in bed type (one step down) and apply a cluster of preferred hotels and brands if the traveler is staying at a non-preferred to improve compliance. Again, savings can be significant – same hotel shopping with a variance (change in bed type, room type, etc.) identified a lower rate 16.3% of the time, with an average savings of $89 per night.
  • Note changes by some chains and their impact. According to tripBAM, rates that are discounted for loyalty program members can be included in the search. The issue, however, arises when the lower rates are not listed within the GDS and must be booked direct. Typically, if a company obtains tripBAM’s service through an agency, these rates are not included, but if a company purchases directly, loyalty rates may be included. If these rates are booked, the agency is notified so they can create a passive segment in the GDS – not ideal for the TMC as there is a cost to create the passive segment.

With the development of dynamic price tracking tools like tripBAM and Yapta’s RoomIQ, travel managers have new, innovative methods by which to get the best hotel rates. With a hybrid model of traditional hotel sourcing and these new tools, travel mangers can more efficiently craft a successful hotel program and realize savings for their company.

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