Dynamic pricing finding favour with buyers
Hotel sourcing methods were in the spotlight at the ACTE Conference in London this week, with travel managers and hoteliers alike criticising the ‘cumbersome’ RFP process and exploring alternative models instead.
“The RFP process is a lot of work for very little reward,” said Mohammed Atef Halawi, Global Travel Manager at Firmenich.
“RFPs bring the most value where you have the most spend and in destinations where there are new hotels opening.”
Steve Sitto, Global Travel & Meetings Manager at Tesla, said the RFP system is “broken” and that he uses dynamic pricing – a set level below BAR rates - to complement his company’s hotel programme.
“In theory you have a year-round fixed rate discount,” added Torsten Kriedt, VP of Product Strategy and Innovation at BCD Travel, who also highlighted challenges encountered when BAR rises.
“It’s hard to see if you’re getting a good deal when the BAR is constantly changing,” added Halawi.
Conducting RFPs for your top 20% of hotels – around 80% of spend – was advised, with dynamic pricing used for the next swathe of hotels and finally chainwide discounts for the bottom level.
Two-year deals were also seen as one way of easing the pain of annual RFPs.
“I’d love to get to that point but not many hotels are in a position to budget that way,” said Sitto. “You can protect yourself against rises but what if the economy goes the other way? You lose out.”
A study from ACTE and BCD Travel, New Approaches to Hotel Sourcing, found 56% of survey respondents plan to source more than half of their room nights via RFP, but only 38% believe it gives them the best ROI.