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Evolution of Business Travel: Adjusting your corporate travel strategy for recovery
The following article is a summary of best practices and tips from our recent webinar, The Evolution of Business Travel. To view a full recording of the webinar, fill out the form on the landing page.
Though corporate travel is not expected to pick up until mid next year, travel managers have been working diligently to prepare for its return. Many have completely reconfigured their Duty of Care considerations and travel approval processes, and are already deep into season 2021 RFPs for next year. Here are some important considerations for hotels as they plan for recovery in the business segment:
Understanding new duty of care and travel policies
In a recent GBTA poll, 56% of travel procurement professionals say that their travel policies have changed. In addition to stricter rules on cleanliness standards, many corporate travel buyers are also tightening rules on approval and booking processes. Some of these include:
- New rules about pre-trip authorisations
- More frequent or detailed pre-trip communications or briefings
- Collecting health info from employee travelers, such as virus exposure and pre-existing conditions
- Clarifying or changing rules about ticket credits and unused tickets (mostly for flight bookings)
- New rules about ground transport and booking channels
Countries like Germany have even made such policies a part of law. Travelers from German corporations now need to have a statement from their employer, emergency request from customer or business partner, self-disclosure about their state of health, negative COVID-19 test, and an A1 and EU registration certificate. These restrictions will ensure that business travel demand remains primarily domestic for the upcoming quarters, with some interregional travel between neighboring countries. However, as the pandemic levels start to stabilize, we may see governments and businesses working together on solutions such as travel corridors and rapid COVID testing, which may help to bring back international travel at higher levels.
For hotels, the message around duty of care must remain strong to maintain travel buyer confidence. Corporate travel managers need as much detailed information as possible about adherence to cleanliness and sanitization practices, particularly if hotels participate in a third-party inspection and certification program.
Navigating RFP season 2021
With season 2021 for corporate RFPs underway, we’re seeing the following trends at Pegasus:
- 1% of corporations are requesting commissionable rates in the forthcoming year;
- 5% are requesting a rate extension of 2020 with a dynamic dual rate, which is a flexible rate that will display either the corporate negotiated rate or the a dynamic discount of 10-20% below BAR, whichever is lower;
- 23% of corporations are requesting the 2020 rate to be extended to the end of 2021;
- 71% or corporations are running a full RFP process, with some requesting the same rate levels as 2020 and others asking up to 15% reduction on season 2020 rates.
Corporations that are running full RFPs appear to be using the process to gather new info on health policies and duty of care, so hotels will need to have that info ready.
Hotels should be planning their season 2021 RFPs with an eye on the future. With the recovery expected to be slow, we predict that 2022 programs could shrink significantly, so hotels that are not in a corporate program for 2021 may not be able to get back in for 2-3 years.
Hotels should also make sure that corporate rate descriptions are up to date. Check your CRS and GDS channels and view your rate plans as if you are a traveler. Does it represent your value? What amenities are you currently offering to the client? Consider additional benefits that you can provided, such as bottled water, laundry discounts, and food and beverage discounts.
The number one priority for corporate clients at the moment is cancellation flexibility. Clients need to be able to cancel bookings at any time due to changing travel restrictions. Monitoring sites like the CDC, IATA, and Reopen EU can be helpful for picking up on potential last-minute cancellations, so that you have the opportunity to resell the room elsewhere.
Setting your corporate rate strategy
It can be tempting to drop BAR to try and pick up your occupancy rates as much as possible, but this may be harmful over the long term. If you’re counting on corporate business to return, dropping BAR can negatively affect your corporate contracting process. There are hundreds of tools monitoring your hotel’s average BAR over the year, which sets the anchor point for rate negotiations.
For example, if you drop BAR by 35-40% and are contracted into 2021 with those lowered rates, it may take another three or four years to get the rates back up. Contract renewals may allow for a 2.5 to 7.5% increase with strong negotiations, but it will be near impossible to jump back the 35-40% to your 2019 BAR levels within a year.
If possible, try to hold your rates and instead apply discounts to sell distressed inventory. By packaging your offer or selling on opaque channels such as Priceline, you can obscure the discount so that it does not affect your corporate rate negotiations. Including value adds such as food & beverage discounts can also help you bring in additional revenue.
Building long-term relationships
Now is the time to get your hotel in front of your top corporate clients to demonstrate how much you value the relationship with them. Don’t just sell your hotel based on rate—think of the overall value that you can provide to your clients, especially in terms of high standards in duty of care, as well as added amenities and services that you can provide. Work directly with the travel managers to fully understand their needs and concerns, so you can adapt your offering accordingly. Having strong long-term relationships in place will be key as corporate travel starts to return.
Interested in learning more about corporate and consortia strategies for the recovery? Sign up for our webinar The Evolution of Business Travel to view a full recording.
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