Hotel RFP Hell: Is the End at Hand?

Let’s agree that all our friends and colleagues who are in the midst of yet another grueling hotel RFP season should have our sympathies.

You’re dealing with big chunks of invisible hotel spend, crappy data on the visible spend, clunky RFP tools, tedious back-and-forth negotiations, last room availability promises that won’t be kept, and disgruntled hoteliers only too happy to poach your travelers with squatter rates that they’ll offer as long as it suits them. Ugh.

Oh, yes – you’re also facing one of the toughest negotiating environments in what, a decade? Ouch.

Speaking of decades, we know you’ve been putting up with this predictably stressful process year after year, for what, two or three decades?  Gag.

Hang in their, friends, for the future is much brighter.  I saw a glimpse of it at the Beat Live conference in D.C. last week.  But fair warning…you’ll need to grit your teeth and open your minds, as it’s not an easy pill to swallow.

Two pills, really.  The first is TRIPBAM; the second is dynamic pricing.  Here’s how they get you out of the hotel RFP desert:

TRIPBAM is a clever hotel rate shopping service.  Send it a hotel reservation, and the service monitors that hotel’s rate, and if you like, a set of nearby similar hotels (your choice if they need to be preferred hotels). These similar hotels are all in a geographic cluster, so the traveler should not have a location issue.

If TRIPBAM finds a lower rate than the initial rate in the cluster, you get the option to cancel the original and re-book at the lower rate.

Folks, this is like sourcing every hotel in your program 24/7/365…all on auto-pilot. Look, Ma – no hands, no RFP process.  Woohoo!

But wait, you say – surely I still need to go through RFP hell to get those initial rates, right?

No, you don’t, or at least not nearly to the same extent as you’ve done in the past. This is where dynamic pricing comes in.

Instead of negotiating for flat room rates, you negotiate for a discount off of BAR – on all room types, no blackout dates.  Voila – no more LRA issue.

Sure, taking a discount off of BAR means your prices will fluctuate.  Up or down.  Just like airfares.  What should matter most is whether or not your travelers have access to a room at a price that is below market, and that the supplier will actually honor that price.

Even if you’re not sold on dynamic pricing, you can use TRIPBAM to cut way down on your hotel RFP workload.  In your high-volume markets, stick with the traditional negotiation for fixed rates…but for everywhere else, you have a couple of interesting options:

One is to tell your most popular hotels in each lower-volume market cluster what rate you need to get them onto the approved list, and that you’ll be shopping rates anyway in the market.  TRIPBAM can tell you what the average shopped rate is in any market cluster, so you’ll have a trusty benchmark for your price-setting.

The other is to not bother seeking a preferred rate from any hotel in your lower-volume markets, and just rely on the rate shopping service to serve up the most cost-effective hotels throughout the year.

Most corporate hotel programs have a really long tail of room nights by market, so you could wind up chopping your RFP workload down by what – two-thirds?   You’d have a lot more time to put into those high-volume market negotiations, or for any of the dozen other things that need your attention in the last half of the year.

Still not convinced?  Check out this story on BTN about how Dell’s Kristina Laurel is using TRIPBAM to improve her hotel program.

Agreed, this isn’t a perfect vision for ending the hotel RFP madness, but this type of automated rate-shopping service surely is a big part of the solution.

NB: I have no commercial ties to TRIPBAM; just a fan of this clearly useful innovation in our industry.

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8 Responses to Hotel RFP Hell: Is the End at Hand?

  1. Spot on Scott. Good technology and making good use of it is the future. There was a very innovative Hotel Booking Agent here in the UK that offered the same benefit as TRIPBAM as part of their service package. Whilst it only found cheaper rates on a small percentage of bookings it overcame the complaint from travellers that they could find it cheaper elsewhere than through the preferred booking channel.

  2. tomruesink says:

    Great article, Scott! I agree completely. I think a lot of products, not just travel, are making their way down the dynamic pricing path – airlines just happened to lead the way. I’d still love to see a PRISM measurement (market share commitment) for hotel as well but the market may be too fragmented for that. TRIPBAM is certainly an innovative product. Tried it out and was impressed. Excellent companion to this dynamic pricing movement.

  3. Simon says:

    Hi Scott – Interesting stuff, but using technology to reduce (and in many cases eliminate) the RFP process is something we’ve been doing over here in the UK for many years.

    It’s all thanks to the fact that over the last decade the hotel industry sold it’s soul to the OTA’s, and in particular became addicted to the OTA’s ability to shift distressed inventory. The result for the vast majority of organisations is that their RFP sourced rates simply became uncompetitive during the peak business travel booking window of less than 7 days – hence the #1 traveller complaint of “I’ve found a cheaper rate online!”

    We did some extensive research into this, which is surmised by this fascinating chart: http://goo.gl/8tkvkF

    We turned this insight into action by aggregating content from lots of different channels (GDS, OTA, direct connects, etc) and encouraging organisations to adopt what we call “dynamic travel policy”.

    In a nutshell, rather than your travel policy specifying, say, “the maximum rate you are allowed to spend on a hotel is £80”, we say “the maximum rate you are allowed to spend on a hotel must be within 15% of the cheapest hotel rate within 2km of the location you are searching for”. In other words, the policy tracks the cheapest hotel rates in the area, at the time of booking, no matter what channel the hotel is publishing the rates.

    For many clients this approach has led to them disposing of their RFP process entirely because they simply have no need for contract rates anymore. Others do maintain contract rates typically in areas where they have substantial volumes – but they do so mainly to provide a “ceiling rate” to cover off times where the location is particularly busy and hence the OTAs are either expensive or closed out.

    The results of this approach are pretty dramatic. For example Land Securities reduced their average hotel rate by 24% (case study here: http://goo.gl/1vrFME).

    Simon

  4. Scott Gillespie says:

    Thank you, Simon – this really does prove the point that there are smarter ways to tackle the issue of securing the best hotel rates.

    I, and I’ll bet many of my readers, would be keen to get more details around the data that went into the chart you’ve provided. It is remarkable how the published prices diverge between the GDSs and OTAs…a real eye-opener. Could you share a bit more about how these findings were developed?

    • Simon says:

      Sure. Each time anyone does a search on our platform, behind the scenes we store every result that comes back from every channel, along with the search criteria and various other meta data. From this mountain of data we can do all sorts of analysis, such as building a picture of how hotel prices change in accordance with lead time. The data in the chart that I provided actually relates to one particular contract rate at a hotel in London, aggregated over a 3 month period. But what we found was that no matter which specific contract rates, or properties, or areas we analysed, the general pattern was almost always exactly the same.

  5. Pingback: Hotel Rates Rising, But New Supply Gives Buyers Leverage

  6. Pingback: Teplis Adds TRIPBAM to Help Corporate Clients Save on Hotel Bookings – Press Release Rocket

  7. Pingback: Top 5 Posts in 2015; What should I write about in 2016? | Gillespie's Guide to Travel+Procurement

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