As revealed in the new Hotel Prices 2023 report from American Express Global Business Travel (Amex GBT), our corporate clients should prepare for higher hotel rates in 2023. Due to a combination of challenges – including inflation, pent-up travel demand, and hotel staffing shortages – we anticipate increased rates across most cities.
This situation puts small to medium-sized enterprises (SMEs) in a tough position. As we have posted in our earnings report, SME travel is recovering faster than any other customer segment. In Q2 2022, SME travel transactions were at 84% of 2019 levels versus 76% from all other customer segments.
So how can SMEs continue ramping up their business travel activities without getting pummeled by rising hotel prices? Amex GBT’s Anu Kuchibhotla, hotel practice line global lead, and Nina Marcello, principal commercial lead, share some strategies.
Partner with a select few suppliers
If you have employees traveling to certain destinations repeatedly, you potentially could save a lot by establishing a relationship with select properties in those locations and making them your preferred suppliers. Many properties require a minimum 100-night annual commitment to qualify for a corporate discount. In bigger cities compressed for supply, this limit can be as high as 500 room nights, said Anu.
To figure out the cities where you may benefit from such a program, you first need to analyze your data and identify the locations your travelers visit most frequently. This task can be tricky if you don’t have the right data-capturing tools and methods.
“Because of certain booking practices, such as when a traveler books directly with a property, you may not have access to the data you need,” Anu explained. To combat the issue, she recommends travelers use the travel management company’s (TMC’s) booking tools to seamlessly capture the necessary data. When this is not possible, many insights can be gained using credit card data if the company mandates the use of one credit card for travel expenses.
When determining which suppliers to work with, Anu also recommends reviewing the current mix of hotels being used and introducing lower-category hotels that will cost less – without compromising on employee safety and security. Looking at hotels that are slightly further away from the office location may be another way to save, she said.
Implement a travel policy
Having a travel policy is fundamental for cost savings. Without one, travelers have no spending limits. Yet, many smaller companies don’t have formal policies because they have evolved or grown so quickly. “They say, ‘Oh, we always did it this way,’ or ‘Bob’s secretary calls and books everybody’s trips.’ But those are the kinds of things that can cost companies money,” said Nina.
Some policy guidelines that will help drive down hotel costs include:
- Booking online with the TMC, not directly with a hotel or consumer website, to facilitate spend visibility.
- Selecting the preferred suppliers in your program when there’s a corporate discount.
- Booking simple trips using the online booking tool instead of the potentially more expensive live agent option.
- Booking TMC discounted rates when the corporate-negotiated rates are not available.
Enforce the travel policy
Having a policy is a great start, but it’s value is dependent on if it is followed and reinforced.
“If you have a policy that says you can’t do certain things or book above certain rate caps, but then everybody on your team knows there won’t be any repercussions if they break the rules, it becomes ineffective. It doesn’t have validity and it’s not going to drive the results that you want,” Nina said.
So only create policy guidelines that you can enforce.
As Anu noted, there are tools that can help determine the compliance rate. If your percentage skews in the wrong direction, digging into the data can help get to the root of the problem.
“Is it because you don’t have the right program in place? Is it because you don’t have the right properties in place? The data can help you understand what’s driving the noncompliance and help you to plug in the gaps,” said Anu.
The online booking tool is another policy enforcement ally.
“The use of an online booking tool can create what’s known as visual guilt,” Nina said. “Just by design, when you have your policy parameters set up within the online booking tool, it steers people who want to be compliant toward the right choices by guiding them to the best choices. Just by guiding them on there, you will see some savings.”
Take advantage of your TMC’s relationships and solutions
For one-off trips or travel to destinations where you do not have a preferred supplier program in place, Nina recommends booking content with TMC-negotiated rates.
Through our Preferred Extras™ hotel program, clients can access special discounts, ranging from 5% to 50%, at more than 34,000 properties worldwide.1 Many also offer complimentary Wi-Fi, breakfast, and other perks, such as a food and beverage discount, room upgrades, and late checkout.
We also offer a hotel re-shopping solution that can help to mitigate costs.
“With the re-shop system, once a hotel is booked, it’ll keep shopping until maybe a day or two before the actual stay date. If a better rate is found for a like-for-like room, it will automatically rebook it at the lower price,” said Anu.
Check the contract carefully
As mentioned in the Hotel Prices 2023 report, hotels are doing what they can to increase revenues and recoup income lost from the travel shutdown. If you are in negotiations with hotels, you can expect the big chains to push for a dynamic corporate rate that fluctuates depending on supply and demand. Resist in locations where you have enough volume to garner a static rate, which remains the same regardless of price fluctuations.
“Even big corporations are hesitant to take dynamic rates because if the best available rate keeps going up, then there is no benefit to having that dynamic rate in place,” Anu said. “We are pushing back quite heavily to the hotels on this point.”
If you have enough volume in a destination, keep negotiating for a fixed rate.
As noted in the forecast, we also are seeing more hotels push non-last room availability in their contracts. This means that a hotel can charge a higher-than-agreed-upon rate during peak times.
If you are stuck in that situation, check to see if you can get a better deal with the TMC’s content. All of our Preferred Extras properties offer last room availability. This means as long as there’s a room available, you will get it at the contracted terms and prices.
Another thing to beware of: Some hotels are approaching SMEs with what appears to be an attractive deal, but in reality, it’s a minimal chain discount.
“When you don’t have a formal program, that might seem attractive, but the chain discount is typically off of the best available rate. With the best available rate being as high as it is today, that may not be the best for the corporation from a cost management perspective,” said Anu.
SMEs should be very discerning when reviewing options for chain discounts and limit the number that they accept. In the end, by consolidating spend toward a limited number of partners, your savings will be higher versus having low discounts with many brands.
Don’t shy away from using your TMC’s consulting team
Whether it’s helping to craft a policy designed to boost the compliance rate, diving into your data to unearth cost-saving opportunities, or going to the negotiating table on your behalf, our Global Business Consulting (GBC) team can help you to reduce your hotel spend.
Think you’re too small for consulting services? Think again.
“We service a variety of clients and are always making recommendations to our clients based on their peer groups and relative to their own benchmark,” said Nina. “In other words, we’re not recommending to a client with $700,000 spend in hotel that they take the approach of somebody that spent $70 million in hotel. We’re tempering recommendations to meet the needs of different size clients.”
For more tips on sourcing strategies – and to see how high hotel rates may go – download Hotel Prices 2023. If you would like more information about how your company can work with our GBC team, connect with Nina if your company is based in North America or Anu if you are based somewhere else.
1 Based on American Express Global Business Travel contractual agreements and availability as of October 2022. Program content is subject to change without notice. Individual results may vary. Additional terms may apply.