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Travel managers unhappy with traditional hotel sourcing: ACTE study

Industry beginning to adopt dynamic sourcing models while managers reluctant to abandon manual processes


October 16, 2017
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LONDON—Corporate travel managers, increasingly frustrated with traditional approaches to sourcing hotels, are slowly supplementing their programs 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 most areas 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 percent) of survey respondents plan to source more than 50 percent of their room nights via an RFP, and 29 percent 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 percent) believe it gives them the best ROI. Unsurprisingly, then, slightly more than two-thirds (69 percent) indicate either unhappiness with the performance of traditional sourcing or a desire to change.

“Institutional inertia can be a major problem across organisations, and the travel department is no exception,” said Greeley Koch, executive director, ACTE. “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—and 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. Fifty-five per cent of travel managers expect setup to consume more than 50 hours of their time, while 40 per cent believe maintenance will require more than 50 hours.

“While corporate travel industry professionals often think of air travel as being the key function of the travel executive’s job, hotel sourcing is an enormous time-sink,” said Charuta Fadnis, senior director of research & intelligence, BCD Travel. “Taking advantage of dynamic sourcing methods can vastly reduce the time and energy spent on negotiating hotel contracts, lead to ongoing program improvements and enhance the traveller experience.”

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

More than two-thirds (70 percent) 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 traditional sourcing when it came to visibility on attachment of preferred or negotiated rates. Managers leveraging dynamic sourcing are significantly (36 percent) less likely to say they lack data on their negotiated rate attachment levels.

Travel programs benefit from dynamic sourcing
Asked to focus specifically on the advantages they had experienced by switching from traditional to dynamic models, travel managers homed in on strategic improvements that tend to contribute to the success of the travel programme as a whole. Forty-four per cent say this approach offered them greater flexibility; 42 percent point to improved traveller satisfaction; and 33 percent 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.

Challenges still hamper full adoption of dynamic sourcing
The desire to change is there, but corporate travel managers appear to find it difficult to translate that desire into action, with 43 percent 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 percent) rule out making a change because they believe the alternatives are too difficult to implement, 19 percent say they lack data to make a change and 8 per cent say they are not aware of alternatives at all.

Finding the best sourcing solution
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 nine percent of managers have a definite intention to switch from RFP-based sourcing to dynamic sourcing). To move forward, travel managers must adopt a holistic view of their hotel sourcing program, solicit feedback from travellers and suppliers alike and be willing to test new models.