Are You Prepared to Change Your Hotel Travel Program in 2021
Among the many descriptions that could be applied to 2020, it is, undeniably, a very peculiar year for hotel sourcing. With business travel down, hotel rates fluctuating, and the uncertainties ahead in 2021, both the corporate and hotel sides of the annual hotel RFP process face myriad questions and challenges without precedent—but 2021 hotel sourcing, approached correctly, may also offer unprecedented opportunity, in terms of transforming and improving the process and results. From KesselRun’s firsthand experience in 2021 hotel sourcing so far, here is our overview of results so far and 2021 outlook.
Corporate Travel Hotel Strategies in 2020
A dual-rate load strategy is the forerunner option embraced by both major hotel brands and corporate clients. Generally, customers with existing 2020 hotel programs and national account relationships with a brand are receiving comprehensive offers to roll over their 2020 rate agreements into the coming year. However, with rates in some locations plummeting, a static rate agreed to back in 2019 may no longer be in the realm of Best Available Rate; a dual-rate load strategy solves this dilemma. With the static rate set as a cap, loading an additional dynamic discount that takes effect when Best Available Rates come in lower ensures that corporate clients are truly receiving the lowest rate available. Customers have largely been jumping at this option and requesting dual-rate load when not already offered, to maintain their true discounts.
With customer volumes in many cases down, below expected margins, the continuation and protection of previously-agreed discounts reflects the partnership that makes many year-over-year hotel contracts successful: it is a workaround to the pandemic-inflicted difficulties on both sides. Looking ahead to more normalized RFPs in coming years, though, likely many customers will want to maintain dual-rate load, guaranteeing BAR as it does, while on the hotel side, this strategy will likely emphasize recent years’ increasing push to favoring dynamic over static rates.
Some customers have been set upon going to bid for 2021 regardless of change. Depending on market, and depending as well on how much ongoing, guaranteed volume corporations have on the table, we have seen some interesting results. However, as major brands’ overall policy seek to avoid offering new discounts, emphasizing maintenance instead, and given the decimating effect the pandemic has had on hotel employment, at both the corporate and property level, in many cases the usual respondents are not available. Anyone familiar with Hotel RFPs knows the usual response challenges, particularly in cases of staff turnover or property changes; those usual changes are significantly magnified this year and in some cases, bids ignoring this reality may not be met with goodwill.
Whichever strategy you choose, you’ll still need to work with your vendors on new market or property needs and COVID-related cleaning procedures and each hotels’ related guarantees to their clients. Now, maybe more than ever, strong partnerships between corporates and travel suppliers is critical.
The 2021 RFP does offer opportunity for industry disruptors whose new technology was already at work changing the traditional process. Hotel rebooking tool TripBam was already edging into the RFP market with tool options for LRA Benchmarking and Hotel Intelligence; with significant rate drops possible, will the TripBam model become more lucrative for clients? Hotel RFP tools operating on a more traditional model have meanwhile been working with hotel brands to add ease to the roll-over dual rate load options; as hotel brands can and will load roll-over rates without the need for a Hotel RFP, some clients may go entirely without use of Lanyon or Sabre Hotel RFP this year, which may be a seismic shift in sourcing approach and open avenues for younger competitors.
What’s To Come in 2021?
No one in the travel industry has a crystal ball for 2021. However, one reality that must be considered: business travel, like so much else, revolves on supply and demand. Right now, hotel vendors holding capacity back as demand is not yet there. Many corporations are predicting business travel by mid-2021 should resume more normal levels. Yet capacity does not instantly reappear when demand does. Take, for instance, a hotel that’s been closed: re-opening, restaffing it, and retraining on cleaning procedures, may take months, and in that interim, other hotels in that market could benefit from that limited capacity. For several months in 2021, while demand and capacity start to balance, we are likely to see high pricing across the board. Corporations need to be prepared for this possibility, particularly when budgeting, and not count on currently-low prices to hold. Even if travel volumes are down, if costs go up, the bottom line may balance out to more normal spend.
Whether your 2021 hotel program winds up consisting of new properties reaching out for business, 2020 partners rolled over via dual-rate load, or a varied combination, keep this final thought in mind: be prepared to change your program as needed based on traveler experience. Some corporations have been conducting checks on hotels maintaining COVID procedures, through traveler surveys and in some case physical checks. Hotel brands require their properties to meet certain standards, which may lead some travelers to be more comfortable with brand properties or a specific brand: make sure your corporation has determined your policy if a traveler is uncomfortable with where they are asked to stay, which airline they are asked to fly, or traveling at all. Make sure to raise any COVID-standard questions with your hotel partners during this year’s process.
Listening to travelers is always a factor in business travel but this coming year, especially, KesselRun recommends making sure your travelers have a known avenue to communicate—and that they know their concerns will be heard and hotels vetted, so your travelers can feel safe wherever they may be staying.
With more than 18 years of corporate travel consulting, KesselRun specializes in developing, managing, and optimizing corporate travel programs. If you’re looking for corporate travel optimization, get in touch with us.