Sourcing was a hot topic at this year’s GBTA convention with education sessions like, “Ditch the Annual RFP (request for proposal) Process for Dynamic Program Management” and “Point Counterpoint – Who Wins the Dynamic Pricing Battle?” Some companies have made headlines recently by declaring traditional sourcing models dead, and news articles consistently boast about sourcing enhancements that may or may not be arriving in the near future.
The reality is there are exciting new advances in technology that can make the RFP - or bidding - season more efficient and create better results. But there are still some practices that will remain the same.
What will change?
Travelers booking outside of policy remains high (around 40% for most companies), which means agency data alone isn’t enough to fully understand your travel spend. Yet, reconciling and analyzing data – an important first step in supplier negotiations – is challenging for 73% of travel buyers. Thanks to advances in technology, algorithms can now clean and reconcile multiple data sources and present them visually, making it easier to uncover insights into the total cost of a trip. This data can also be used to negotiate everything from room rates to F&B discounts.
Intuitive sourcing tools
Wouldn’t it be nice if a tool could analyze your data and market trends in order to indicate how likely you are to secure a discount before you spend hours negotiating for it?
CWT Solutions Group is capable of analyzing supply and demand at a market level in order to understand city occupancy rates and room inventory. They combine these findings with client travel patterns, supplier usage (hotel volume, market share, etc.) and change capacity.
The resulting Negotiation Power Index© helps you pinpoint where you should invest sourcing resources and where you should rely on other rate sources.
Algorithms can clean and reconcile multiple data sources.
Reliance on additional rates
Dynamic pricing is not completely overtaking your fixed negotiated rates but they should account for 10-20% of your hotel program.
Additionally you should rely on rates from your TMC (travel mangement company) for any property that receives roughly 150 room nights or less, as the discount secured will not be enough to justify the effort spent negotiating. RoomIt Rates offer up to 20% off and a minimum of six amenities.
More companies will be utilizing third-party hotel rates, like those from Booking.com and Expedia Partner Solutions, in their booking tools. These rates act as a gap filler, ensuring you have coverage all over the world, in case of compression, or for those one-off trips your program doesn’t account for. They can also be priced below your client negotiated rate (CNR) depending on fluctuations in BAR.
To meet this growing need, more TMCs are offering third-party rates alongside GDS rates, making it easy for travelers to book a wide variety of content sources via corporate booking channels.
Greater mix of rates
Beyond providing optimal availability, a well-diversified rate mix also ensures optimal savings opportunities as well. A mix of negotiated rates, TMC unique rates, consortia rates, third-party rates and public rates is the best way to ensure the lowest rate is available to travelers.
Even in a company’s top ten destinations, RoomIt has discovered that the lowest rate can be spread between negotiated rates, RoomIt Rates (our unique business rate), CWT Hotel Programme rates (our consortia rate) and third-party rates.
Additional negotiating tactics
For global programs, there may be more emphasis on some additional tactics that help increase efficiency and decrease costs. For example, more hotels are open to two year deals. Pursuing a two year deal with core hotels can significantly reduce sourcing time and cost in consecutive RFP seasons.
In regions where discounts are limited, you may also want to start utilizing other forms of hotel spend, such as F&B. These discounts can come about in two different ways. You may be able to justify the expense as reason to receive deeper room rate discounts, or hotels may provide discounts directly to F&B.
One of the newest and most exciting developments is the ability to make forward-looking predictions, rather than only looking at historical data. Data scientists can now build predictive models that look at a large list of factors to help predict future rates for preferred suppliers. If your preferred supplier rates are expected to increase more than similar suppliers in their market, you can add challengers to your RFP solicitation list.
Many hotels are open to two-year deals
What Will Stay the Same?
Negotiating with major properties via the RFP process is not going away. All the hours spent negotiating via RFPs can make us daydream about a new, innovative process, but the reality is this tried and true method still delivers the deepest discounts for clients with significant hotel volume.
However, one thing you can do to ease the burden is offload some of the work on a trusted consultant. These experts negotiate rates for the world’s leading travel programs and have all the data necessary to make well-substantiated decisions.
Dynamic rate share
As mentioned before, another exciting concept is that of dynamic pricing. The reality is companies are still capable of receiving 20%-49% off BAR with fixed negotiated rates. No other rate, including dynamic rates, can provide the same upper limit.
It’s best to save dynamic pricing for areas where you have less buying power, or for when you need a quick win – like when adding a new market partway through the year.
Rate loading errors are still going to be an issue, because the rate loading process is still very manual. Luckily, however, automatic rate auditing tools are more common now. Your travel agency or consultants have technology capable of ensuring rates are loaded accurately, will verify availability, and can see if breakfast, internet, parking, and cancelation policies are correct. Be sure any technology used can detect squatter rates too.
There are exciting changes coming to the sourcing world in 2020 including new rates worth exploring, tools that will make data collection and analysis easier, and methods that will improve negotiations. Despite all this innovation, traditional sourcing methods won’t suddenly disappear with the changing of your calendars.
Blog author: Eric Jongeling, Director, Solutions Group