HRS offers deeper insights into hotel sourcing

HRS has unveiled its new Hotel Sourcing Report to provide intelligence on 2019 rate projections, the progress of continuous sourcing, rate trends in Shanghai and hotel scenarios for manufacturing companies.

Hotel sourcing is an an evolving practice, and as detailed in an ACTE Sourcing report from last year, 51% of companies have altered their approach to hotel sourcing in the past three years. Beyond changing the timing and frequency of their sourcing, multinational programmes are increasingly leveraging global performance data and benchmarking to drive better results.

HRS sheds light on rate trends and predictions as hotel sourcing evolves

Recent developments in hotel sourcing
Enhancements in automation and process improvement are making 2019 a watershed year for hotel sourcing. As detailed in last year’s ACTE report, more than 10% of companies have moved away from the traditional, once-a-year hotel RFP season to an engaged, year-round model.

Continuous sourcing ensures that companies can take advantage of rates fluctuating in select markets, as well as alter their procurement strategy as internal corporate priorities change. Continuous sourcing drives increased transparency in the relationship between corporates and hotel suppliers.

Hoteliers appreciate the elevated level of engagement from preferred partners that deliver consistent volume; corporate hotel programme leaders benefit from timely rate analysis that can drive faster implementation of newly-negotiated rates in all relevant shopping/booking channels.

With such benefits, it’s no surprise that 52% of programmes that practise continuous sourcing recorded both increased financial savings and flexibility. A whopping 44% measured increased programme compliance.

A deeper look at Shanghai as a business destination
Shanghai is China’s busiest hub for corporate travel and has retained
that status for several years. The government’s decision to create the country’s first free trade zone in Shanghai in 2013 has enhanced this position; more than 40,000 companies have established operations in Shanghai in the past five years.

While other first-tier cities like Beijing or Guangzhou have also seen major infrastructural changes, Shanghai has an advantage in its long history as an international hub. In the new millennium, buoyed by the opening of the free trade zone, the city has been transformed into one of the world’s most important and eclectic financial centres.

Overall in the Asia-Pacific, the hotel landscape is very fragmented. Ninety-five per cent of the hotels in the market are independent hotels, defining the environment as a pure buyer’s market. In Shanghai, specifically, market data showed an average rate increase for 2018 of 3.6% with an occupancy rate of 63% (source:

The traditional approach for hotel programmes is to drive high levels of optimisation; the main lever for improvements is the capability and willingness to innovate the approach. A growing number of hotel programmes are using an outsourced automated process (through benchmarking, volume bundling and alternative hotels), delivering rate decreases of 12% on average, with benefits in the quality of the hotel programme as well. In Shanghai, there are excellent opportunities for companies to save on all categories of hotels via automated outsourcing.

Here are the savings corporates were able to secure in 2018:

  • Corporates should aggressively negotiate to include Last Room Availability (LRA). An examination of Shanghai hotel contracts found a range of 60 to 87% of contracts including a clause for LRA.
  • Free Wi-Fi is a must. More than 90% of contracts include free Wi-Fi. Corporates should make this request up front in any Shanghai hotel negotiation.

*percentage of hotel contracts including LRA at the contracted rate

Data source: HRS analysis on 1 million room nights sourced for global clients in Shanghai in 2018

A deeper look at top vertical markets: manufacturing

Manufacturing firms book a significant number of hotel rooms around the world. With rare exceptions, manufacturing is a conservative sector when it comes to travel management. Hotel programmes are based on chains and historical agreements, despite the global market offering a fragmented landscape with 75% of global supply coming from independent local players. Leakage remains the main challenge to overcome.

Manufacturing companies also stand to gain from continuous sourcing, so they can take advantage of savings opportunities in different markets as rates evolve during any given year. Once-a-year hotel negotiations no longer suffice.

Based on sophisticated benchmarking and focused negotiation, the hotel programmes of more than two dozen global manufacturing companies reported rates (on average) 5% lower than average programmes.

In the past two years, HRS has found that manufacturing companies, in particular, have seen the quality of their hotel portfolios increase when they take advantage of outsourcing models during bidding seasons. As a result, these companies have registered increased traveller satisfaction, rising adherence to policies and better, the duty of care compliance.

Here are the savings corporates in manufacturing were able to secure in 2018:

  • As always, corporates in any vertical market should lock in LRA in their hotel supplier contracts. An examination of manufacturing company hotel contracts found a range of 58 to 69% of contracts including a clause for LRA.
  • Free Wi-Fi is a must. More than 90% of contracts include free Wi-Fi. Regardless of the vertical market, companies should make this a standard request in any hotel negotiation.

*percentage of hotel contracts including LRA at the contracted rate

Data source: HRS analysis on room nights sourced for global manufacturing clients in 2018

Sponsored Post