November 16, 2018
Hospitality industry executives look ahead to 2019
There are headwinds ahead for some hotel brand companies and real estate investment trusts, but the overall tone on calls in regards to next year was positive.Read more
The process by which companies obtain negotiated rates from hotels is broken and has been for years. What’s missing from this negotiation process? The actual “deals” themselves.
In most agreements, there is a buyer willing to make purchase commitments and a seller or supplier willing to provide a product or service for a price, plus the appropriate discounts. But with hotel negotiations, neither party makes a hard commitment.
Instead, buyers make soft commitments for room nights and suppliers make soft commitments for price and product, supplementing with loosely defined terms such as last room availability. Room night commitments are rarely met because companies struggle to control hotel spend among travelers or to shift share to preferred suppliers. On the other side of the equation, the negotiated price or product is only realized on average 60 percent of the time.
In other words, six to nine months of effort is wasted each year across the industry for a company to maybe obtain a discount and for a hotel to maybe obtain additional volume.
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