Travel Supplier Negotiation
KesselRun has been successfully negotiating air, car, and hotel supplier contracts for its clients since its inception. In some cases, our role is in support of a corporate Travel Manager who doesn’t have the benchmarking tools and technology to assess the strength of her position or just doesn’t have the band-width to manage the arduous tasks. In other cases, our clients simply don’t possess the subject matter expertise required to get the job done. Many find that the process around identifying the right air, car, and hotel suppliers to solicit preferred agreements and then actually managing the negotiating process from Request for Proposal (RFP) to contracting is not as familiar to them as other spend categories within their organizations.
Preferred Airline Negotiations
While the sheer size of the clients’ airline spends is important, many other factors play into a successful airline negotiation. Unlike other spend categories within an organization, buying leverage doesn’t come from how much money is spent with a particular vendor alone.
Given the limited number of choices a traveler has between any two cities, time, route connections, and personal loyalty programs, airlines take into account both spend profile and market penetration when considering how it engages a client.
For example, a company that spends 90% of its total $5 million in air spend on Delta Airlines originating in Atlanta should expect Delta’s negotiating position very strong. The simple reasoning is that given Delta’s footprint in the Atlanta market as its primary hub means that the vast majority of these travelers will fly Delta despite any incentive or discount.
However, if the other 10% of this client’s spend profile is in a city where Delta doesn’t possess a stronghold, then Delta will not only be very interested to negotiate on that 10% if the client will contractually obligate itself to using Delta for at least a portion of that spend and will “bend” on some of that air travel originating in Atlanta as an additional incentive.
- Using Delta in Atlanta
- Using Delta in Another City
Preferred airline negotiations are dependent on:
- Spend profile
- City pairs flown
- Client’s ability to move market share from one carrier to another
To make the process more confusing, KesselRun also utilizes the best benchmarking tools in the industry to ensure the proposed discounts even make sense. A prudent client will want to understand the relative value of the proposed discount versus buying on the spot market or purchasing its airline tickets using a different consortium deal typically arranged by is a travel agency. And lastly, the industry’s new standard called NDC (New Distribution Capability) puts negotiating power in the hands of clients willing to book air reservations directly with the airline, enabling the carrier to bypass costly fees incurred by travel agencies and third-party intermediaries.
Preferred Hotel Negotiations
Similar to airline supplier negotiations, hotel spend is critical but not the only factor to consider. Over the past many years, hotel occupancy rates have been sky high. What this means is that hoteliers are not having a lot of problems filling rooms. The result is that hoteliers seek to deftly negotiate with corporate clients to ensure a good, long standing relationship with its business travelers but not at the expense of selling to “one-off” business travelers or vacationers at more expensive “rack rates”.
In short, if a hotel property in New York City contracts all of its inventory to a few large corporate clients, it risks cannibalizing more a more profitable average daily rate to non-clients. Here, KesselRun advises clients on the best way to negotiate both the right property in any given city but also the right number of properties in any given city. The goal is to maximize savings across the right number and type of hotel without diluting the client’s discounted program with too many properties.
In addition to understanding the marketplace, it is also critical to understand the best way to go about hotel supplier negotiations. In some cases, a company may have dozens or hundreds or even thousands of preferred hotel deals across the globe. KesselRun utilizes the best available RFP technology which, while readily available, carries a cost to implement and know-how. Like airline supplier negotiations, KesselRun recommends leaving hotel negotiation to “the pros”.
Car Rental Negotiations
While the options around car rental negotiations seem somewhat endless, a sound corporate preferred car rental program is heavily dependent on a company’s profile. If the client is a regional company operating domestically in a handful of states, the value of negotiating a “brand-wide” discount can become diluted versus negotiations by city. In general, most larger programs look to engage a “primary” car rental brand and a “secondary” brand aimed primarily at achieving a discount level for the “secondary” brand for those travelers who have a loyalty program or other tie to that rental agency.
Our Process For Travel Supplier Negotiations
KesselRun utilizes best practices across all of its travel supplier negotiations. As an independent consulting organization, we are not tied to any industry related supplier. The result is unbiased, unfettered advice with our only concern being the client’s best interest.
KesselRun uses the best benchmarking and analytics tools available in the marketplace to help drive our strategy while taking into account client corporate culture, user behavior, and other organizational goals.
Ultimately, we recognize that any air, car, or hotel program we help create for our clients is theirs and will be long after we are gone. So, it is our goal to make sure our clients are well represented and have the best possible outcome for their specific program.
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