Travel buyers are urged to frequently audit their hotel rates – because more than one in six corporate hotel contracts contains an error.
GBTA vice-president Catherine McGavock was addressing delegates at the HRS Corporate Travel Forum in London, presenting joint GBTA-HRS research that polled more than 400 travel buyers around the world.
She said those contract errors cost companies an average of 14 per cent more than their negotiated hotel rate. “Rate auditing makes a real difference,” she said.
While 86 per cent of buyers polled said they do audit rates, the frequency varies, with just 9 per cent auditing monthly, and 27 per cent doing it once a year.
McGavock added that sources of audit information varied. “Relying on travellers or hotels is probably not the best approach – neither are privy to every contract detail nor reliable enough to accurately report incorrectly loaded rates,” she said.
HRS vice-president Flavio Ghringhelli compared the markets for air travel and hotels, showing how air travel is a seller’s market, whereas hotels are a buyer’s market. Just 250 airlines supply 95 per cent of all international flights, while of the world’s 450,000 hotels, 76 per cent are independent.
He said the fragmentation of the hotel market offers more savings – 20-35 per cent compared to 7-9 per cent with buying air, but means higher ‘complexity’ costs in the distribution chain, including ‘squatter rates’ – rates loaded into the GDS by non-preferred properties via a buyer’s rate access code. Another issue for buyers and TMCs is that just 23 per cent of hotels in the world are available on the GDSs.
Ghringhelli said that outsourcing hotel procurement will become the “new normal” to reach wider cost savings across the accommodation market. And consultant David Jarach quoted two chief procurement officers from multinational companies; one said that “outsourcing provides significant benefits in terms of cost savings, enhanced efficacy and better focus over core processes,” while the other said: “We don’t feel the need to develop an internal competence over travel services, rates etc – it’s not our core business.”
One travel buyer said reducing leakage is driven by both education and giving employees more choice, but also utilising good data: using ‘reason codes’ – for example, for an event – when booking travel means your system can automatically chase employees if they haven’t booked hotels at the same time as booking their air travel.
The forum also discussed KPIs (key performance indicators); in addition to cost savings targets and service level agreements with suppliers, buyers should consider looking at KPIs for demand management, user satisfaction and innovation.
Total cost of ownership
Discussing ‘total cost of ownership’ of a travel programme, Duncan Brock, group director at the Chartered Institute of Procurement & Supply (CIPS), said he is seeing more demand for sales skills by procurement professionals. “You need to have done your homework to make a compelling case for change.”
He cited ‘emotional intelligence’ as one of the skillsets, and one buyer added her company had a ‘business partnering programme’ to help procurement people harness emotional intelligence to engage and connect with suppliers and partners.
Buyers said measuring ‘total cost’ is a challenge – for example conducting a time management study on travel booking habits both within and outside preferred channels can demonstrate the value of your programme, but agreed with CIPS director Brock who said the biggest challenge for this type of strategy is lack of resource.
One travel buyer who backed this up said her initiative to conduct an RFP (request for proposal) for a single global TMC involved engaging a wide range of stakeholders including IT, human resources, health & safety and finance – who all had something to say. “don’t underestimate how much time and effort is needed to get buy-in,” she said.