How do I find the best accommodation rates for my business travelers?

When aiming to negotiate prices, it's important to understand the business model of the negotiating partner.

Let's take a look at the accommodation industry:

The number of hotels depends on various factors such as the definition of what constitutes a hotel (from small guesthouses to large luxury resorts), regional developments in the tourism sector, and economic conditions.

According to an estimate from 2019, there were over 700,000 hotels of different sizes and categories worldwide. This number will have changed in the years since then, influenced in part by the impact of the COVID-19 pandemic.

Additionally, there are 'long stay' apartments and private residences offered through platforms like Airbnb, which are increasingly used by business travelers.

Different sources provide varying ratios of how this supply is divided between private travelers (tourists) and business travelers.

A rough approximation suggests that about 30-40% are business trips and 60-70% are leisure trips.

Every accommodation establishment aims for a high occupancy rate around the clock. In other words, almost every hotel needs both private and business travelers.

The attractiveness and targeting of these customer groups are heavily influenced by the traditional adage that the three most important criteria for successful hotels are 'location+location+location'.

Today, one could say 'location+location+online presence'.

This brings us to a point that plays an increasingly significant role in answering the question 'How do I find the best accommodation rates for my business travelers?'.

Let's equate online presence with the use of IT.

In distribution, different costs are associated with booking for each accommodation establishment (direct costs):

• In-person/Phone/Email: 0%
• Through the hotel's website: 0%
• Through Online Travel Agencies (OTAs): 15% - 50%

Clearly, every hotel would prefer that all bookings - including those for business trips - come directly to them and not through intermediaries.

For business trips, this is not feasible, as additional criteria beyond price come into play. For instance, how far is the hotel from the actual destination of the business trip? In other words, how much time and transportation costs need to be added to the room rate to make a realistic comparison? Sustainability factors are also increasingly important in the accommodation industry.

This implies that for every trip, you would need to compare among 'numerous' hotels directly to determine the actual price.

This effort is taken over by OTAs - along with other services that vary from company to company.

One of the highest-paid positions, especially in the hotel industry, is that of 'revenue management'.

Sophisticated systems allow these managers to optimize prices on a daily basis - of course, from the hotel's perspective.

Factors like their own occupancy rate, current prices of direct competitors (yes, this can be monitored), upcoming local events (trade fairs, conferences, gatherings) are factored in.

Thus, it can be assumed that accommodation prices can change almost hourly - a phenomenon familiar from the airline industry.

From this, it can be inferred that negotiated fixed prices must be structured to smooth out all conceivable or at least foreseeable price fluctuations.

This means that you must be a significant purchaser for a specific hotel in order to obtain such prices.

Sufficient coverage can only be achieved by DAX or Blue Chip companies, and even they usually negotiate directly for only 25-30% of their needs (number of hotels, not costs), utilizing OTAs or similar for the remaining accommodations.

For SMEs, this means it's no longer worth negotiating hotel rates bilaterally.

Unless, of course, you genuinely have a travel destination that is used so frequently that your company contributes significantly to the local hotel's occupancy.

Pay close attention to the contract terms if you intend to include such a hotel.

I've seen contracts where the negotiated price applied all 365 days of the year.

This means that even when the hotel needed to bolster its occupancy with special rates at times, etc., the fixed rates still applied. And bookings were only allowed directly through the hotel.

Apart from the fact that it was quickly calculated that these inflexible rates were overall too expensive, such a hotel is excluded from any statistics that your STM (Strategic Travel Management) desperately needs.

Otherwise, your STM will repeatedly assess which electronic booking method, coupled with further administrative support such as cost coverage (reducing creditors to one) and invoice verification, is best for your company.

Currently, it's interesting to note that OTAs, which mostly offer their own - sometimes extensive - portfolios based on their own contracts, are facing competition from Meta Search platforms. These platforms compare at least 60 sources for price development for each booking. (It's worth noting that these 60 sources also include OTAs.)

It took some time for companies to adapt this Meta Search system to the dynamics of business travel.

Now there are companies that utilize databases from travel organizers, check whether the offered price there aligns with the conditions required by the business traveler (short cancellation periods, no rebooking fees, etc.), and then offer that rate.

If today you allow your travelers to search the internet themselves and they book according to their preference or 'somewhat' through your travel agency or exclusively through a specific OTA, by using a Meta Search tool, you can expect cost savings of 10-20%.

I'd be happy to assist you in finding the best solution for your company.

In this article, I've used the term OTA multiple times. It stands for 'Online Travel Agency' and was initially somewhat misleading, as most entities falling under this term initially 'only' facilitated hotel bookings. The largest ones, for example, are Booking.com, CRC, Expedia, and HRS, listed here alphabetically from a German perspective.

And just to reiterate, STM stands for 'Strategic Travel Management,' which any company with an annual total travel cost of over €500k requires, as opposed to OTM 'Operational Travel Management'.

#hotelrates #bestprice #accomodation #OTA