HRS Intros 'Convergence' to Drive Deeper Hotel Negotiations

Procurement

The hotel program sourcing and solutions provider touts deeper relationships and rate consideration when all the cards are on the table. Achieving it, however, takes some organizational work.

HRS and the Global Business Travel Association today released a research report that suggests a sourcing strategy HRS has defined as “convergence” to combat rising hotel rates. The report cites “the declining importance of corporate travel,” when compared to leisure travel, as one of the challenges buyers will face when negotiating their programs for 2024. That’s combined with rising occupancies in major business travel markets and a high inflationary environment overall for travel and hospitality.

“Some of the ways suppliers have seemed to be making changes to sales tactics suggests that buyers will have to show the value—to bring volume to hotels and market share to airlines—to get the discounts they may have gotten in the past as a matter of habit,” said GBTA senior research manager Mark Sharoff, who led the study.

Buyers know the market is tough. According to the HRS/GBTA survey, 77 percent of buyers believe their next negotiation with suppliers will be more difficult than the last. They rated the more consolidated airline market as their No. 1 challenge. The fragmented lodging sector came in a close second, but it wasn’t a single picture for lodging types across the board.

While 55 percent of respondents told researchers it was difficult to obtain favorable rates for hotels during their previous RFP exercise, less than half that number (23 percent) said it was difficult to obtain favorable rates for small/simple meetings and 34 percent said it was difficult to get good rates for extended stay accommodations.

The HRS “convergence” strategy encourages companies to look at their accommodations volume more holistically and to engage their lodging partners—often the bigger chains in this scenario because they have multiple lodging types in their portfolio—in the entire picture.

HRS has 32 clients who are doing that exercise today, and “it works,” said HRS VP of procurement consulting and supplier solutions for the Americas Pauline Robin.

“We are able to get stakeholders to come together on our single platform to work on a project—they are travel managers, meeting managers, HR. They are all the stakeholders who may have different needs, but they can fill in our RFP [tool] separately and we as HRS take it back to look at the requirements."

By converging the clients’ needs, HRS has been able to achieve 16 percent off of market rates for meetings lodging, 7 percent off of transient rates for long-stay journeys and 1.7 percent off of previous transient rates for new transient rates. In markets where rates have gone sky high? “It works to mitigate the increases,” said an HRS spokesperson.

The strategy is endorsed by at least one hotel partner—Hyatt Hotels global sales VP Gus Vonderheide.

“We have 48 clients who work with us this way,” he said. “We determine those clients through research. They have to be global—on two or more continents—and they have to deliver a certain amount of revenue. But we don’t just look at what revenue would be delivered today, we look at the potential for the account as well. We want to grow with these clients and work with them strategically, so we have to know what their business really looks like, and they have to know what I’ve got—and where I’ve got it—so we both know the potential to really [build] the relationship."

Vonderheide said while Hyatt only has 48 such clients today, he thinks the hotel company could and should double that number, and for companies that could—but aren’t willing to—work that way, it’s a miss.

“We’ll work with them however they want to work with us, but if we do the total spend approach, we do work with them differently. We could grow revenue with more of these relationships, [by taking] marketshare from our competitors. I’d like to do more.”

New Term, Old Concept, New Life?

According to the GBTA survey, the willingness to break down internal silos and establish consolidated data is the lynchpin for such supplier relationships. Survey respondents said they generally collaborated with meetings and HR colleagues, but only a handful had joint processes and workflows that would facilitate joint sourcing exercises.

While “convergence” may be a new moniker, the idea of consolidating different types of accommodations volume to leverage program savings is as old as travel procurement itself. The difference today, said HRS executives, is the technology that will allow companies to facilitate it.

HRS is working on a booking tool that would bring all these travel types together to capture that data on the front end, rather than gathering it through collaborative RFP projects or merging data from different sources.

That offering won’t be ready until next year, though. For now, Robin said, the company was leaning on a combined hotel stay and long stay booking tool, while wrapping in small meetings data from the HRS Meetago tool. “We can do that work on the back end as well, but it will be ideal to have one tool to consolidate the data capture,” said Robin. “We’re working on that for the first quarter of 2024.”