Hotel reshopping
and analytics technology provider Tripbam says corporate travel managers should
be working to obtain discounts in their contracts now, before rates and
occupancy start to increase as business travel returns.
Analyzing the
impact of the COVID-19 pandemic on the corporate hotel space, Tripbam says it
has found shifts related to rates, star rates, locations and booking trends. The
data, included in Tripbam’s Quarterly Market Report, comes from the corporate
transient travel bookings of its 2,000 clients around the world.
The average
market rate at the end of January – which is the lowest corporate rate
available in a market – is down 41% compared to the same time last year,
dropping from $205 to $120, while the average booked rate has dropped from $175
to $116.
Tripbam CEO Steve Reynolds say rates continue to trend down.
“Volume has
kind of flatlined or it’s trending up a little bit for seasonality into January,
but the rates continue to go down,” he says.
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“Is there
an end in sight? Probably. We are bouncing along the bottom maybe, but we are
still seeing that trend down.”
The overall
drop in rates caused by the COVID-19 pandemic means that the gap between market
and booked rate is also shrinking – from an average of 25% last year to just
16% now – diminishing the value of the corporate hotel program.
And data
about traveler booking behavior reflects that: Tripbam says corporate travelers
are booking the negotiated static or flat rate less often – down 37% year-over-year
– while the booking of publicly available rates is up 46% and loyalty rate
bookings are up 583% in that same period.
“The static rate I negotiated, that I rolled over, is exceptionally
high, so what I thought was a 25% discount when I did the deal back in 2019 for
2020 is now only 5 to 10% above the best available rate,” Reynolds says.
“You’ve got to get a rate that’s more in line with reality. You can’t
rely on historical data anymore to determine or benchmark that discount.”
A buyer's market
Instead, Reynolds advises travel managers to view this as a “buyer’s
market,” and to go directly to specific hotels now to negotiate the best
discounts, before rates and occupancy start to increase.
You can’t rely on historical data anymore to determine or benchmark that discount.
Steve Reynolds - Tripbam
He says buyers will also need to “manage
through rate volatility” – which he expects to remain high as hotels reopen,
supply increases and hotels try to generate demand by lowering rates.
At the same
time, corporate travel managers should closely monitor their LRA (last room
availability) performance – which is supposed to guarantee the company can book
at the contracted price, regardless of how many available rooms are left.
“What travel
managers forget is revenue managers have the ability to turn [discounts] off
whenever they want,” Reynolds says.
“Because of
COVID, there’s greater pressure on revenue managers to turn off the discounts.
I need to drive RevPAR, so I want to sell this room at as high a price as I
possibly can.”
Other findings
from Tripbam’s analysis: The average star rating of hotels booked has decreased
by .4 compared to last year and length of stay has increased by one day. Comparing
the large chains, Hilton has gained 43% in corporate market share compared to the
same period last year, while Marriott International has decreased 22%.
Reynolds says
all of these trends are a reflection of the type of people traveling now –
primarily essential workers who are choosing a different type of hotel than
traditional business travelers. And in the case of the chains, Hilton’s portfolio
offers more down-market properties than Marriott.
“It used to be Marriott was
by far the dominant chain across corporate transient. Now, because of the type
of hotels they have, Hilton has tied Marriott if not surpassed them in terms of
market share across corporate transient travel,” he says, adding that this can
be advantageous to travel managers.
“It’s a little bit of a fresh air in that Marriott was a
tough negotiator.”