Corporate Hotel Programs Need to Stay on Top of New Chain Cancellation Fees to Mitigate Financial Impact

by Suzanne Neufang

August 21, 2017 – The recent announcements by major hotel chains on the expansion of advance cancellation penalties drove a degree of media coverage, but a lack of understanding of the potential cost implications for corporate hotel programs. Off-the-cuff assumptions rarely satisfy CFO queries; travel managers need to have answers ready for their bosses as questions on the impact of these changes are likely as 2018 budgets come into focus.

HRS certainly understands that hotels have every right to maximize their room inventory and generate revenue. That said, optimized supplier-buyer relationships are a priority for hotel chains big and small. Armed with metrics from verifiable travel data, HRS believes travel programs can leverage their relationships and proven performance to mitigate these new fees and help keep the historical free-of-charge cancellation up to 6 pm on the day of arrival in place.

A new study from HRS, together with fresh survey results, provides the first true glimpse at the potential fiscal ramifications of these new policies for multi-national corporate hotel programs. An in-depth analysis of the booking data of our largest corporate customers over the past twelve months – cancellations in particular – leaves no doubt that these new fees could drive millions in new travel-related expenditures. Some takeaways from the study:

  • 17 percent of business trips are cancelled
  • Five percent of those cancellations are within 48 hours of arrival

To provide a concrete example, HRS took a detailed look at metrics potentially impacting a multi-national client that spends $82 million globally on lodging:

  • If all cancellations made by this company in North America within 48 hours of arrival were subject to this charge, the budget impact would be $600,000 USD a year.
  • If all chain hotels globally implement this policy, this same company could see additional costs of up to $2.7 million USD, corresponding to three percent of total booking volume.

As these results show, there is real money at stake. While most of the changes so far impact only North American properties for a few global chains, corporations need to be vigilant on this issue as the traditional RFP season begins in earnest in September. Hoteliers often mimic other industries…once a new revenue stream proves to be sustainable, it’s a good bet that many others will follow suit. And once they see notable revenue from the new policy, it’s certainly conceivable that such policies could extend to properties on other continents.

Travel buyers that outsource to HRS can be assured that this issue will be properly addressed in hotel negotiations – not only to mitigate recent policy expansions, but to wrap in a degree of protection from future fees that some chains are modeling.

The survey of 100 travel managers reveals that most travel buyers value cancellation policy flexibility; we’re confident that hoteliers will respect that never-ending request when it is married with the bulletproof data of “past room nights” that showcase the steady volume of a preferred customer. We encourage travel managers to get their best data, re-state the importance of business traveler flexibility, and work with their preferred hotel supplier partners to prolong historical policies that best serve today’s business traveler.

Become a Data Diva: It Makes all the Difference in Hotel Sourcing Season

by Suzanne Neufang

August 8 – HRS has long advocated that corporate travel managers have irrefutable data before they sit down and cut deals with hotels, whether it’s for a system-wide program or just specific properties in a single destination. As the 2018 RFP season gets underway…and we see mixed economic signals impacting global economies and hotel suppliers…that guidance looks to be spot on.

Here’s the good news; the U.S. economy features a robust stock market (surpassing 22,000 for the first time last week), consistently high monthly new job figures, and an environment where the hospitality segment is hiring more than many other sectors. IATA reported that global air travel grew by 7.9 percent over the first six months of the year: it’s easy to conclude that many of those travelers slept in a hotel during their journey. On the hotel chain front:

But here’s the bad news: TravelClick’s latest report noted that U.S. hotel bookings in the business transient segment are down 3.8 percent for the third quarter, and group occupancy is down more than five percent from last year. Analyst John Hach said that their data “predicts a prolonged decline” in most North American markets. GBTA notes that global business growth is projected to top five percent both this year and next….but all projections come with a caveat tied to the unpredictable political scene in nearly every region on the planet (see GBTA graphic below).

So…what can a travel manager do as they try to shape a relevant lodging forecast for the next six months to a year?

Like many things, the answer lies in staying focused and leveraging irrefutable benchmark and program data, coupled with keen insight on the company’s business goals. Showcase the value which a managed hotel program brings: the ability to drive spend and traffic to preferred properties, and leverage other discounted rates when it makes sense. Take the right steps, and workable metrics can be in reach.

Increase your odds for better outcomes – both in the short term and long term – by working with experts on rate trends, projections, and execution. Don’t underestimate the value of on-the-ground expertise as you consider new markets for your travelers.

Sure, reports and projections drive a lot of headlines. Successful benchmarking, sourcing and ultimate execution, however, is the final proof for lodging program success which every CFO appreciates.

Joint GBTA/HRS Survey Details Frequency of Corporate Hotel Rate Auditing

By Suzanne Neufang

Those of us who have worked in the arena of corporate hotel programs for any length of time in recent history have all participated in debates about the accuracy of hotel rates. Far too often, those conversations revolve around erroneous rates and the scenarios pertaining to why the rates negotiated during RFP season don’t always – or even often! – appear when employees shop for hotels.

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HRS Kicks Off Collaborative Global Series for Corporate Travel Buyers

by Suzanne Neufang

Travel managers and corporate procurement executives are often challenged when it comes to carving time to check the pulse of the industry. In North America, we’re lucky enough to have a number of events (GBTA, ACTE, local BTAs, regional BTN events) that offer educational opportunities to consider fresh trends and hear from our peers on interesting panels. Many global corporate travel observers look at the list of events in North America with a jealous eye, wishing there were more scenarios for travel management professionals on other continents to further their knowledge of best practices and take new tactics back to the home office.

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HRS Helps Shine A Light at Los Angeles Film Screening

by Suzanne Neufang

HRS was a lead sponsor among several travel industry iconic brands at an L.A. Live event earlier this month that put a spotlight on the scourge of child sex trafficking. On January 17, 600+ people attended a screening of SOLD, a film adaptation of the globally acclaimed novel by Patricia McCormick, starring Gillian Anderson and David Arquette. Through one girl’s journey in Southeast Asia, the film illustrates the brutality of child trafficking which affects millions of children both domestically and globally.

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2017 RFP Season – Time for Travel Managers to Pounce

by Suzanne Neufang

We’ve arrived at the fourth quarter, and prognostications for hotel rates in 2017 are starting to unfurl. Several respected entities have already published their forecasts. NYU’s Bjorn Hansen projects increases between 3-4 percent in the U.S.; Advito sees increases averaging as high as five percent. These type of “blanket” average forecasts often color RFP seasons that are, in many cases, just getting underway.

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MANAGED TRAVEL TAKES THE STAGE IN BEIJING

by Suzanne Neufang

This week in Beijing, several hundred of the Asia-Pacific region’s leading corporate travel managers and industry suppliers will meet to discuss the exponential rise of business travel in that part of the world. In particular, the explosion of business travel in China presents both challenges and opportunities – not only for Chinese companies, but the vastly growing number of multi-national companies doing business there.
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GBTA Corporate Travel Projections Highlight Importance of Securing Solid Hotel Rates for 2017

Headline writers – even in travel trade publications – are most focused on words that drive likes, shares, and clicks on immediate news. That semi-obvious conclusion can be seen in recent news stories about softening business travel trends. GBTA downscaled their full-year 2016 projections, and Hyatt revised their 2016 revenue-per-available-room figures from a 3-5 percent jump down to a 2-3 percent increase.
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