As of July 2015, hotel occupancy continued to increase, topping at 75.3%, which is the maximum that has been documented by Hotel Data Company, STR. In some markets, these record-high occupancy rates are now affecting corporate hotel programs. Each of the top 25 markets saw upsurges in average daily rate (ADR) for July. According to STR, the ADR at U.S. hotels rose 5.9% year over year in July to $124.32.
This record high occupancy, coupled with increasing ADR and group demand, is impacting corporate hotel rates as the 2016 request for proposals (RFPs) begins. Last room availability (LRA) is challenging to negotiate in this high occupancy market. However, many hotels will offer non-last room availability (NLRA) in order to manage demand. Additionally, properties are seeking commitments and minimum goals from travel buyers prior to thinking about decreasing rates.
While growing demand gives hotels an advantage in this seller’s market and allows for tougher negotiations, Acendas has the following recommendations for success as travel managers prepare for another difficult RFP season.
- Outline your Negotiation Strategy. Working with your travel management company (TMC), Travel Managers should promptly start developing a plan that involves effective and aggressive negotiations for U.S. properties. If you have considerable spend, you have the control to push back on substantial rate hikes.
- Establish well-defined and practical goals. Have clear objectives for program achievements when negotiations are finished, then observe the advancement towards those targets during the RFP process. This strategy assures you focus on your company’s targets as you endure long meetings with hotels and negotiations get tougher.
- Gain an in-depth understanding of hotel volume. Obtaining data and a complete familiarity with your existing spend, current rates, and traveler trends, will strengthen your company’s negotiating leverage.
- Benchmark during and after hotel sourcing. Ask your TMC to assist with benchmarking to compare your program with comparable companies. Continue to benchmark during the year to assure your rates stay on track.
- Review adding mid-scale brands. Consider local mid-scale hotels that might not be well known or currently in your program. Several mid-scale hotels in the U.S. are more superior beyond their home market.
- Boost your negotiating power. Combine meetings and transient volume to leverage hotel supplier agreements.
- Seek TMC advice. Your TMC should provide guidance on your program and spend throughout the hotel RFP process and after negotiations. In addition, your TMC should make recommendations on other possible savings opportunities that you might be missing.
Once RFP season is complete, don’t just sit back and relax regarding your hotel program. During the entire year, Travel Managers need to maintain compliance and program metrics. In order to preserve supplier relationships, obligations need to be met. In addition, establishing a regular schedule to audit hotel rates ensures that suppliers are also keeping their promises.
Looking for more corporate hotel negotiations assistance? We’ve compiled several key actions to start now to assure companies achieve their 2016 hotel program goals. Click the link below for our white paper on the Crucial Steps to Success After Hotel Negotiations.
Crucial Steps to Success After Negotiations