The Rate Fluctuation Game: How Good a Deal are you Really Getting?

By Mark Williams, Partner

Not too long ago, I had a client tell me about a consistent problem that was coming up among her travelers. Everyone and their brother, it seems, was emailing her with lower rates than their negotiated rates at the company’s preferred properties. This is not an unfamiliar phenomenon among travel managers; so much time and effort is put into the hotel RFP process, only to be undercut by rates available in the open market – a decidedly frustrating experience. What is going on here?

As noted, in many markets, rates negotiated by corporations are not always the best rate available to the traveler. It may not make sense, therefore, to negotiate rates in markets other than the very largest volume markets for any particular program. Using a hybrid approach to your hotel sourcing program can help by traditionally sourcing high volume markets and using an intelligent price-tracking tool such as TRIPBAM or Yapta RoomIQ for the remainder (read more on this here).

How common are rate fluctuations? Almost 20% of hotel bookings reflect rate drops from the time booked to the day of arrival – and that is only measuring those rates that drop, not the rate increases followed by drops throughout the period. To top it off, around 30% of the time rates are found less than the negotiated Last Room Availability (LRA) rate, and most the time where there is a rate drop, the rate goes back up prior to the arrival date.*

Rate fluctuations are also largest in the most difficult locales for securing hotels, such as:

  • San Francisco
  • Singapore
  • London
  • New York
  • Honolulu
  • Washington
  • Seattle

The average potential savings per booking from the time of booking to time of arrival exceeds $100. Although actual savings are high, travelers frequently refuse these savings, whether due to delayed action, preferences, or another circumstance. Therefore, the realized savings are much lower at an average of just over $20 per booking. While still significant, managed travel programs may be leaving money on the table by not jumping on available rates picked up via hotel re-shopping tools.

The travel manager should track these savings, communicate when it is appropriate to take advantage of offered savings, and thereby increase overall savings to the organization. For more information on how to take steps to improve your program this RFP season, please contact us.

* Special thanks to TRIPBAM for providing all of the statistics included in this article.

Back to all news