How to...

Control hotel spend

Expansion at telecommunications contractor Kelly Group highlighted a growing need to get a better handle on hotel spend.

Control Hotel Spend

February 2011 was a good month for the Kelly Group. It secured a large contract with BT to install tele- communications equipment, which meant a large mobile force of 500 engineers travelling around the country in vans – often to remote locations – and clocking up lots of hotel nights.

“It dawned on us that we were going to run up some rather large hotel bills,” says Jimmy Bradley, the group's deputy finance director. The company has 40 operational depots across the UK and a workforce of 1,800 that are chiefly engineers working at exclusively UK customer sites. Kelly’s customers are mostly large blue chip companies including the likes of British Telecom, Serco, Siemens, Network Rail, Thales and Virgin Media. Read on for how the company successfully tackled this area of business travel spend.

STEP 1: The company was already aware of the fact that its existing hotel booking process was a drain on resources and that prices had started to rise. The company already had travel guidelines in place – centred on lowest logical cost – with each site responsible for its profit and loss so site managers are focussed on cost.

Two bookers at Kelly Group headquarters were the conduits in the booking process. They accepted bookings from the engineers by phone and would then search the internet for them and reserve a room. “It was laborious, not controlled and there was no MI apart from the credit card information and certainly no visibility of where people were staying,” explains Bradley.

Premier Inn was the main hotel chain patronised but was unable to provide lower rates. “We would see hotel adverts for £29 and thought, ‘Blimey, we’re not getting a rate like that and not getting the best deal’." More than ever Kelly knew it had to change its hotel booking process and supplier in order to provide better value, flexibility and to attain a service that prioritised the customer.

STEP 2: Rather than a formal RFP undertaking, Kelly asked around and two suppliers pitched, with HRS winning the bid and starting on the account in February 2011. “We liked HRS and its business model,” says Bradley. “There were no upfront costs, they offered transparent pricing and no real risk.”

With no traditional travel manager position at Kelly, group purchasing manager Suba Muruganathan was the nominated project leader for the implementation process. The key areas for HRS to satisfy were savings and ease of use. “They’re in a cut-throat business and every penny counts so price is key,” says Mark Douglas, sales director at Kelly’s hotel booking agency, HRS. Kelly’s Bradley adds: “As our customer contracts are charged per project rather than per day, it is crucial that we keep our hotel room costs down.”

 

STEP 3: The first thing HRS did was take a look at what and where Kelly were spending – based on spend with the existing supplier over the previous two months – and presented a detailed savings analysis which showed savings of between 20-30 per cent. “Across all our sites we spend £800,000 per annum on hotels so it’s good money to save,” says Bradley.

HRS set up their corporate booking portal for Kelly and loaded the company's 40 depot locations, a mix of BAR (best available rates), HRS rates and Kelly rates, with live availability at time of booking. The portal was also loaded with Kelly’s travel policy and entry fields covering all cost centres. “We now use Travelodge and lots of independent hotels as when it comes to price competitiveness they’re good,” says HRS’ Douglas.

The portal can search hotels by proximity to the required location or by price, and for Kelly it’s by price. Kelly is proactive in alerting HRS to possible new contracts and potential volumes in new areas so they can begin the hotel negotiation process without delay. “It’s a soft benefit of our good relationship with the client,” says HRS's Douglas. “We sign up hotels in that new location in advance rather than waiting for Kelly to win the contract.”

 

STEP 4: Product training was undertaken for the two bookers who then transferred their skills to four newly assigned bookers in other parts of the business. “People grasped the system quickly. It’s very intuitive and bookings were very high from the start,” says HRS' Douglas. Bradley and his team were also clear in their communications to staff about why HRS was appointed and the benefits they were going to bring.

STEP 5: The 70-80 per cent of bookings that were previously going to Premier Inn has now dropped to more like 20-25 per cent, while the average rate has dropped by between 21-25 per cent. Kelly now has a better spread of hotels – many of them independents to satisfy the remote locations where there are usually no chain hotels – and space to park the man with van or man with lorry.

“We had no real bargaining power before as we would say, ‘We’re here for the next three weeks’,“ recalls Bradley. Now, with six-month lengths of contract through BT, plus more engineers working on rail projects and others spent installing ’Boris’ bikes, volumes were increasing and Kelly has better leverage with hotel suppliers. “We went from a standing start to having 500 engineers in the first year so we’re getting more savvy about hotel bookings now. More hotels want to talk to us about price so we’ve definitely raised our profile,” says Bradley.

The other real benefit is one of resource, relieving the two bookers who previously accepted all the phone calls. Now the online process has meant spreading the load among six people able to get on to the HRS portal and deal with all bookings. The use of HRS is mandated. “By pushing the system out to the divisions, it has become a shared resource throughout the company, improving efficiency and taking the strain away from limited resources at headquarters,” says Bradley. Round-the-clock telephone support is also crucial for engineers when they are delayed on site and need to stay overnight at short notice. “It’s great that even at 11pm our people on the road can still make a booking via their smartphones,” says Bradley.

STEP 6: “We’re £100,000 better off now than had we done nothing,” says Bradley. His focus now is on streamlining the internal processes for invoices, which is still quite a chore. The company has a central credit card used by all hotels as a booking guarantee and also as a charging mechanism. After finding a solution for processing the pile of invoices, next on Bradley's list of priorities is to receive more useful MI reports – ones that he has more control over – and to integrate with the purchasing department to make accounting more efficient. At present, Kelly downloads reports on a weekly basis detailing what has been spent, average room spend, in what destinations and by whom. HRS takes a download of mainly the top 15 hotels and rates being paid to benchmark internally in an ongoing process of improving rates.

Finally, Bradley would like to get hotel invoices to match up with payments; they rarely do as hotel food and drink costs inevitably muddy the picture. “We’re fine tuning all the time,” he says. “This is our Step 5 second year with these volumes and we may look at other solutions. We’re taking one step at a time,” concludes Bradley.