Corporate travel involves a lot of hotel stays! At some point, all hotels have more rooms than they can sell through their own web site or call center. Hotels often turn to wholesalers to sell these rooms. Hotel wholesalers are independent companies who buy rooms in bulk and re-sell them to budget conscious travelers. The largest wholesalers sell rooms directly to travelers on their web sites. Expedia and Priceline are well known examples. Hotels require these wholesalers to abide by strict contracts. In particular, they are not allowed to offer a room on their web site at a lower price than the hotel is offering on its web site.
Some wholesalers sell rooms through tour operators and travel agencies. Agencies are allowed to offer these rooms at much lower prices than the hotel is offering on its web site. In fact, a travel agent can often offer a room for 40% less than the hotel. Agencies cannot publish these rates on a web site that is available to the general public. Instead, travelers must call agents over the phone. Agents then make the reservations using private web sites protected by passwords.
How to use wholesale hotel rates for corporate travel?
Agencies know that they are allowed to offer wholesale rates to corporate travel customers. Travel managers find the savings very appealing. Travelers stay at the same quality hotel. However, corporations rely on online booking tools to make most of their reservations. These tools:
1. Enforce their travel policy.
2. Access their negotiated rates.
3. Show travel managers how funds are being spent.
The booking tools supported by travel agencies rely on systems which are decades old and do not have access to the wholesale rates. Companies looking for greater savings should find a travel solution which can:
1. Show wholesale, negotiated, and public rates in one search.
2. Show whether each rate complies with the organization’s travel policy.
3. Direct the traveler to choose the lowest rate which meets the business needs.
Big changes have come to airline frequent flyer programs in the past five years. Southwest Airlines was the first to change its travel rewards program, known as Rapid Rewards program. In 2011, Southwest began awarding points based on the cost of each ticket rather than the number of flights. Southwest also began offering additional points to travelers purchasing refundable fares and to travelers who fly often enough to be in its A-List elite program. Delta and United mimicked Southwest’s changes in 2015, awarding travel rewards (miles) based on the cost of the ticket and the traveler’s elite status rather than based on the distance of the flight. American Airlines announced that similar changes to its AAdvantage program will take effect in the summer of 2016.
What impact do travel rewards from airlines have on a corporate travel program?
Are these changes good news for a corporate travel program? In short, no. They incentivize the behaviors that the travel policy is designed to avoid. Everyone knows that airfares usually rise closer to the date of departure. In fact, a study revealed that tickets sold one week before departure are 30% more expensive than they were two weeks prior. Tickets sold a few days before departure are often more than twice as expensive. The new programs encourage business travelers to wait to the last minute to buy their ticket so that they earn the most miles by paying the highest price.
Elite status has always provided an incentive for the business traveler to choose their flights based on the airline rather than the price. However, the bonus miles and points take this perverse incentive to a new level.
How can corporate travel managers curb this trend?
Corporate travel managers can fight back with a few powerful tools.
Require travelers to choose the flight option with the lowest logical fare. An online booking tool with a rules engine can determine which flights are “logical” based on departure and landing times, duration, and number of stops.
Require travelers who make last minute bookings to justify them with a written explanation. The explanation can be captured using your corporate travel system when the reservation is made.
Everyone knows that hotel rates vary by market, season and when the room was booked. However, no one would describe hotel pricing as intuitive. Take the San Francisco market. The federal government estimates that the median rate for October of 2016 will be $250. Travel rules applied by government agencies will reflect this amount. However, a search for hotels on October 5th in a corporate travel system returns a median hotel rate of $409.
Travel rules will only be effective if an organization uses real time hotel rates.
The rate is high because a very large conference will be held on this day. In fact, there are more people attending this conference than there are hotel rooms in San Francisco.
Why are traditional travel rules unfair?
However, a hotel reserved at this rate would violate your typical travel rules.Hotel rates in a traditionaltravel policy are based on average prices in the market and month of the year. They do not take into account large conferences, days of the week, sub-market, length of stay, advance booking time, and other factors which have a significant impact on room rates. As a result, the company may not reimburse the employee for the full cost of the hotel.
Similarly, most managers reviewing an expense report for this hotel stay will question the cost. They may not know that the conference took place or how much impact it had on hotel prices. They don’t have time to research hotel costs on different web sites. Even if they did, most expenses are reviewed after the trip was completed and hotels don’t show rates for nights in the past. The manager may conclude that the employee didn’t use travel funds responsibly.
What can you do to address this situation?
A few common sense steps and the right travel software can solve this conundrum.
Set a travel policy based on the median rate in the market rather than a flat rate per night.
Use a travel booking tool that calculates the median rate and shows which hotels are out of policy.
Have the travel system notify a manger when a trip is booked. Trips which are too expensive can be cancelled without penalty.
Show the expense approver the rates available at the time that the booking was made. This gives the approver enough information to decide whether the travel funds were spent wisely.
Contact us to learn more about creating the right hotel policies.
Deciding how to pay for corporate travel can feel like being stuck between a rock and a hard place. Corporate credit cards make sense for senior managers and other frequent travelers. However, corporate credit cards are not good options for employees who travel less than once a quarter. They carry the risk of loss or misuse. They also can’t be used by independent contractors or job candidates.
Employees who charge travel to their personal cards can be stuck carrying a large balance until they are reimbursed. In such instances, the company also misses out on corporate card rebates. These rebates can be as high as 1.5% of spending.
How do ghost cards work?
A ghost card represents the best of both worlds. It is a single credit card that is used to pay for travel for a number of employees. Here is how a ghost card works.
A travel manager saves the ghost card in the organization’s online travel system.
The travel system enables the manager to control which employees have permission to use the card. The manager can set the type of travel (flight, hotel, and rental car) that can be purchased by each employee.
Employees purchase their travel within the online system. The system automatically submits the card details. The employees never see the full card number.
Will you get a huge credit card bill and have no idea who spent what and why? Not so fast. An online travel system with an integrated expense management tool makes the process a breeze. Here is how it works.
Commercial credit cards provide electronic statements which include ticket numbers, hotel identifiers, renter names and destinations.
The travel system knows which employee made each reservation by matching this data to details captured at the time of booking.
The expense system lets employees assign cost centers and add receipts to ghost card charges. Explanations can be required for bookings that fall outside of the travel policy. Managers review and approve all charges.
Negotiated hotel rates are one of the most powerful ways to save money on corporate travel. These rates may save companies anywhere between 20% to 50% on their hotel expenses. In fact, corporate negotiated rates represent almost 30% of US lodging industry revenue.
It is a common misconception that only large corporations have the market power to negotiate a lower rate with hotels. On the contrary, companies that spend as little as $5000 in a particular market can be successful in negotiating a preferred rate for themselves.
How to get access to negotiated hotel rates?
The following steps will help you negotiate a lower rate.
Identify the markets where your employees travel to frequently.
Calculate the total number of room nights you expect to spend in each market. These figures may be monthly, quarterly or yearly.
Locate the destinations (such as offices, conference centers, etc.) in each market where your employees are traveling to. Find hotels that are convenient for the business purpose.
Send a “request for proposal” to the sales manager at each property. This is also known as an RFP, for short.
Review every RFP and then select preferred hotels.
Put a process in place to ensure that your employees make reservations at the said property. You will also need to ensure that they utilize the negotiated rate.
Does this sound like a lot of work? Of course it does! How will you gather all the data? Collating this information can be very hard for companies using antiquated systems and processes. However, organizations using the right software can access the data with a simple click.
How many room nights did my company use while traveling to destinations within three miles of downtown Chicago in 2015? Click.
What was the average room rate that we paid? Click.
What were the rates offered by other hotels of similar quality? Click.
How to ensure that your employees take advantage of negotiated hotel rates?
How do you make sure that your travelers actually book rooms at the hotels you have chosen? After all, travelers have every incentive to stay at hotels that give them the most miles or reward points.
Luckily, an effective travel policy and the right software makes the process work. With the right tools, you will be empowered to do the following.
Write a travel policy which requires your employees to book hotels through your travel system. Use an integrated expense system to flag hotel reservations booked through other channels for review.
Configure your travel system to highlight negotiated hotel rates at the top of the search results.
Alert managers by email when a traveler chooses a rate that is more expensive than the negotiated rate. Configure your expense system to flag such reservations for further review.
We let you do all of the above and a lot more. Feel free to contact us right away to request a demo.