Hotel consolidation is not new, but it’s changing the way corporate travel is bought, sold and negotiated. While the full impact of the recent mergers is uncertain, we definitively know a few things.
- The size and number of mergers are reshaping the hotel landscape.
- There will be more acquisitions around the world as chains respond to increased pressure to remain competitive.
- The rate of change is not slowing down.
In this environment, it may seem like hotel chains have the upper hand during contract negotiations. But, travel buyers have leverage, explained Marwan Batrouni, senior director and practice area leader for Advito. The key is to discard traditional hotel program practices and employ new tactics to manage hotel spend and change traveler behavior. He offers six strategies:
- Keep it real time. To realize the full value of contracts and combat increasing hotel rates across regions, travel managers can optimize contract performance through continuously sourcing throughout the year. This is called dynamic performance management and requires you to invest in new intelligence and analytic capabilities.
- Track your entire footprint. Despite procurement’s best practices of consolidating suppliers and mitigating risk, companies have long defended silos of hotel spend. Current consolidation trends underscore the importance of integrating pockets of hotel spend across chains, lines of business or subsidiaries to improve your buying power and leverage. Demonstrate your market share with chains by aggregating transient and meetings spend; it may help you secure chainwide agreements and value-added amenities.
- Diversify your portfolio. Consider adding new hotel suppliers, particularly in places where you have relied heavily on newly consolidated brands. These “other” hotels may feel increased pressure to win your business. You can also diversify by testing sharing-economy providers, like Airbnb, in strategic markets. This offers you additional supply in competitive or secondary markets where negotiated rates with brand hotels are more limited. And, in Latin America, Europe and Asia Pacific, boost your use of independent and boutique hotels as chain alternatives in select markets.
- Engage travelers. Companies are realizing that policy compliance alone is a weak and limited approach. Your negotiations can easily be diluted if your travelers don’t book preferred hotels and are distracted by direct communications from hotels. Communicate with your employees in the same way that you communicate with your consumers. This traveler engagement tactic works for in-house marketing campaigns, social enterprise and timely digital messaging to explain how choosing a preferred hotel is good for travelers and your travel program. (Check out BCD Travel’s new white paper, Get Engaged: Empowering Travelers to Make Smart Buying Choices.)
- Collaborate virtually. More companies are taking a holistic approach and weaving virtual collaboration into travel programs to determine when it makes good business sense for employees to travel. If a trip isn’t revenue producing, travelers are presented with collaborative and less expensive virtual options to conduct business without travel.
- Monitor contractors’ and consultants’ hotel spend. Many procurement teams are not actively managing the hotel spend of a third of their workforce, i.e., their contingent labor. These seasoned professionals, consultants and independent contractors are your on-demand workers and account for a growing number of company trips. Track this hotel spending to determine what percentage is (or isn’t) going toward preferred suppliers. This gives you additional leverage with preferred suppliers and improves your probability of moving market share.
Hotel consolidation doesn’t have to erode travel buyers’ leverage. It just requires uncovering new opportunities in the changing landscape. Do so, Batrouni advised, and you can show hotels the true value of your program to their business.
Gain more insights into hotel trends and how to make the most of them by reading Advito’s latest Industry Forecast. Want to discover other strategies for improving your travel program? Talk to your BCD Travel account manager or email Advito at [email protected].
