Our industry expert’s guide to auditing hotel rates
4 April 2016 by Sam Welch
Auditing hotel rates is a topic we are passionate about. And according to new data, the percentage of customer rates not properly loaded by suppliers can be as high as 40%.
As unexciting as it may sound, it’s something you should expect of any agency that specialises in the management of accommodation for businesses. Let’s face it, there’s no point in negotiating competitive rates for employee accommodation, if the rates are often unavailable to book when you need them.
So, whether you’ve just finished your accommodation RFP – negotiating rates and rooms in key locations – or you’re contemplating your strategy for the next one, having a robust rate audit process is vital for the performance of your programme. If you’re using a tried and tested RFP platform then you should automatically receive the benefit of rate audits as part of the process. Unfortunately, these audits are sometimes a box ticking exercise rather than a due diligence process.
What’s in an audit?
An audit will confirm whether your negotiated rates have been loaded by hotels into the Global Distribution System (GDS) – a worldwide network that enables automated booking transactions between airlines, hotels etc and agencies.
Are your audits frequent enough? Rate audits are generally conducted at the point an RFP process is completed but a good provider will offer you more than one audit.
A good quality audit will confirm that your rates are accurately loaded and available across multiple dates and that all elements of the negotiated price are present and correct; for example, room types, meal plans, tax, commission and LRA – ‘Last room availability’ means that as long as a hotel has a room available to book, then customers with a LRA contract have a right to book it at their negotiated rates. Do your audits dig deep enough in to this detail?
Validating the case for audits
Our own recent analysis showed us that when initial post-RFP audits take place, the percentage of customer rates not loaded or incorrectly loaded by suppliers can often be as high as 30%-40%.
Due to the sheer volume of customer rates and negotiations managed by global hotel chains, it’s natural to expect a margin of error.
However, some would argue that a few suppliers are lethargic about loading rates correctly – especially if a rate ‘squatting’ in the system is higher than the one which has been agreed and contracted! In this scenario, a squatter is a hotel that uses a customer’s identifying GDS rate-loading code, without consent, to load unauthorised rates that would appear to any booker to be his/her companies negotiated rates.
Either way, the analysis validates the case for a robust rate auditing process.
The science of compliance
Once you’ve satisfied yourself that your rates are correctly loaded, is it time to relax? I’m afraid not; your next focus needs to be on the compliance to the rate programme – are your employees using it? If you opted for any non-LRA rates then there’s a risk that pricing will change with market pressures as suppliers yield rates – where they amend rates based on understanding, anticipating and influencing booking behaviour to maximise revenue or profits.
Tracking the average room rate achieved at each property versus the negotiated rate will ensure you have visibility of any unnecessary rate creep – an increase in average room rate over time.
*Data and analysis from Capita Travel and Events’ bespoke ERFP platform
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