From “secret menus” to “coupon codes” that unlock special savings for the cognoscenti, everyone is looking for a deal. But before the internet made it possible to scour gazillions of data points a second to mine these hidden gems, you really did have to “know a guy who knew a guy” to score special deals at hotels.
Unless, of course, you qualified for a long-term contracted or “corporate rate.” The concept of long-term contracts is simple; a hotel, or chain, offers a guaranteed room rate to guests from a particular company or agency in exchange for a negotiated minimum number of rooms within a fixed time period. The most familiar version of this practice is the government per diem rate; deeply discounted, fixed hotel rates for government employees as determined by each state.
Once upon a time, corporate rates were fairly easy for almost any company to negotiate and their use was policed generously, if at all, by hotels. Anyone with the right business card could access deeply discounted room rates for their business or personal use.
Times Change
Prior to 2007, hotel occupancy and room rates were predictably cyclical; a pattern of peaks and valleys repeating about every 7 years. But as the economy began to recover from the Great Recession in 2008, something extraordinary happened. Hotel performance indicators began to rise from the recession lows and … just kept rising. What followed was nearly 15 years of uninterrupted growth in occupancy rates, average daily rates and REVPAR and the practice of offering “discounts for the sake of discounts” via unprofitable corporate rates dried up.
Even before the recession, there were factors that were causing the practice of granting corporate rates to fall out of favor. One was a just general overuse; when even the most modest-sized company demanded a corporate rate as if it was their birthright. Also, hotel consolidation gave owners and hotel management companies improved ability to analyze and predict profitable revenue trends across brands. Adding to the mix, OTAs created a distribution channel that let hotels make short-term discounts available to the masses whenever they needed. Except for the very largest corporations and agencies and very niche business segments, corporate rates became virtually extinct.
Then Came COVID
What was only whispered before is now being said out loud, business travel is NOT back and may not be for a while. While leisure travel continues to rebound, business travel lags behind and more and more travel and hospitality suppliers are starting to rethink their business strategies to accommodate this persistent condition.
Maybe it’s time for long-term contracted rates to make a… technology-enabled… comeback?
There are opportunities for long-term contracts that still make sense for both hotels and buyers. Advances in travel sourcing technology allow hotels to better manage the entire process to protect profitability, while providing an important revenue stream at this critical time. For buyers, negotiating long-term contracts means taking care of their travelers’ need for safe and comfortable accommodations while instituting cost controls that protect the company’s bottom line.
That’s why today may be the PERFECT time for buyers and sellers to take a fresh look at the use of long-term contracted rates, especially within the business segments that are most actively traveling right now: work crews, trainings, military deployments, construction, sales, etc.
Technology-optimized Sourcing and Contracting
Procuring “indefinite delivery/indefinite quantity” accommodations is tricky, requiring specialized expertise and the right tools. Vindow’s revolutionary cloud-based sourcing platform was designed from the ground up to support all types of RFPs, including the option to source accommodations based on duration & consumption, rather than only fixed date/room block events.
Vindow is not another “look & book” online hotel database. The Vindow cloud-based travel technology platform unites both buyers and sellers in a powerful and transparent online marketplace. Our mission is to give all transactional parties unprecedented visibility into the prevailing market dynamics with powerful data analysis tools that “level the playing field” to make it easier for sourcing professionals and hotels to build productive relationships, source more efficiently and contract with real transparency.
So, what are you waiting for? Learn more at www.Vindow.com.
Buyers, start your 15-day, no credit card required, free trial of Vindow’s platform today.
