The Hybrid Model. This is still an annual process. Buyers use data to identify their top markets
based on spend or volume and then secure static, negotiated rates only at top hotels in those markets. In secondary and tertiary markets, buyers adopt some mix of chainwide discounts, agency
rates and rates found through hotel rate shopping tools. Though this model has become well worn,
many sourcing professionals maintain it’s still one of the best options for corporates because it
allows for ;exibility, it shortens the procurement season by limiting the number of property negotiations and it protects programs from rate spikes in important markets during periods of high
occupancy. “From our perspective in working with a variety of clients, there’s room for all of the
rates that can be negotiated out there,” said Advito senior director and hotel practice area leader
Marwan Batrouni. “There isn’t a one-size-;ts-all approach. Fixed rates, dynamic rates and chainwide agreements can live happily together.”
The Airline Model. This means multi-year agreements in which almost all dynamic discounts are
calculated as a percentage off the best available rate. From the hotelier perspective, static negotiated
rates constitute a backward pricing model, while dynamic pricing would better re;ect real-time market
conditions. Additionally, dynamic rates would mean throwing out the annual RFP process and moving
toward longer agreements. For corporates, hoteliers’ guarantee that dynamic rates will bene;t both
sides isn’t good enough to give up the assurance of static rates. “[Dynamic rates] do reduce workload
and drive ef;ciencies,” Hillenmayer said. “However, there isn’t currently a very valuable way to know if
it is actually getting the same sort of value and market picture that the ;xed-rate model is. Not getting
the entire market picture could hurt the corporations.”
The Long-Term Service-Level Agreement Model. This long-term contract, tracked and measured monthly, includes several service-level metrics that can trigger renegotiation or termination by either party.
McDonald posed the question: “Why would you basically hit reset from zero and negotiate every agreement for every rate for every year for every property? The reality is: Unless something has fundamentally changed in your business, the movement of hotels in or out of your program could be a max of
10 to 15 percent of the hotels you had the year before.” According to the GBTA survey, travel buyers
typically drop just 12 percent of their hotels from the prior year. Yet each year, the process of sending
out lengthy RFPs is repeated. “It seems so silly for both sides to have to go through this process each
and every year,” said Coach senior manager of global travel Rosemary Maloney. “The current state of
the 150 questions that have to be ;lled out each year—[the hotel] should only have to ;ll that out once.
The hotel doesn’t move away from the ;re station.”
Reynolds believes the solution is to negotiate only as often as key metrics make necessary. For in-
stance, a buyer could require that their negotiated rate—dynamic or ;at—generate at least 20 percent
in savings, not including amenities, when compared to the lowest quali;ed rate, which excludes rates
corporates wouldn’t use, such as nonrefundable. The buyer would also require that the discount be
available, via last room availability, at least some percentage of time. Hoteliers, in turn, could require
that a discount be renegotiated if it goes above 30 percent of the lowest quali;ed rate for an extended
period of time. It could also demand some marketshare commitment from the buyer.
This model isn’t just about rates and savings. Reynolds said long-term SLAs also could include metrics
like traveler sentiment and satisfaction measures or safety and security ratings. The catch? Reynolds’
model does depend on an independent
intermediary to measure the savings and
marketshare metrics, a role he’d like Trip-
bam to occupy (see Tripbam Wants to Be
the Hotel Industry’s Prism below).
However, McDonald did suggest a
similar model, independent of Reynolds’
proposition, in which buyers negotiate
for a set list of amenities via a long-term
agreement and reevaluate only price.
THIS ALL COULD BE
Yes, the corporate travel industry is ex-
tremely slow to change. Yes, this article
did begin with a decade-old anecdote
about how everything would be different
and nothing would be the same. But new
developments around analytics and arti;-
cial intelligence really could prove disrup-
tive to the hotel procurement process.
Consider this: Organizations are con-
stantly in ;ux. Clients change, teams
change, travel patterns change. Yet, cur-
rent hotel contracts are static and negoti-
ated based on events and behaviors that
have occurred in the past.
What if travel buyers, rather than pull-
ing reports to get snapshots of data, could
access continuous data streams and mar-
ket dynamics in real time? And what if
online booking tools and the agent desk-
top portals could use that data to encour-
age booking behavior that optimized
travel programs to meet their contracts?
Jay Richmond, Amadeus IT Group head
of business travel for North America,
thinks the technology is here to wire that
sort of supplier data into the current hotel
search and shopping infrastructures. But
to make that effective, automation needs
to step in. “The human element of doing
[a supplier] assessment is quite a high
cost,” he said. “If that could be automat-
ed, now you’re constantly knowing that
you are managing your supplier spend to
the best goals of your company.”
If these advancements occur and travel
buyers are able to access real-time pro-
gram data and can guarantee market share
or spend to suppliers, then sitting down to
negotiate won’t be the headache it is now.
And if both the buyer side and supplier
side can agree to hotel contracts that en-
able ;exibility for both market dynamics
and changing business needs, there won’t
be a need to negotiate every single year. In
that scenario, the annual hotel RFP season
would no longer exist.
Hotel RFP Models
20 | Business Travel News | July 17, 2017 www.businesstravelnews.com
Launched in 2000, Prism drove the adoption of market share-based airline contracts, providing data
transparency that allows both buyers and suppliers to assess discount programs and monitor account
performance. Among those familiar with both the hotel and airline industries, a common complaint is
that there’s no Prism for the hotel side.
Tripbam founder and CEO Steve Reynolds is looking to solve that problem. Working on behalf
of both corporates and hotel companies, Tripbam for Hotels would act as an unbiased intermediary, tracking whether hotels are making negotiated rates available and whether corporates (which
wouldn’t have to be Tripbam clients) are meeting marketshare commitments.
Unlike Prism, Tripbam also would deploy its existing technologies to keep each side in line. For
instance, if a corporate isn’t meeting its marketshare commitment at a certain hotel, Tripbam would
send a message to travelers prompting them to switch to the preferred property—or it could rebook
travelers automatically, depending on company policy—but only if the rate is better.
To make the system work, Tripbam first has to get a number of major hotels onboard. Reynolds is
bullish about making that happen but admitted that the fragmentation of the hotel industry means it
could take much longer to get off the ground than Prism did.
Tripbam Wants to Be the Hotel Industry’s Prism