Building an international hotel program means taking a multi-faceted 360 degree view
The world may be getting smaller, but disparities still remain from region to region in the way business gets done. While advancing technology makes travel management easier in many ways, the complexities of international travel continue to pose challenges. Nowhere are these differences more apparent than in the global hotel scene, where travel managers face an abundance of independent hoteliers and a less robust distribution system.
To begin with, says Suzanne Neufang, vice president-Americas for HRS Global Hotel Solutions, outside North America travel managers should keep in mind that it is very much an independent hotel market. “The chains American travel buyers are most familiar with are in international financial centers, sure,” she says. “But outside of that, it is much more the domain of small, regional chains and individual, independently-owned or managed hotels.” This factor creates challenges for US-managed global travel programs in terms of higher leakage, difficulty in sourcing, duty of care risks and fragmented data.
“The fast track to tackling these strategic issues is to work with an outsourcing solutions company to enable all of these various hotel types to be available for sourcing and via preferred booking channels,” Neufang advises.
Perhaps the most significant challenge facing travel managers is that hotel networks in different markets around the world have a different makeup. While in North America a big segment of hotels are branded under one of the large flags, the same is not true elsewhere, notes Wes Bergstrom, vice president, global supplier relations, hotel value and revenue management team, American Express Global Business Travel.
“Across Europe and the rest of the world, there are more independent hotels and small chains that don’t have the same reach, but add relevant and necessary local expertise,” he says. “With this in mind, managers should keep options open, maintain flexibility, and mix and match global hotel partners with local players to offer multiple choices to travelers.“
Bergstrom adds that TMCs with the right mix of global scale and local expertise can help travel managers navigate all the content that’s out there, resulting in cost savings and more options for business travelers.
“This is a more efficient alternative than negotiating hotels on an ad-hoc basis,” he says. “A TMC can also help to ensure managers get the right rates, with the right amenities, and manage hotel supplier relations locally and globally, with the ultimate goal of saving money and offering travelers greater convenience.”
In the Asia Pacific region, booking is different for corporate transient business than in North America, according to Sandy Russell, vice president for commercial operations Asia Pacific, Carlson Rezidor Hotel Group. She notes that in North America, compliance to a managed program is relatively high. Use of an online tool with back-end global distribution system functionality is mostly typical, with adoption and compliance rates reaching 75 to 95 percent.
“In Asia Pacific, that can potentially be a challenge as corporate accounts tend to book through consolidators and offline operators like C-trip in China who control about seventy percent of the volume,” Russell says. She recommends ensuring that partner TMCs are vigilant about managing the program with employees in Asia Pacific.
Dealer’s ChoiceRegardless of the region, finding the right properties begins with analyzing the hotel spend to identify the markets with high enough concentration to warrant negotiations, says Marwan Batrouni, senior director, practice area leader for consulting firm Advito. Based on what the data show, travel managers can either choose to continue using the same properties if they meet the right criteria for the global program, or search for alternatives in the same proximity that may better meet the needs of the program.
Travel managers looking to add to a company’s preferred hotel program need to work with a sourcing solution company that not only handles chains, but also the independents, Neufang says. Sometimes those independents are the only hotel available – or when there’s more choice, they may be the ones with the highest value and quality for the price. Leaving them out of the selection process means a hotel program could be ignoring 70 to 80 percent of the local options.
Having access to all relevant property content in one place is critical in driving traveler satisfaction, Bergstrom says. Travelers want to find properties close to their meeting venue, with pricing that is in policy, and where they will feel safe. "TMCs can be a great partner in helping travel managers effectively aggregate these diverse content options, to give travelers a more effective, rich shopping experience,” he says. “Not to mention, travel managers have peace of mind when they know where travelers are staying.”
Eric Jongeling, director, CWT Hotel Solutions Group recommends using a combination of approaches. “First, look at where travelers are staying today and also utilize local office knowledge,” he says. “If they have a global chain partner they can offer assistance. Or a hotel consultant company will have visibility into city-specific areas and be able to provide market recommendations.”
Another challenge is adjusting or adding to the hotel brand portfolio to accommodate varying needs of travelers.
Having a mechanism to track and monitor the performance of the hotel program on a monthly basis is a key first step, according to Batrouni. Identifying markets that may be low in compliance, or new markets with no preferred hotel coverage experiencing high volume, is a good way to spot opportunities to make adjustments throughout the year. Also, having a process to gather feedback from local contacts is key to identifying opportunities that may escape data analysis.
Each time a property is added to the preferred program based on pre-established criteria, it should be reviewed and approved by the security team. Safety and security are critical factors in globalizing a hotel program, Batrouni adds. He advises involving the security team as the travel team develops a strategy for expansion. This means engaging the security team to review the list of properties being considered as additions into the preferred program. The security team should provide feedback on an ongoing basis in the decision making process.
Added costs in the form of fees or taxes is another consideration, Jongeling says. He says that VAT/tax/service fees can be a significant factor in some markets. In London, for example, some hotels include a 20 percent VAT in their rate, adding substantially to the total amount paid.
Consolidation FalloutRecent headline-grabbing consolidation such as the Marriott-Starwood tie-up promise to do more than just streamline choices for travelers. But opinions on the implications for travel programs vary.
“We don’t foresee consolidation of major chains having an immediate impact on preferred programs domestically or internationally anytime soon,” Batrouni says. He predicts business as usual in the coming months, and that it will take several more months until hotel companies are fully integrated and can implement a combined pricing strategy. A clearer picture of combined sales and pricing efforts should emerge in 2017.
However, he acknowledges that the Marriott-Starwood merger means one less competitor in the marketplace giving suppliers more buying power. With more consolidation, the number of markets where a single chain is dominant will increase. “Any time there’s consolidation, leverage moves from buyer to supplier, at least for a while,” Batrouni says. “But hotels are not typically owned by the chains, so there’s a real chance that properties will reflag away from Marriott/Starwood, restoring some consumer choice.”
Russell predicts that this trend will be an ongoing one. “Consolidation within our business is not new,” she says. “It has been predicted for the last twenty years and has in fact been going on in the airlines, car rental and travel management companies’ space for many years. It is anticipated that this trend will continue into the future.”
One repercussion may be the need to give greater consideration to the minimum volume needed for a global discount. “There will be more inventory within the program to provide options and assist in meeting quotas,” Russell says. “One would also think that such mergers would allow synergistic restructuring and that could provide an opportunity to move resources around.” Developments in technology and product investment can only mean a better and more all-encompassing experience for the end users, she adds.
Bergstrom agrees that consolidation generally drives more consolidation. He believes the industry will have to watch this space because scale matters, with larger chains looking to integrate independent hotels into their programs to offer a boutique experience to travelers. “We’ve seen this is working,” he says. “Look at the growth Hilton has had with Curio and Marriott with the Autograph Collection.”
Global chains will continue to grow leverage and put more pressure on the regional chains to partner with a global affiliate, according to Jongeling. He predicts more consolidation, though not likely on the scale of Marriott and Starwood. “We do expect other chains to look for consolidation opportunities to compete with the new Marriott,” he says. “We also expect global companies to continue to drive spend to their chain partners which will put more pressure on independent properties.”
Batrouni suggests that the impact of consolidation in the long run will be slightly different for each client based on overall spend volume and travel patterns. However, he doesn’t expect that consolidation will have a negative impact on client negotiations overall. “Competition between hotels will continue to exist even if the hotels are within the same chain or brand,” he says. “Clients will benefit from having more choices within the same chain in a specific market, and they will also be able to take advantage of additional coverage when it comes to chain-wide agreements.”
To Neufang, industry consolidation and the current economic climate will present international programs with a unique opportunity in 2017. “Chains will try to raise rates, but outside of the US they are not the vast majority of inventory, and they are wary of losing corporate business,” she says.
Thus the big chains may be willing to trade lower rates for a secure commitment on volume. At the same time, the independent hotels are hungry for a larger slice of corporate business. Seeing a lucrative opportunity amid the chain consolidations, they may find themselves increasingly in a position to offer business travel programs more competitive rates to win corporate room commitments.
Moving forward, traditionally sourced programs need to be reevaluated as the world becomes hyper-connected and traveler preferences change, Bergstrom says. Now that GDS and non-GDS content can be combined in one, easy-to-use booking platform, the results include enhanced traveler options, reduced program leakage and support for duty of care.
“With all this content at their fingertips,” he says, “it’s easier than ever for travel managers to satisfy their travelers and still achieve cost savings.”