Developments in technology and the marketplace are driving change in the annual hotel RFP ritual
Like Stonehenge or the Great Wall of China, the annual hotel RFP process seems to be an enduring feature of the corporate travel landscape. However, recently cracks have appeared in the wall. Changes in technology have had an impact on rates and booking systems and supplier consolidation may give additional negotiating leverage to sellers. Further, there’s been enhanced emphasis on traveler satisfaction and productivity.
Despite that ongoing evolution, many observers see the RFP process as resistant to change – though some don’t see that as necessarily a bad thing.
“The fundamentals of RFPs are still present in the projects we see,” says Michael Robertson, vice president of sales and account management for Egencia, Expedia’s business travel subsidiary. “We’ve noticed a trend in accelerating integration with technology to manage the process through web portals and analytic tools to make reviewing information more efficient.”
Amazingly, says Kevin Fleiss, vice president for Cvent Hospitality Cloud, more than half of all RFP’s are still managed offline, “so the biggest ongoing change is the shift to digital. Each year, more planners and organizations are adopting eRFP sourcing technology.”
But there are those who think change is already significant. William Sarcona, assistant general manager of KIE/Kintetsu, a TMC, says, “There really is no ‘RFP season’ anymore. Contracts are being created and modified year-round, as the corporate companies and travel agencies need to adapt to an ever changing market and the fluidity of online agencies and their pricing models.”
Opinions diverge widely on what the future of the RFP process should be, depending on where the observers sit. For example, Steve Reynolds, CEO of tripBAM, the hotel shopping service, says, “The process is still insane with 100’s of RFPs going out waiting on a response, followed by several months of back and forth. There is no strong commitment on either side of the agreement.”
Taking a more positive tack, Will Tate, partner in GoldSpring Consulting, says the current process works but needs to be broadened to include service and productivity as negotiating points. “We see travel as better managed than ever,” says Tate, “and that’s why traveler experience has now come to the forefront and has become the number one issue for mature programs.”
Cancellation Becomes CrucialUnsurprisingly, rate continues to rule when it comes to negotiations, but the recent move by Marriott, Hilton and others to tighten cancellation rules (fees for canceling less than 48 hours before arrival) has brought that issue to the forefront. “The value for cancellation up to 6 PM day of arrival is big,” Reynolds says. “Very few companies (if any) know the true cost of cancellation fees.”
For example, he explains, “If rates stay the same as with the 24-hour cancellation, companies will push their flat rates more aggressively and potentially exclude these 48-hour rates from the online booking tool as well as move travelers to competing hotels with more flexibility. If they are discounted, we’ll include them but only if they generate enough savings to offset the risk.”
According to Nicole Ferrer, corporate director of sales and marketing at Triumph Hotels, “Most travel managers will push back on cancellation fees that are more than 24 hours prior to arrival. Managers prefer and push hard for 6 PM cancellation on day of arrival. I would be surprised if Marriott would implement this cancellation on negotiated rates.”
Beyond the cancellation issue, Reynolds continues, “Discount remains the key driver with a strong preference toward flat rates and a reluctance to use dynamic pricing. Last room availability is also a strong requirement with no room restrictions and few blackout dates. Non-LRA rates are nice to have but do not add much value.”
As for other negotiating issues, with the widespread availability of free WiFi and complimentary breakfast, those issues have receded but they can still be challenging. “We did a roundtable with corporate customers and when I asked how many travelers eat breakfast at the hotel they had no idea,” says Jeff Hillenmayer, head of sourcing in the Americas for HRS.
“Rarely do I sit down and eat a $25 breakfast buffet,” says Hillenmayer. “I go to Starbucks or Panera and spend $7 or $8 – so if you can get your negotiated rate down and not have breakfast included and allow travelers to get their own breakfast that might be to your benefit.”
But Hyatt and other hotel brands contend that a majority of travelers do eat breakfast on property, which is why Hyatt Place recently upped the ante on its complimentary breakfast – offering a Build Your Own Breakfast platform, featuring premium ingredients that are customizable and in bowl form.
Reynolds agrees on the need for more data, saying that amenities are “fairly low in importance due to lack of awareness in regards to consumption. Breakfast is hugely popular in Europe but not so much here in the US except for New York City. WiFi and parking are throwaways due to hotspots and ride sharing.”
Creative perks are taking a more prominent place in negotiation. Marwan Batrouni, hotel category leader for Advito, a corporate travel consultancy, says, “Some hotels offer free drink coupons and gift cards redeemable for hotel amenities. Others offer customer appreciation days and experiences like a local craft beer tasting. Savvy travel managers should seek these additional benefits when negotiating deals with suppliers to drive more travelers to hotels that add the most value to their overall program.”
And the focus on satisfaction and productivity is coming more and more to the fore. In the past, says Tate, RFP’s were all about an exchange of discounted rates from suppliers for more market share from buyers. Today, he says, “buyers are saying, ‘let’s have a discussion about service.’”
It’s not so much contractual, Tate explains, as it is about “the leverage a buyer might gain if they have data about traveler satisfaction. If I tell my traveler to stay at XYZ Hotel I will circle back to them and ask, ‘How was your stay?’ We can then tell the hotel – we liked your rate but the traveler was not happy or was happier across the street. We need to be partners here.”
Consolidation ComplicationsWhile the big news has been Marriott’s acquisition of Starwood, other companies like AccorHotels are becoming globally dominant, which is bound to have an effect on negotiations in some markets.
“There are going to be changes coming in the RFP process resulting from consolidation,” says Robert Langsfeld, a partner with Corporate Solutions Group, which provides travel management solutions to businesses. “The big players like Marriott now have enough muscle to have an impact on the process and they will act on that.”
Consolidated suppliers have made tools like strategic sourcing even more important as travel managers seek to maximize their total spend. “Providing a clear and open flow of information allows for a solution that shows real creativity, innovation and the best overall solution for the client,” says Thomas Cates, executive vice president-strategic brand development for Balboa Travel. “TMC’s need to know what the primary motivation is for change and what if, anything, is wrong with the status quo, etc. By better understanding the motives behind the RFP or the need for change, we are able to understand and provide the client the correct solution, which might otherwise have been missed.”
The Travel Manager’s RoleAccording to a recent survey of travel managers conducted by the GBTA Foundation in partnership with Best Western Hotels & Resorts, a large majority (87 percent) have some level of involvement with the hotel RFP process while 56 percent say they rely somewhat or a lot on a travel management company to conduct the process. Overall the process lasts an average of 3.2 months.
In general, the research found two-thirds of those surveyed are satisfied with the RFP process, and three-quarters of those who rely somewhat on a TMC for this task have higher levels of satisfaction. The 33 percent of travel managers dissatisfied with the RFP process note several factors driving their dissatisfaction, including how long it takes, the absence of tangible benefits from going through the process every year, and lack of resources to dedicate to the process.
Companies with larger travel spend have higher levels of satisfaction with the process. possibly because they can address some of these complaints and have greater resources. More than two-thirds (67 percent) of organizations with travel spend of $30 million or more claim to rely on a TMC somewhat or a lot, compared to only half of those with travel spend of less than $30 million.
In 2012, the GBTA Foundation and the GBTA Hotel Committee developed a Hotel RFP template to standardize the process. Two-thirds of those surveyed are aware of the template, while 40 percent say their companies currently use it. Organizations with travel spend of $30 million or more are more likely than those with lower travel spend to not only know about the GBTA Hotel RFP (80 percent vs 60 percent) but also more likely to use it (59 percent and 26 percent, respectively).
Looking To the Next RFPSome players hope for the demise of the RFP process. Among them is Steve Reynolds, who says, “Our proposal is it’s time to RIP the RFP. Sign evergreen agreements and only renegotiate rates in certain circumstances. The seller can renegotiate if the client isn’t delivering the market share that they promised. Automation today can easily measure these items and shift share as needed. Metrics should be monitored real time instead of using once-a-year heroics. Benchmarks are applied real-time rather an average across the entire year. The rate may be good in August but terrible in September.”
But while the current RFP process remains in place, there are strategies that can make the most of it. The GBTA Foundation survey offers these suggestions for travel managers:
• Use TMCs for time-consuming activities related to the RFP process while staying involved in the decision-making process
• Understand there is not a one-size-fits-all approach
• And, while yearly reviews may work for some programs, others may be successful with every-other-year reviews.
GBTA recommends travel managers “should analyze their decision-making process to understand the key elements relevant to them, organize them in tiered levels of importance and identify the top elements as essential to making decisions. The bottom-tier elements may not necessarily need to be collected every year.”
Travel managers frequently lack the time and resources to manage their hotel programs, Langsfeld maintains, and that can create its own set of challenges. “Understandably, they look to third parties for help but in many cases, those third parties are acting in their own interests and not in the interests of the company.” Langsfeld cautions travel managers to “take a hard look at how they can achieve objective and independent oversight. They have to be aware of some of the inherent conflicts out there and make sure they are looking out for their own interests first.”
Robertson points out, “An effective RFP needs to not only express what a company’s objective is, it also needs to outline what pain points are driving the objective. Savings is a common goal for a travel program, but the specific needs driving a savings goal are critical to making a compelling and relevant offer.”
The good news overall, Hillenmayer says, is that hotels and travel managers are talking about how to fix the RFP process. “We are in a discovery timeframe with lots of different conversations happening about what makes the most sense – whether it’s fixed rates and dynamic rates or any other issues. The fact that everybody wants change means change is inevitable.”