Negotiating the Hotel Room Rate Maze

New technology, e-commerce and global economics continue to drive dramatic change in hotel distribution.

Two years ago less than 10% of hotel bookings were made on line. Current estimates predict within two years 20-30% of all hotel bookings will be made on line.

Globally hotels are scrambling. Scrambling to gain control over price, room inventory and the customer relationship, put at risk by this “online” revolution.

How then do hotel groups view their market?
Like hotel ownership the way hotels view their market is fragmented. Some view by customer type, some by booking channel, and some based on customer loyalty and others a combination of all three. How hotels distribute and receive bookings also is an array of alternative paths coming together though both human and electronic means.

Property categorisation is a critical element of the hotel distribution process influencing the consumers search and review of value and the method or channel by which the hotel chooses to distribute.

The internet has definitely forced margins down however technology will be a major influencing factor for survival into the future.

Traditionally corporate travellers have transacted their hotel bookings over the phone via their travel management company. Large corporate organisations have negotiated discounted fixed room rate levels either directly with hotel chains or through their travel management company.

Once upon a time the TMC survived on hotel commissions now the trend is a move to net room rates and the TMC is compensated via a fee.

As important as pricing is to hotels the ability to price compare is of the utmost importance to the traveller.

Providing a price comparison whilst managing within an organisations travel policy is a clear advantage for the TMC.

How Do Travel Management Companies Add Value on Hotel Bookings?

Value add opportunityProvided by TMC
Facilitate search and provide choice YesProvide event planningYesManage costs and travel policyYesExecute bookings, cancellations and re-bookingsYesResolve payment issuesYesProvide forecasting, competitive and marketing informationYesProvide the opportunity to package with other travel needsYes

The internet has also enabled TMC’s to reduce distribution costs. The benefit to corporate customers being the provision of a sliding scale of fees based on the level of self booking, e- fulfilment supported bookings and total offline transactions.

Barraged with a variety of new distribution channels via the internet, many corporate customers have been tempted to experiment in an effort to contain costs and take control of their own booking process.

The reality is that travellers searching websites and other sources for hotel rates often cost their organisations more in terms of time, reduced productivity and also penalty costs. Penalty costs because of the loss of tracking and therefore purchasing power, limiting a company's ability to leverage the most advantageous room rates long term.

Hotels have now reacted and are facilitating a change for corporate customers. Static contracted rates are no longer meeting the needs of the corporate traveller. “Corporates” are demanding access to consistently low rates and hotels are positioning themselves to provide dynamic rates linked to customer demands and hotel occupancy rates.

These dynamic rates are made available and supported through TMC’s

As this change in rate distribution occurs, the economic model evolves and hotel bookings online grow TMC’s continue to provide choice, provide vital management information and provide a time efficient way to reduce accommodation costs.

©Gordon Young 2005. All rights reserved.