The accommodation request for proposal (RFP) season is nearly upon us, and for longer than many of us care to remember, we’re still using the same old, tired playbook for this bidding game.
So much of the year is devoted to this monumental undertaking, analyzing data to identify the properties to target, drafting and submitting proposals, negotiating terms to obtain more savings and traveler perks. Then there’s the GDS rate loading, which alone can take months.
It wouldn’t be that big of a deal if it weren’t for the fact you have to go through the same process with every individual hotel in your program — and you may have 500, 600, heck, 1,000 properties in your portfolio.
By the time you’ve wrapped it up, the year’s nearly up and you’re back at square one, without any real time to optimize what you’ve just negotiated, educate your travelers on purchasing behaviors or tackle the tasks those at the top keep putting on your to-do list.
You might be wondering if there are any timesaving strategies out there to cope with this labor-intensive process? Well, good news, there are!
Pauline Houston, global director of hotel sales and strategy at American Express Global Business Travel (GBT), has worked with many clients through the years on improving their RFP practices. What she has come to discover is, you do not need to go through the extensive RFP rigmarole each year to achieve your hotel program goals, that there are alternative ways to do it all — create the savings you’re seeking, deliver the kind of experience your travelers need (and deserve) when traveling for business and capture the information necessary for duty of care.
In fact, she recently was discussing with a senior procurement director who has about 950 hotels in his program (not an uncommon scenario) about some tactics to make the process more efficient.
Houston’s first suggestion for this client was to reduce the number of hotels in his program and, for the ones removed, to instead utilize the negotiated discounts that American Express GBT already has negotiated on behalf of our clients. And because we have nearly 1.1 million properties in our inventory, from the content we’ve negotiated ourselves as well as that from our partnerships with Booking.com and Expedia, there really isn’t a need for this company to have nearly 1,000 hotels in its travel program.
“Not that he should wipe his program out — that’s not a good move either,” Houston explains, noting it’s not a strategy she recommends for a company’s top destinations. “But he can reduce it to the core number that he needs in his high-demand locations and then he can utilize other forms of support in terms of the content that we’ve negotiated.”
With this approach, he can still control his costs by putting in place a limit on the room rate (aka a rate cap), which is usually done by key city or region. Plus, travelers likely will respond well to having more choice and, thus, probably are more likely to book in policy and in channel if their needs are met.
In addition to using the travel management company’s (TMC) discounted rates, hotel reshopping tools that search for a better rate automatically after a reservation has been made can be used for rooms — so you’re not just getting savings at the time of the booking with the TMC’s negotiated rates, but there’s also potential to save even more post-booking.
Because rates during RFP negotiations traditionally are for standard room types only, using these strategies — i.e., a TMC’s discounted rate and reshopping tools — also may be a better fit when a company requires executive-level rooms.
Splitting up the work
The second strategy Houston suggested to this client: two-year contracts over one-year agreements.
After digging into the hotel data, Houston saw that his spend falls into two core geographical categories known as “home market” and “rest of the world.”
“Home market is usually where between 60 to 80 percent of your spend will be. It’s where you have your biggest presence, where the biggest number of employees are traveling, where your biggest customer bases are. And then you have the ‘rest of the world.’”
Since this particular client had about a 60-40 split between his “home market” and “rest of the world” properties, Houston suggested splitting up the two categories and negotiating a biannual contract with suppliers. This way, he can divide how many RFPs he needs to manage each year roughly in half.
This year, he plans to do two-year contracts with his “home market” suppliers and extend his “rest of the world” property contracts for another year.
“Then next year,” Houston says, “he will renegotiate the ‘rest of the world’ properties required in his high-demand locations, and then they would leapfrog each other each year.”
Houston says he also plans to include a contingency in the contracts that allows him to come back to the table and renegotiate if at any given point the market economics change or demand increases significantly.
While the client is at the very preliminary stages of implementing these changes, Houston says if they have calculated correctly, just by reducing the number of hotels in his program and doing this leapfrog exercise, he will gain back two months of the year. And with all that extra time, he could be analyzing traveler behaviors, encouraging travel policy compliance and optimizing the hotel program to achieve set objectives and savings.
Want to learn more about how to prepare for the upcoming RFP season? Check out the three reports our Global Business Consulting team has put together. There’s our Hotel Monitor 2019, which offers an analysis of factors impacting prices at a regional, national and city level, a price forecast for 150 key cities around the world, and a white paper on smarter hotel buying strategies.