Hotel Sourcing 2017: The Dawn of a New RFP Process?

By Bill Knepper, Senior Consultant

Thank you for the many participants who completed our latest survey on the hotel sourcing process for 2017. While there have been many developments in the RFP process over the years, it is safe to say that the current method leaves something to be desired for both buyers and suppliers. With this in mind, we asked travel managers if they were planning on making changes to their programs for 2017. Below are the results from our survey.

Almost One Third of Respondents Plan to Change Sourcing Process
chart-001While 55% of survey participants responded that they do not plan on making changes to their sourcing process for 2017, 30% do plan to make changes (15% are undecided). This has increased over the past few years as new technologies and strategies emerge to disrupt traditional sourcing strategies. An emerging trend is that corporate buyers are no longer satisfied with just rolling their program forward using the existing process, and are instead looking at new ways to improve traveler satisfaction while reducing costs.

This is consistent with feedback we’ve been getting from buyers and suppliers for years, albeit with growing intensity in the recent past. In a recent GBTA webinar, Improving the Hotel Procurement Process, the widespread sentiment was unfavorable from both the supplier and buyer side. Look for more developments to come in this area as industry groups, new technology providers, suppliers and buyers work to continue to improve this process.

Where are Respondents Making Changes?
The number one area for change, according to survey participants that indicated they plan on making changes to their sourcing process in 2017 (25%), is the implementation of hotel shopping services such as TRIPBAM and Yapta RoomIQ. These services have established themselves as viable alternatives, or supplements, to traditional sourcing and are providing significant cost savings when incorporated into hotel programs, which has led to some travel managers looking for new approaches to sourcing that incorporate these technologies.

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There has certainly been a lot of interest recently in these technologies, as indicated by educational sessions and webinars at multiple industry events. TRIPBAM now has over 1,300 clients using their hotel shopping service, and Yapta currently has over 1,100 clients utilizing their solutions, with a significant number of those utilizing RoomIQ. We see this trend increasing as more travel programs sign up for these services in 2017 and beyond. Perhaps in the not-too-distant future, a hybrid approach of traditional sourcing and new technology will become the norm for sourcing hotel programs.

As far as other areas where our survey respondents indicated they would make changes for 2017, Risk Management initiatives (23%) and dynamic pricing (20%) closely followed hotel shopping services, and utilization of shared economy providers such as Airbnb, HomeAway and others brought up the rear (10%). All have the ability to strengthen a hotel program and provide savings if strategically implemented.

Areas considered for implementation in future hotel sourcing
Of those that are undecided or are not looking to make changes for 2017, utilizing dynamic pricing was the number one response for the future hotel sourcing (27%). As the push continues to reduce costs while providing a high level of service to travelers, consideration of dynamic pricing can make sense when deployed strategically in your hotel program.

This is consistent with the recent increase we’ve seen from several hotel chains, most notably Hilton and IHG, pushing clients towards dynamic pricing. The good thing about dynamic pricing is that it can save your program money, as they tend to offer a better rate overall than a flat rate can deliver. The difficulty with dynamic pricing is that it’s hard to communicate to travelers. For example, a traveler in New York may have three different rates for three different trips within a month, or may even have a different rate each day of a several day trip. Utilizing all available communications channels to explain the benefits of what can be a confusing phenomenon for travelers is crucial – from the initial itinerary, to emails, to app push notifications, among others.

In summary, although there is apparent widespread dissatisfaction form both the buyer and supplier side with the current hotel RFP sourcing process, as changes are made within managed travel programs and new solutions are adopted, we see this continuing to improve in 2017 and beyond. The use of new hotel shopping solutions such as TRIPBAM and Yapta HotelIQ, along with dynamic pricing offered by hoteliers, are two areas that can help alleviate the frustrations of the sourcing process both for 2017 and in the future.

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