Anybody Understand the Corporate Hotel Market?

I spoke to somebody last week about the problems they were having whilst trying to organise a managed hotel programme for their company. He is new to this side of the business and could not comprehend the basic issues he was facing. All he was certain of was that nobody really knew what the company spent and whether they were getting good value. Ok they had a corporate card that most travellers used but nobody seemed to be able to tell him any useful spend detail.

He was also concerned that there seemed no simple, coordinated and efficient way of making, changing or cancelling bookings. There were so many different ways and each with varying processes. Some you could book online and some you couldn’t. Some on the GDS but most not. The majority necessitated a call to an agency which cost too much for such a transaction. He correctly identified that these variations contributed greatly to the lack of proper MI. What he wanted to know from me was what the problem is? Why is it so hard to book hotels in a way that gives him as a buyer what he absolutely needs to do his job? I gave him the basics as I saw them and thought you might like to read them too.

The hotel market is hugely fragmented. There are thousands upon thousands of hotel and most of them act individually. Yes there are major hotel chains and yes there are consortiums but even here a large amount are privately owned. Consolidating a programme becomes very difficult when there are so many different players with different systems and different communications methods and language. This differs hugely from airlines which are not only far smaller in numbers but use the same GDS booking platforms and share similar systems and codes however I did warn him that this may be changing soon!

So how should one make a reservation? It would be good to combine it with the air or rail booking but unfortunately the range of hotels in the airline booking systems (GDS) is tiny compared with the market. Add to that the difficulty of being able to use your own negotiated fares or room allocations and it becomes not a very feasible option.
You could connect to the numerous hotel booking web sites but again can you be sure you will be booking your deal and capturing sufficient detail. You might get one-off savings using their buying power but creating a nightmare in payment, reporting and control terms.

Out of frustration and a desire to save fees charged by agencies many travellers book direct with the hotel but is that what you really want them to spend time doing? And then again you could miss out on consolidated MI for policy measurement, security and negotiating purposes. I can understand why travellers or their administrators want to make hotel bookings personally but in my view you can forget about control if you let them do it. It is also very vexing when they find out the hotel GM is spot selling rates cheaper than your centrally negotiated deal. This is another thing that regularly happens in this industry.

I advised him that I can only see one logical way of consolidating all ones spend items together and that is through a Travel Management Company (TMC). There are not that many yet who can provide a true solution and it does not come for nothing so buyers need to be absolutely committed in order to reap full benefit

You basically need to find a TMC that can deliver a system that seamlessly links the GDS booking system to their own separate hotel booking and management platform. This platform needs to directly connect with the main hotel chains and have the ability to store and manage your negotiated rates and room allocations with them and the others. All this, and other services need to be on one customer friendly booking screen. It would also be valuable to have this screen branded to your company not the TMC.

Taking pre booked room allocations at key locations is essential in order to allow the system to confirm rooms to travellers straight away and avoid unnecessary costly and time consuming middle-man phone calls. These allocations when combined with those negotiated by the TMC themselves often mean that hotels that seem full can still be bookable to you. It also results in your travellers have their own company one stop shop that pulls together their whole journey along with bolt on services such as policy compliance authorisation system and communication opportunities.

To me his choice is relatively straightforward. He either does what 90% plus of corporations do which is keep their hotel programme separate from air or go the whole hog and combine the two in an online total travel solution which is only now beginning to become a viable solution. I wished him luck and went back to my hotel room…which I booked myself!

What does a hotel brand really mean?

Does that seem a weird question? Probably so but what I am trying to say is, does the logo over the door actually mean, or importantly guarantee anything? Is it saying ‘This is a Hilton, Holiday Inn, Four Seasons or whatever and this means you should expect and get what that brand markets?

This question is borne from spending many years trying to truly understand and make sense of the hospitality industry. It is a vital sector yet commentators and industry bodies barely notice it when compared to say airlines. What does make it so very different? And why should anyone need to care?

I think the difference is ownership hence my original question. You see there are quite a few different ownership scenarios within a single brand. Because a hotel displays say Hilton over the door does not mean it is owned by Hilton. Very often it is owned by someone completely different but Hilton has the management or marketing contract to run it and is employed by the owner to deliver an agreed profit. They are an employee of the owner and have to act accordingly.

So what I am saying is that if you negotiate with a hotel chain you may not be speaking to someone who has absolute control over policy, inventory or pricing with all their properties. Hence you can find yourself in a position where various properties opt out of some commercial agreements which are good for the whole family but not for them. It is a bit like a global TMC who has to sacrifice profit in one location to deliver a good deal in other countries. Most TMCs have had to come to terms with this but I do not think hotels have.

The issue becomes even more convoluted when you are dealing with hotel consortiums. These are mainly pure marketing organisations where hotels (of a certain comparable quality) link their properties to an umbrella brand in order to take on the big boys and achieve global coverage. Again, this does not mean that such consortiums can tell these hotels what to do as far as pricing and inventory is concerned.

Probably still the most influential person in any hotel is its General Manager who can, and do, instruct their reservations office to close out heavily discounted negotiated corporate rates if they think they can sell for more. Even worse for the bigger corporations is when their travellers tell them that the hotel ‘price at the door’ is cheaper than that negotiated by their procurement department. Sounds familiar?

Another side effect of confused and disparate ownership is the woeful lack of management information you get fro the hotel industry. The only really useful thing IATA does for airlines is it provides a standardised language and reporting base that is essential for meaningful information. Hotels do not have this type of global format hence they all do things in different ways. You really would be shocked by how little they know about their customers and what they spend.

So what am I trying to say? I am advising all buyers to find out exactly what control/ownership of key properties a chain or consortium has. Maybe you should insist on key contract clauses like last room availability and lowest price on the day. Perhaps require countersignature by the GMs of the main hotels confirming they understand and support the contract. Finally, why not think of ways to make your oh so wise travellers become willing watchdogs by actively encouraging them to test the system. You know how they love it so!

By the way, I have mentioned a few hotel brands in this post. This has been purely for general illustrative purposes only and does not imply that I was refering directly to them.