For most business travel buyers, now is the moment in the negotiating cycle to sit down with hoteliers and negotiate 2007 rates. At this time, it is more incumbent on buyers than ever to demonstrate that they have significant volume they can shift through corporate policy. In this seller's market, the more effectively they have been able to drive compliance, the better their chance of ameliorating increases.
Having a mandated hotel program facilitates easier negotiations with preferred vendors, but many companies—perhaps as many as 50 percent—remain nonmandated, according to Maria Chevalier, BCD Travel's vice president of hotel relations and travel procurement services. Further, hotel compliance within a nonmandated travel program pales in comparison to air.
"Air has had great success, with a compliance rate that runs around 98 percent," said Chevalier. "Hotels only run in the 50 percent to 60 percent range in terms of compliance."
This disparity, coupled with rising hotel rates, is causing companies to take a closer look at their hotel spend. The latest data from American Express Business Travel's quarterly Business Travel Monitor report said average domestic booked hotel rates increased 3 percent to $139 in the second quarter this year, compared with the same period last year (see story).
Yet, while there are indications that room rates will continue to rise both domestically and internationally, many companies still remain nonmandated, and the onus falls on corporate travel managers to compel employees to book preferred properties, whenever possible. The question then is, if you don't mandate, how do you influence?
"The right program mix, good data and analytics to negotiate at the right hotels in the right locations," BCD's Chevalier answered. "If mandating doesn't work culturally, then you have to be able to influence. There is enough functional technology today which can attract a traveler to your program and to use your preferred booking channel, which, in turn, will compel them to book your negotiated rates. Having travelers in your booking channel influences them at the point of sale. Influencing them into your booking channel is influencing them to use preferred properties, but you need to have the right properties, the right information and functionality that travelers will want to use."
Brian Nichols, hotel and ground transportation manager for Deloitte Services LLP, oversees a hotel program that is not mandated, but he said that one of the misconceptions in the hotel industry is that a nonmandated program is not strong.
"Whether a program is mandated or not shouldn't be the question that measures a program's effectiveness," Nichols said. "It should be, does the program have the mechanisms in place to move volume to preferred suppliers."
Nichols said companies without a mandate often have strongly worded policies. "You can only call it a mandate if you're not going to reimburse travelers who don't concur with the policy," he said. While nonmandated programs do not go to that length of admonishment, there are other, more subtle ways to persuade travelers to fall in step with a hotel program, such as reporting to senior managers or issuing divisional reports. "An effective travel program has to recognize the different points at which travel managers can affect traveler behavior," said Nichols.
To achieve this, travel managers need to, according to Nichols, clearly communicate the benefits of staying within the prescribed boundaries of the program and influence them at the point of sale. "Where do we touch traveler decisions?" asked Nichols. "Before you get travelers booking the right hotels, you have to get them using your managed reservation channels, because that is where you bias the preferred options. The channel needs to be easy to use and rates at preferred hotels need to be clearly designated and accurate."
Likewise, pre-trip reporting can be a valuable tool for driving compliance. Simply informing travelers at the point of sale that they booked a nonpreferred property and offering a better rate option can often resolve the issue.
"Too many times it waits until the back end, once the trip is already expensed," Nichols said.
Minneapolis-based Medtronic Inc., a medical technology provider, takes a highly data-driven approach to spur traveler compliance, also relying on a decentralized method to wrangle noncompliant travelers. Gerry Williams, Medtronic's director of travel and expense reporting, leans on each company business unit to ensure employees are following steps toward booking with preferred properties. The information he provides for each unit, he said, helps do this.
"We track the rate differential between preferred properties and nonpreferred properties by citypairs and communicate savings opportunities out on a monthly basis to our business units," Williams explained. "We'll do a profile analysis where we analyze an individual city and come up with cost differentials and savings opportunities."
It then falls on the business units to impress upon their employees to book at specific properties as a way to deflate company costs. Williams said that though there still aren't repercussions for travelers who book out of policy, the company has started to identify travelers by name who are out of compliance. Williams added that the company's new travel policy, implemented last year with an emphasis on hotels, is showing signs of success. "It's starting to work moreso as hotel rates increase and there is more of a mindset to control cost."
Yet, convincing travelers to book certain hotels can be exacerbated if senior management personnel do not offer their intransigent support.
"Here's the inherent crux of this matter," said Stephen Ridzon, vice president of Norwalk, Conn.-based Management Alternatives, Inc., who also served as American Express' director of global corporate travel for 13 years. "A travel manager will say, 'I'm in a tough spot. We worked really hard to put a formal policy in place. I have a preferred supplier program in place with service-level commitments, but it's all based on a nonmandated program.' Invariably what happens is that senior management will come back and say something like, 'This policy is great, but not for me, maybe for the rest of the company.' But there's no way you're going to manage a top-to-bottom an effective program with that kind of thinking. It must be understood that a management policy must be in place and it has to be owned by the executive management of the company. The policy needs to be single-tiered and apply to everyone from the most senior executive to the most junior ranking employee."
Ridzon is a proponent of mandated travel and he has a tough time believing that compliance can be attained any other way. "You're not going to be able to achieve a best-practice travel program and get the kind of compliance you need if you don't have a mandated program that conforms to the company's culture and supports its strategic business goals," he said. "Mandated programs put the teeth in consequence management. If travelers know that the program is nonmandated, it's their opportunity to opt out."
Ridzon recounted one other reason in support of mandated hotel programs: traveler safety. If travelers book out of policy, then they, more than likely, will be staying at properties that were not given due diligence by the company's travel team.