May 28, 2024

Welcome to the new world

The pandemic has turned hotel procurement on its head, says Louis Fernandes, MD Northern Europe for HRS

The view from almost any corporate hospitality standpoint is challenging to say the least. There is no model to account for the demand shock witnessed this year. That said, the statement used in politics about not letting a crisis go to waste strongly applies as we look towards the future of hotel procurement.

Priorities for buyers have changed dramatically. Hoteliers are making investments in hygiene and guest education that none could have surmised. Negotiating for 2021 is both a challenge and an opportunity our industry has never seen.

The biggest change presented by the pandemic is the massive leap to the front of the line for duty of care. Of course, the safety of travellers has always been a priority. Today, however, duty of care has taken on a totally new definition. Buyers have spent the last few months becoming experts in hygiene protocols, distancing and tracking, even as they’ve collaborated across their organisation to recalibrate travel programmes with slashed allocations.

Accordingly, hotel RFPs are totally revamped, with safety and hygiene questions dominating. Queries include topics such as guest and meeting room cleaning frequencies, the use of sanitising chemicals, contactless check-in and check-out, including virtual pay options, distancing guidelines for public areas like lobbies, elevators, and gyms, and enhancements to food and beverage preparation, individual item options, and so on.

“The biggest change presented by the pandemic is the massive leap to the front of the line for duty of care”

The answers to these questions are vital as buyers manage up and down in their companies. C-level executives are keenly focusing on travel expenditures, as most corporations endure lower revenues yet still face competitive pressure to engage with clients and prospects as economies recover. Travellers seek continuing reassurance that the locations they are going to have revised protocols and that going on the road to support corporate objectives will be safe.

Some parties have advocated simply carrying over rates as hotels still don’t have enough staff back from furlough. Unfortunately, corporates would be derelict in their duty to not do so. The world has changed, and the industry’s economics have changed with it. For the first time in more than a decade, it’s a buyer’s market. Buyers have an obligation to explore the latest rates and terms in their key markets, wherever they may be. New bundles that appropriately balance critical hygiene issues with financial considerations are becoming the next normal.

It’s hard to justify paying extra for Last Room Availability with occupancy rates down. Companies are reconsidering breakfast as part of the bundle. If they are paying for it, they want safely packaged items. Cancellation flexibility is crucial as the pandemic’s next spike is impossible to predict. Understanding pricing models – where static rates can be secured, where dynamic / hybrid rates make sense – is crucial to maximizing a (likely) smaller accommodation allocation.

The good news for buyers in the face of these challenges is that automation and analysis tools have advanced and been refined. These services enable shorter RFP cycles, repeated rate auditing to ensure negotiated savings turn into actualised savings, and transparency that shines a light on hotel partners that work best with corporates to drive mutual programme performance.

Louis Fernandes is Managing Director Northern Europe for HRS, the global corporate lodging platform and provider of hotel procurement services for more than one-third of the Fortune 500. He joined HRS in January 2020.