With major hotel mergers allowing already massive chains to gain even greater negotiating power over room rates, it is vital that corporates take enhanced steps to ensure that any arrangements made between them and their travel accommodation providers need to be in their utmost interest.
While this may seem like a given, it is not always the case in reality. Taking a look at one common form of arrangement, the chain wide discount, also known as dynamic or floating rates, we can see why companies can do more to empower themselves.
Under such an agreement, a company is given a percentage discount off the hotel chain’s prevailing Best Available Rates (BAR) – essentially the public rate – when booking rooms using their corporate booking tool. In return, the said hotel’s inventory is more prominently displayed on the company’s booking platform, often with preferred status or similar mechanisms conferred, resulting in very high visibility.
This may seem logical at first glance. However, feedback from our corporate partners indicate that a dynamic pricing plan would only complicate rather than aid travel managers in their work.
Most ostentatious is the apparent savings and impact on budgeting. As BAR rates fluctuate according to public demand, room prices can easily soar without prior warning. Budget planning becomes redundant if this is allowed to happen.
Where a dynamic pricing plan has a place as a complement to a company’s negotiated rates programme, they don’t consider chain-wide discounts.
This leads to a second issue regarding transparency, specifically with regards to what is included at the point of purchase by the traveller.
Besides a supply-and-demand driven BAR rate that may or may not be working in favour of a company’s travel budget, floating rate agreements often entail other things such as whether there is last room availability, flexible cancellation policy, type of amenities, and whether or not rooms will even be open for booking during peak periods.