What is the cost benefit of a well-managed hotel programme?
12 April 2017 by Leigh Cowlishaw
What is the cost value of having a well-managed mandated hotel policy? Here, we explore the question from two views, the corporate and the hotel...
Capita Travel and Events has written a number of articles on the importance of having a well written, mandated, concise and relevant travel policy; one that supports your travellers, considers the market place while also achieving duty of care and cost management objectives. You can also read our debate feature on mandated versus non-mandated travel policies.
But the question remains, what is the cost value of having a well-managed mandated hotel policy? Here, we explore the question from two views, the corporate and the hotel.
What are the compliance trends?
The key components of a well-managed hotel policy is the compliance to a company’s preferred hotel programme and maximum rate caps. Capita Travel and Events customers’ see hotel programme compliance vary. It ranges from around 75 % for new customers or companies with fragmented travel patterns, up to 90% for customers with a high volume of bookings and a mature hotel programme. Generally, customers with spend of over £5m achieve compliance of over 80% on average.
From a geographical perspective London compliance averages 5% lower than across the provinces. A key driver here is the requirement for accommodation across different areas of the city. It can be a challenge to create a programme in London that meets everyone’s objectives and still gives particular hotels enough business to achieve favourable rates.
When it comes to rate cap compliance the overall figure increases up to 95% with a preferred programme. We see a similar pattern to programme compliance, with high volume customers averaging above 80% compliance compared to low volume customers with rate cap compliance around 75%. Unlike programmes, London rate cap compliance averages 7% higher than the UK Provinces.
What is the value of having a hotel programme in place?
The customer view: Lone Konradsen, head of consulting, Capita Travel and Events
Let’s examine pricing. Looking at our top 20 locations, customers with managed hotel programmes achieve an overall average room rate (ARR) of up to 20% less than those without one.
And, in locations where customers have a preferred hotel, they also have higher compliance to rate caps - 3% across the UK and 7% higher in London, respectively. Also, when travellers using a preferred hotel book over the rate cap, they still spend 7% less than customers without a programme in any given location.
Overall, when looking at the average price achieved by companies in preferred properties versus non-preferred, you see the value of a hotel programme. In London, customers realise average rates in programme hotels that are up to 9% lower than the average rate paid in non-preferred hotels. In the UK provinces the average is 7%, although it varies from 5% in Portsmouth to 20% in Milton Keynes.
The supplier view: Leigh Cowlishaw, director of supplier partnerships, Capita Travel and Events
For hotels, the benefits from hotel programmes is a base of business at agreed rates. This allows hotels to yield accordingly, topping-up with flexible business at rates that are driven by availability and supply/demand. It allows hotels to ensure they aren’t putting all their eggs in one basket; they can accommodate other demands such as conference rooms and large group bookings etc.
The mandating of policies provides hotels with assurances that the volume of bookings that they’ve based customer pricing on, will be targeted. This, coupled with allocation or last room availability (LRA), provides travellers with assurances that they can always secure a room when needed, rather than loyalty points impacting decisions that are against policy.
Suppliers recognise the benefits of pricing within customer rate caps to ensure they are going to be accepted on programmes in the first place. Working closely with agencies should allow them to attract the right customers to suit the hotel inventory, their rate strategy and demands.
Managing compliance with fragmented travel patterns
Companies in the professional services, retail, logistics, utilities and manufacturing industries tend to have a more fragmented travel patterns. And with more unpredictable destinations and trips, getting a hotel programme and rate cap policy right can be a challenge.
Capita Travel and Events works closely with supplier partners to try and bridge the gap in preferred hotel programmes, with coverage in locations that may not have been needed during the original programme negotiation process.
The Traveller First programme, open to all customers, covers over 1800 hotels and venues across the UK. From Global chains, to independent properties, all of them provide negotiated rates, content and availability. And, they offer added value packages including parking, free upgrades, bottled water in rooms, and room service without the tray charge. For meetings, they offer unlimited tea/coffee, upgraded breaks, free pastries on arrival and use of a syndicate room.
Capita Travel and Events also offers The Collection, a small vendor initiative that puts independent hotels, venues and serviced apartments on an even playing field with large groups. With over 350 independent properties on board, customers have a choice of properties in line with their programme objectives and rate caps. Take a look at why independent properties can be good for your business.
What can you do to improve your compliance levels?
The starting point should be comprehensive analysis of your hotel spend. Look at your travel profile, hotel programme, availability and in particular reasons captured for non-compliance.
The importance of auditing your hotel programme is critical and ensuring you have negotiated the right level of availability to support your travel requirement is the key to achieving compliance to your programme.
Ask yourself ‘Are my rate caps set at the right level?’, ‘Does my hotel programme address the majority of requirements?’, and ‘Have I got the right level of availability?’ These should all help to identify potential challenges.
If the answer to all of those questions is yes, it’s time to start looking at why your employees aren’t complying with policy. Do you have rouge travellers or bookers that are consistently breaking policy? Is there a preference for one hotel over another? Is there a new business requirement? Are loyalty points, that could be driving personal gain behaviour, allowed in your business?
Once you have the answers, you can adjust your rate caps or hotel programme to address new requirements. And you can speak to rouge travellers and bookers. The resulting increase in compliance levels will bring mutual benefits for you and your suppliers, helping you to keep costs in line with market conditions.
Want some help finding the answers? Speak to one of our market specialists to evaluate your programme and help you increase compliance.
Interested? Let’s have a chat about your company’s travel, meetings and events objectives - from the stuff that keeps you awake at night, to the everyday experiences of your employees! Call us on 0330 390 0340, or submit the details below, with an idea of the times that suit you for a call.