Hotel chains are pressuring corporate travel buyers to switch to dynamic pricing, a trend that will intensify in 2017. And many buyers are wary—with good reason. Dynamic pricing, in which hotels give a fixed discount on the best available rate on the day, usually works out to be more expensive than negotiated fixed corporate rates.
But the reality is that hotel chains increasingly are withdrawing last-room availability from corporate rates. That restricts traveler access to negotiated prices, so companies aren’t always getting what they bargained for anyway.
Some savvy travel buyers are taking a pragmatic approach. A recent Business Travel News survey of large corporate travel buyers shows just under half have adopted dynamic pricing in some way. That’s up from 20% adoption in 2011.
The strategy behind buyers’ increased adoption: To make sure business travelers always have access to a discount. Many of these buyers are allowing a portion of room nights to be governed by dynamic pricing, while also taking a hard line on using only negotiated rates in cities where they have significant spend.
Experts from Advito explore the pros and cons of dynamic pricing in the business travel consultancy’s 2017 Industry Forecast. Their conclusion: Dynamic pricing can have some advantages. It saves a lot of time on RFP negotiations and is better than simply accepting the market rate. It can occasionally be better than the corporate rate, too.
But, Advito experts warn, there is little doubt that switching entirely from negotiated corporate rates to dynamic pricing pushes up a client’s average rate over time. It also hampers accurate budgeting.
Dynamic pricing tops Advito’s short list of tips for travel buyers navigating today’s hotel market:
- Analyze your hotel data to ensure you have the right balance between negotiated rates (for primary markets), fixed chain-wide discounts and dynamic pricing (for secondary markets).
- Make sure your contract terms and conditions prevent hotels from imposing cancellation and change fees, which will become much more common in 2017.
- Keep on top of chains moving your preferred properties from one brand to another. It could lead to reduced services for the same price.
- Rates within individual hotels vary more than ever. Introduce a rate assurance program that actively monitors and re-books rooms when rates fall after the original reservation.
- If you haven’t already included Airbnb-type alternative accommodations in your program and travel policy, 2017 is the year to do so. Alternative properties are a good option if a preferred hotel refuses to negotiate or grant last-room availability.
Get more analysis and insights by downloading Advito’s 2017 Industry Forecast. Want to discover how to use the insights to improve your travel program? Talk to your BCD Travel account manager or email Advito at [email protected].
