Hotels make up a significant portion of a company’s travel spend, but the hotel sector has emerged as a strategic partner to corporate customers thanks to willingness to negotiate rates for employee travelers. But here’s the problem: many times, a company’s negotiated hotel rate won’t appear at the time of booking and payment on company booking platforms or global distribution systems.
Earlier this month, HRS released new research, conducted along with the Global Business Travel Association (GBTA) Foundation, that found it’s quite common for companies to miss out on discounted hotel rates, even after the effort to negotiate a better price. Worse, researchers found many companies are using manual processes to audit hotel prices and to use those negotiated rates, making it more difficult for a business to identify when it’s losing out on savings.
Around the world, 86 percent of corporate travel managers told researchers that they audit their hotel contract information, which includes negotiated rates. But that auditing is infrequent, with just 3 percent reporting that they audit this information every week.
Nearly half of survey respondents said they manually audit this information too, and, according to HRS, 17 percent of those audits contain an error. On average, a lack of auditing, and a lack of automation in the process, means businesses pay 14 percent more than their negotiated hotel rates.
According to Neufang, hotel spend makes up about 27 percent of overall travel costs, so missing out on savings has a significant impact on bottom lines. But the issues of auditing and missed savings have been around for years, she said.
A manual approach to the issue is one of the biggest errors a company can make.
“A few times a year — maybe once a year — a travel manager will go into their online booking tool and look for a hotel at a random date to see if the [negotiated] hotel rate was loaded in,” she explained. For companies with hundreds of properties with negotiated rates, those random checks are hardly thorough, she added.
Automated solutions can provide the accuracy and thoroughness needed to ensure negotiated hotel rates are used, but as with any technologies, companies can face resistance when it comes to adopting new solutions. According to the HRS executive, deploying a better auditing service for this purpose makes for such an easy way to save money that it’s difficult to imagine a business would be reluctant to get on board. The problem, though, is that businesses don’t have the visibility into the error of their ways to initiate a change.
“I think it’s quite obvious that hotel managers don’t understand the implications of this, and probably their bosses don’t either,” Neufang said. “Otherwise, they wouldn’t still be doing this. They’re busy focusing on other things instead of this, which leads to a direct bottom line impact.”
Adopting electronic payments technologies can also help a company in its broader efforts to manage hotel spend, but Neufang noted that there must be the technologies in place to make that happen too.
“It’s a bit of a myth that electronic payments data is foolproof,” she said. “It’s still up to the credit card company to digitize more of that Level 3 data.”
She added that HRS supports the use of virtual cards for corporate hotel payments, which can enhance fraud protection. The company also digitizes invoices to augment the data pool from which an organization can analyze its spend on hotels. Technology can boost accuracy rates when payment and invoice data is captured, and that information can be quite helpful in analyzing use of negotiated hotel rates, too, the executive noted — and to identify geographic regions that may be calling for a negotiated program between hotels and companies. Further, she added, that information can be looked at historically to assess how often a business actually captured its negotiated hotel rates.
“That kind of data is so precious within the management of a program,” she said. “Payments is the virtuous end to the cycle of hotel stay — it’s very important to have good payment data.”