We in the business travel industry are seeing divergent opinions from expert on what the future holds for business travel over the coming months and years. Some projections offer great news, both about the current state of the industry and what the coming years will hold:
According to the most recent Knowland US Meetings Recovery Forecast, released in July, “In Q1, U.S. meetings and events volume was flat with the forecast while Q2 overperformed by 25.8% more meetings and events. Corporate events are leading the charge in this recovery with several markets already recovered at more than 90% of 2019 levels in this segment… Meeting levels will recover to 106.3% of 2019 levels in 2023 and 115.7% in 2024.”
But at the same time, other sources are saying the complete opposite:
“Inflation, energy prices, supply chain challenges, labor shortages, and regional developments add 18 months to industry recovery forecast, according to the 2022 GBTA Business Travel Index… Just as many COVID-related recovery conditions have improved, many macroeconomic conditions deteriorated rapidly in early 2022. These new developments are impacting the timing, trajectory and pace of business travel’s recovery, both globally and by region, pushing the forecast for full recovery into 2026 instead of 2024 as previously forecasted.”
No matter which forecast you believe, underscoring all these projections is a data gap of almost two years’ worth of recent travel numbers, the result of COVID-related shutdowns. This leaves all those who depend upon reliable data to negotiate annual contracts for hotel accommodations in a difficult spot: how do you develop an effective strategy when you are unsure of the future?
The solution may lie in implementing new technologies that can analyze different pricing strategies and help you discover what works best for your organization: fixed rate or dynamic pricing.
Let’s look at how these two types of rates can best be leveraged:
Fixed Rate Annual Contracting
Until recent years, all hotel contracts for annual rates (a.k.a. “Corporate Rates”) were fixed. Large corporations and travel management companies, who represent significant annual business travel volume, negotiate annually for fixed, discounted rates from hotels or hotel brands in exchange for guaranteeing a certain number of sleeping rooms; however, in the real world, hotel rates tend to be very responsive to the market dynamics of supply and demand, fluctuating throughout the year based upon seasonality, occupancy and a myriad of other factors.
Annual contracts have advantages for both parties: hotels get a guaranteed number of rooms nights per year and build customer loyalty; the buyer, on the other hand, enjoys predictable rates all year round, regardless of market fluctuations, which makes managing their travel spend easier. That being said, there are also downsides to the practice. For example, during times of high occupancy, hotels may have to honor deep discounts and turn away more lucrative transient business. On the flipside, during periods of low demand, companies may find themselves paying rates that are well above the current market value.
Regardless of their drawbacks, negotiated corporate rates have long been the standard practice for TMCs and large corporations. Unfortunately, the process of sourcing and negotiating for corporate rates each year can be tedious, overly complicated and labor intensive. Fortunately, new technologies are making it easier than ever to manage the annual renewal process and allow for a more flexible pricing model, called Dynamic Sourcing.
Dynamic Sourcing
Dynamic sourcing lets hotels quote multiple rates over the course of a year, tied to the applicable prevailing market dynamics, typically expressed as “Best Available Rate +/-%” (BAR +/- %). The dynamic sourcing model has distinct advantages for all parties:
Hotels can quote rates that are more in line with prevailing rates for other types of business, including rates for peak/high/shoulder seasons, rate by day of the week pattern, or even designating specific “blackout dates.”
Buyers also benefit from dynamic sourcing; not only can they still show overall savings, they also have the option to align their travel policy to take advantage of the available best pricing and reduce their total spend even more.
Of course, dynamic sourcing adds a layer of complexity to an already cumbersome process. Fortunately, Vindow has introduced flexible quoting to their RFP tool for business travel management. With the Vindow cloud-based RFP sourcing platform, buyers can quickly create and distribute RFPs that outline their exact specifications. Hotels can respond with their choice of fixed, dynamic or hybrid rates. Vindow’s Workflow of Approval functionality streamlines the negotiation and approval process and the integrated Contracting module makes renewals simple. There’s simply no better tool on the market for business travel management sourcing!
Find out more about Vindow’s transparent marketplace for buyers and sellers of contracted accommodation, and to sign-up to use the platform for free, at vindow.com.
