The art of penny pinching – not spending money unnecessarily, rather than being cheap – is a sound policy for any corporation in tough economic times.
From a travel perspective that means casting an eye over your corporate procurement policies because it is largely with forward planning that there are substantial savings to be made, Bryan Mulliner, Strategic Development & Revenue Director for the Protea Hospitality Group, says in this month’s SmartProcurement.
Mulliner recently addressed a gathering of Corporate Travel Procurement specialists to give them a State of the Nation update on hotel industry performance this year compared with 2011 and to analyse booking patterns and channels, which revealed a number of facts:
- Occupancies year-on-year are increasing.
- Average Daily Rates (ADR) are lagging behind Occupancy and are below the rate of inflation.
- Bookings are increasingly being made much closer to the time of travel.
- Many companies are not taking advantage of group bargaining and they are not consolidating their normal corporate travel and conferencing spend.
- Companies are not analysing distribution channels cost when making bookings.
So what does that mean for Corporate Travel Procurers who are already preparing their calendars for next year? There’s good news and there’s bad news, says Mulliner.
The bad news is that rates will increase.
As an economic reality ADR will have to increase because hospitality, like other sectors, is battling to contain rising input costs such as food, transport and electricity consumption – all of which have risen sharply.
We are also slowly emerging from a depressing two years when occupancy slowed as a result of the global economic situation. But while Rooms Night Sold is rising, ADR has lagged and the long-term result of the industry’s excessive discounting is a loss of services and ultimately closure, unless ADR begins to reflect the realities of input costs, notes Mulliner.
The good news is that there’s a lot Corporate Travel Procurers can do to mitigate these increases if they look at the individual factors that influence their buying strategies.
The first is looking at consolidating company travel, which will probably invoke a Bart Simpsonesque “Duh!” reaction. But are your various departments sitting down frequently to discuss not only executive travel needs, but also the timing and location of events, promotions, launches and meetings?
As far as possible that sort of travel needs to be incorporated into the individual executive calendar and form part of the overall travel negotiations, as opposed to being treated as ad hoc items, which is often the case, says Mulliner.
It could mean a vast difference in spend.
“We know many companies aren’t doing this sort of planning because the corporate booking stats clearly show that a couple of years ago the average time between booking and occupation was 14-7 days, whereas now it’s almost always under 7 days.”
If you’re booking a meeting venue and accommodation at the last minute you’ll most likely pay BAR (Best Available Rate), whereas negotiating a price for that same meeting 40 to 60 days in advance could end up costing BAR less 20%.
And if you have your ducks in a row at the beginning of the year and have most of those events already planned in your travel calendar, talk to us about it collectively, because logic dictates that a larger overall room order gives you more leverage on rates, he says.
The second factor that impacts heavily on buying is travel timing – the days and the months you choose to travel.
An obvious example would be that everyone wants to have meetings in Cape Town in summer, which is reflected in the price threshold of short lead booking BAR. Booking an event in Cape Town in June, July and August, when the city has beautiful, warm winter days, is going to save a substantial amount of money.
Another example is looking at what day of the week your executives travel. Hotel and flight rates are generally much softer on a Sunday night, so fly your executives late on a Sunday rather than in the premium commuter rush period that is early Monday morning.
The final cost-saving measure Corporate Travel Procurement Specialists should be evaluating is the supply chain. Are you booking your travel a certain way because that’s the way you’ve always done it?
Different supply channels carry different costs for both corporates and hoteliers. If you have a good understanding of how the supply chain works – especially in an age of rapidly changing technology – you can use it to your advantage and secure a more beneficial nett rate.
The bottom line is that no company can afford to sit back nowadays and not review spending. Every penny spent is one the company can no longer add to the good side of the balance sheet, and just a few changes to the way Corporate Travel Procurement Specialists operate can ultimately make the world of difference to the bottom line.
Protea Hotels is a proud Travel Partner at Smart Procurement World 2012 on 13 – 15 November 2012. If you are interested in the last exhibitor stands available please contact email@example.com.