Travel management company CWT and “lodging-as-a-service” (as it now
styles itself) provider HRS have both issued 2024 hotel negotiation planning
reports in recent weeks. Both make the same recommendation to buyers: integrate
your spend.
CWT urges companies to offer hotels not only their regular transient
business travel spend but as much of their meetings and events business as they
can muster too. This is especially important now because many of those
companies are booking fewer room nights than they did pre-pandemic. “As travel
buyers find themselves with less volume to offer for negotiating power they are
repeatedly seeking to weave in M&E volume as compensation,” says CWT.
HRS goes even further in suggesting additional types of spend to throw
into the negotiating pot, including long-stay bookings, day use of hotels and
“bleisure” – employees tacking nights on to their business trip for leisure
purposes. According to HRS, “Converging all lodging spend can deliver savings
of up to 16 per cent on bundled programmes.”
The logic of integrating spend sounds compelling, and has been advocated
for many years, but does it work? Not necessarily, according to independent
consultant Kevin Iwamoto, whose career has included spells as a travel manager
and as a strategic meetings management professional. “In theory, any time you can combine volume
you can negotiate something better. In practice it’s far more challenging.”
Another sceptic is Meenaz Diamond, senior vice president for M&E,
airlines and marketing at the Accor hotel
group. Asked how she responds to
corporate clients suggesting a combined negotiation, she says: “Show me the
data and show me the predictability. Let’s have a conversation and look at it.
I wouldn’t say no straight away but my instinct would be to say no because I
know all of the issues that are involved in meetings and events compared to
business travel.”
Diamond has several reasons for believing travel and meetings need to be
handled separately. First, there is the question of data. Corporate clients
tend to have good visibility of their transient spend; of their meetings spend
rather less so.
Then there is the difficulty of setting an appropriate blanket discount
in advance for meetings in the same way as for transient. That does not work
well for either the buyer or the seller, Diamond believes. For the buyer, each
meeting is different, thereby requiring a longer conversation.
“Anything beyond
a repetitive 10 to 15-person training kind of meeting has additional bells and
whistles attached to it,” she says. “They might be small bells and whistles but
they are there. You need food and beverage, audio-visual and so on. It’s more
of an investment in many ways, so the terms and conditions are different.”
And the promise of additional business does not necessarily help the
hotel supplier either. “Companies have a tough time understanding that ‘Well, I’m
giving you lots of business, I need a better rate,’ doesn’t always work,” Diamond
says. “Actually, it may not fit the composition of business those hotels are
looking for.”
Like Diamond, Iwamoto also identifies lack of comprehensive data on
meetings spend as a culprit, a challenge linked to travel typically having one
owner within an organisation but meetings having several. A survey by HRS found
that only 25 per cent of travel managers say their team has ownership of
meetings management.
An integrated negotiation only has a chance of succeeding, in Iwamoto’s
view, if those responsible for the two categories work together. Can vendors
smell disunity? “I pity the buyer who doesn’t realise how astute suppliers
are,” Iwamoto says. “The suppliers will recognise that right away.”
Such is the case for the prosecution against integrated negotiations. But
the defence also presents a robust argument. “I would say about 60 per cent of
the time we are in negotiations with hotels with events as part of the
negotiation,” says Pat Batra, executive director for travel, expense and fleet
at Olympus Corporation.
“From my vantage this is a total spend. Hotel chains claim there are
different requirements and you need different skill sets, and the needs of the
customers are different. I get it, but it’s all coming into the same property. You
could add another 5-10 per cent to your overall savings on your global spend if
meetings and travel are integrated.”
Circumstances are, Batra admits, especially propitious for his company to
integrate. Olympus has a very close relationship with one particular hotel
chain. But this is by no means uncommon.
Hyatt EMEA vice president for revenue,
sales and distribution Paul Dalgleish says his chain has a global enterprise
programme for 47 major clients which gives each of them a discount on the
totality of their spend. Average combined spend with Hyatt by its global
enterprise customers is six times higher than that of its regular corporate clients. “This
is a growing area that we want to expand, and to work with the right customers
to get their people into our hotel,” he says.
Client spend rolled up by Hyatt includes not only transient travel but meetings, extended stay and even the
holidays of clients’ employees. Dalgleish is confident the latter can be
tracked and assigned satisfactorily, and can amount to a significant sum in the
case of companies with ten or even hundreds of thousands of employees.
If travel buyers want to pursue the integrated option, they need to start
a data hunt and form an internal coalition with whoever has responsibility with
the procurement team for meetings, according to Iwamoto. Key to making that
coalition successful, he says, is “trusting each other to ensure their specific
needs are met. You don’t want to get into a competition of ‘My spend is larger
than yours, so I should have more say in the supplier selection’. Whatever the
differences or variances may be, the internal corporate coalition has got to
get its strategy and processes aligned before it sits down with suppliers or
even sends out a combined RFP.”
Meanwhile, Batra urges flexibility by buyers not always to hold the
supplier to the agreement. “Sometime you have to understand that a certain
supplier may not be profitable. In some cases we have accepted changes to a
contract because the hotel was so small that it was struggling,” he says. “We
want to come back next quarter or next year and we want to make sure that it’s
a healthy relationship. You have to be fair to suppliers.”
Batra adds that buyers must extend the same flexibility to their internal
customers. Sometimes the contracted hotel supplier in question may not have appropriate
accommodation for the needs of a particular meeting.
That’s why, says Diamond, if an integrated approach is going to succeed,
clients need to present suppliers not only with historical spend data but a forward
schedule of quarterly meetings, annual conferences, sales training and other expected
events. “Show us what the planning is,” she says. “It doesn’t have to be set in
stone. We know things change. But it’s about transparency – having that
sensible conversation.”
Even with her wariness based on lengthy
experience of integrated negotiations, therefore, Diamond adds: “It’s not to
say that it’s not possible. But it’s a dialogue. It’s much more nuanced and
it’s not just about sending out an RFP and saying ‘Respond in ten days, here
are the terms and conditions, take or leave it’.”
Last time: Hotel RFPs – The negotiating outlook for 2024 rates, poll result:
