Reports of the death of the annual hotel request for proposal process have been greatly exaggerated. In spite of the growth of continuous sourcing practices, a show of hands at the BTN Group’s accommodation summit in London earlier this month revealed every buyer in the room was negotiating a programme of corporate hotel rates for 2024.
A wealth of trends and negotiating tips emerged during the day. Here are five key pointers to help you secure the very best 2024 deals for your organisation.
Expected negotiated rate rises look lower than they did three months ago
When BTN Europe ran a 2024 RFP preview in August, buyer readers were polled on what they expected to negotiate compared with 2023 rates. While a handful of respondents predicted flat or falling rates, 33 per cent forecasted a rate increase of up to five per cent, while 45 per cent forecasted an increase of between six and ten per cent, and eight per cent tipped more than a ten per cent rise.
It now looks like those suggesting up to five per cent were right. “We’re hearing three-to-five per cent in terms of rate increases, which is much better than the double-digit increases we were seeing last year,” says Juliette Jackman, head of business development Europe for corporate travel auditing technology company TripBam.
“Negotiations from the hotel side are not as aggressive and there are more unsolicited bids coming through, which suggests more appetite on the part of hotels to look at corporate business as their core business again. Leisure markets are softening,” adds Jackman.
Fidelity International director of global travel, events and ground transportation Carol Fergus is also confident after, like nearly all buyers, having to swallow big rate rises for her 2023 programme that followed two years of stasis during Covid.
“As with every year, we will be looking for a decrease on our current rates, but being realistic, remaining flat or a nominal increase will be what we will be working towards,” Fergus says. “Last year, increases were averaging 12 to 14 per cent, and some places were more like 25 per cent. But indications are that the rises are decreasing.”
These changing dynamics mean buyers should not rush to settle with suppliers. “The difference we are seeing in the first rates being offered versus how much they are prepared to reduce that first offering is quite strong this year,” says Richard Williams, a senior hotel solutions consultant with Advito, the consulting wing of BCD Travel.
But beware of inflationary pressures too
Despite making good ground last year, hotels will need to push through some kind of rate rise. “A lot of hotels took out loans over the past few years at fantastic interest rates that are due for renewal over the next 12-18 months,” says Jackman. “Those interest rates won’t be the same level as they were before, alongside electricity, wages and other costs going up. There will be a need to pass those costs on.”
There are also hotspots where high demand means rates will rise sharply. Cities appealing to both business and leisure travellers, like London and Paris, are key examples. But the biggest red flag is India. “Last year we saw a lot of business moving from China to India, which led to 28-30 per cent rate increases. We have seen rates to India go up more than anywhere else,” says Jackman.
Price unbundling has come to the hotel sector
A major trend this year, according to Williams, is hotels proposing the unbundling of what is included in the corporate rate – and clients accepting. “The reduction of amenities can reduce the rate quite quickly,” he says. “Clients are now more open to excluding those from the rate to ensure they get the best price point in the market.”
Examples of unbundling include removing breakfast and parking, and also on-the-day cancellation, with clients having to accept free cancellation only up to 24 hours before arrival. This, Jackman believes, is a concession often worth making. “I wouldn’t focus too much if I were a travel manager on a 6pm cancellation policy because the reality is people don’t cancel on the day very often,” she says. “The price you are paying to have that in your hotel programme is quite an expensive insurance policy.”
Hoteliers are still trying to assert control, this time by pressing clients to accept non-last room availability
Suppliers are pushing non-last room availability
Rate type selection can be seen as a battle for control of price and room inventory between supplier and buyer. For 2023, suppliers asserted control by avoiding fixed rates where possible and making buyers accept instead a dynamic rate, in other words a discount off the best available rate (BAR).
This year, with leisure demand declining and an appreciation that they need corporate business, hoteliers are giving corporate clients the certainty of fixed rates. However, hoteliers are still trying to assert control, this time by pressing clients to accept non-last room availability: the right for the hotel to withhold the discounted rate even if the hotel is not full.
NLRA is to be avoided, according to Jackman. “It’s like you asking me on a date and me saying ‘Yes, unless somebody else comes along.’ The hotels should say no up-front because they’re not really offering you a rate.”
Can buyers resist NLRA? “If you can prove you’ve got the volume and can shift your business, then yes,” Jackman says. “The RFP is not a one-and-done process. If [they insist on non-LRA] you can say you’re not prepared to work with them, and then if, as we’re expecting, the market softens, you can speak to them again in three months’ time.”
However, Williams says buyers can turn NLRA to their advantage, as hoteliers will often offer a significant discount on an LRA rate. He recommends considering it “in secondary markets where buyers don’t have huge volume and their leverage is not as high.”
Williams adds two caveats. NLRA only works in cities where the client has an alternative preferred hotel and if it audits continuously to ensure the negotiated rate is available reasonably often.
Negotiate dual rates or ceiling rates if you can
Both these options are great insurance for buyers because they offer the best of both worlds. Dual rates are where the buyer negotiates both a fixed rate and a discounted BAR with the same hotel. A ceiling rate is a discounted BAR that can only rise as high as an agreed maximum price.
Fergus is a fan of ceiling rates. “The way we get them is by maintaining our relationships and being fair and open with the way that we distribute market share,” she says. “If you give them a high volume of business, hotels are willing to work with you.”
However, Fergus ranks among a successful elite in achieving ceiling rates. “It’s almost the best situation you can have,” says Williams, “but it’s only single-digit percentages of clients that have dynamic rates with ceilings attached to them.”
One reason is that smaller hotels may lack the technology to offer either ceiling or dual rates. But in many cases they are simply unenthusiastic. “Hotels that are very willing to get into a client’s programme are most likely to put that forward,” says Williams. “If it’s a market where they are suggesting a dynamic rate only instead of a static rate, then part of the negotiation would be to suggest you go to a dynamic rate with a ceiling. Then it’s up to the hotel whether they will do that or not.”