ACTE: Corporate Travel Managers increasingly dissatisfied with traditional hotel sourcing

17 October, 2017

Corporate travel managers, increasingly frustrated with traditional approaches to sourcing hotels, are slowly supplementing their programmes with newer, dynamic systems, according to research from the Association of Corporate Travel Executives (ACTE), underwritten by BCD Travel.

The findings come as technology streamlines almost every aspect of travel. However, for many corporate travel managers, hotel sourcing is stuck in the pre-digital era. The hotel sourcing paradox is underscored by the fact that, despite their frustrations with the manual and time-intensive process of seasonal RFP negotiations, most companies are nevertheless following that same pattern in contracting hotel nights for 2018.

The study, New Approaches to Hotel Sourcing, found that many corporate travel managers' jobs continue to feature management of the resource-intensive annual RFP process. It reveals that more than half (56%) of survey respondents plan to source more than 50% of their room nights via an RFP, and 29% will use RFPs to source at least three-quarters of their rooms.

The traditional RFP-based hotel sourcing method seems uncompelling for many managers: Just over one third (38%) believe it gives them the best ROI. Unsurprisingly, then, slightly more than two-thirds (69%) indicate either unhappiness with the performance of traditional sourcing or a desire to change.

For many years, RFP-based hotel sourcing processes have been the norm with no viable alternatives. But travel managers now have access to newer, more cost-effective tools. Speaking at the CAPA-ACTE Global Summit in London last week, Greeley Koch, executive director, ACTE acknowledged a need to "move away from the 'this is how we've always done it' mind-set."

Sourcing hotels using an annual RFP is time-consuming, both for setup and ongoing maintenance. Just under half (45%) of travel managers expect setup to consume more than 50 hours of their time, while 40% believe maintenance will require more than 50 hours.

Today, many corporate travel managers are exploring the potential of dynamic sourcing and management to address the challenges created by the RFP process: the findings show 42% of managers are using some degree of dynamic hotel sourcing, with 20% saying they are using the dynamic model to source at least half of their room nights.

More than two-thirds (70%) of managers using a dynamic approach for some portion of their hotel sourcing secured more than half their rooms at their negotiated rate in the last sourcing cycle. Managers using dynamic models for some portion of their hotel sourcing also outperformed those using traditional sourcing when it came to visibility on attachment of preferred or negotiated rates. Managers leveraging dynamic sourcing are significantly (36%) less likely to say they lack data on their negotiated rate attachment levels.

Asked to focus specifically on the advantages they had experienced by switching from traditional to dynamic models, travel managers responding to the survey homed in on strategic improvements that tend to contribute to the success of the travel programme as a whole. ACTE says 44% say this approach offered them greater flexibility; 42% point to improved traveller satisfaction; and 33% say dynamic sourcing helped them increase compliance.

In contrast to the managers using dynamic sourcing, those managers who continue to use traditional hotel sourcing mentioned more tactical benefits, such as improved negotiated rate versus industry benchmarks and better average room rates, as the top advantages arising from their approach.

The desire to change is clearly there, but corporate travel managers appear to find it difficult to translate that desire into action, according to the report findings with 43% saying they want to change but do not yet have definite plans. Barriers to implementation and a lack of education seem to be the key obstacles: One in five (22%) rule out making a change because they believe the alternatives are too difficult to implement, 19% say they lack data to make a change and 8% say they are not aware of alternatives at all.

The study New Approaches to Hotel Sourcing shows that corporate travel managers who use a dynamic approach to sourcing are achieving real benefits in terms of greater flexibility, improved traveller satisfaction and greater compliance. However, the research also suggests that managers are uncertain about how to find and implement an alternative sourcing strategy. Most don't set out with a clear plan for change (only 9% of managers have a definite intention to switch from RFP-based sourcing to dynamic sourcing).

To move forward, ACTE says travel managers must adopt a holistic view of their hotel sourcing programme, solicit feedback from travellers and suppliers alike and be willing to test new models. "Making any major programmatic change requires travel managers to take some risks," says Mr Koch.

The dynamic sourcing model is more complex than the traditional model, and for many organisations, it might work best alongside traditional RFP methods. "The key to success will be trial and error, and not being afraid to step back, evaluate what didn't work and continue to forge ahead," adds Mr Koch.

DOWNLOAD the full study: ACTE LONDON New Approaches to Hotel Sourcing