While leisure travel is coming back, there are still a multitude of uncertainties surrounding the return of business travel through the rest of this year and beyond, with some experts wondering if it will ever return to its pre-pandemic levels. Whatever happens with business travel will have many ramifications for pricing and RFP season. Members of HSMAIs Revenue Optimization Advisory Board (ROAB) shared what they are anticipating regarding business travel on a recent call.
By Mark McBride, Senior Director of Franchise Revenue Management, Hilton, and member of HSMAI’s Revenue Optimization Advisory Board
While leisure travel is coming back, there are still a multitude of uncertainties surrounding the return of business travel through the rest of this year and beyond, with some experts wondering if it will ever return to its pre-pandemic levels. Whatever happens with business travel will have many ramifications for pricing and RFP season.
Members of HSMAI’s Revenue Optimization Advisory Board (ROAB) shared what they are anticipating regarding business travel on a recent call. Here are key takeaways from our discussion:
NEW BUSINESS TRAVELER BEHAVIOR
Several ROAB members said that while they are seeing some group business travel, it’s mainly unmanaged business travel, which changes how and what hotels need to sell. “We’re starting to see not necessarily what you’d consider a group inside of a hotel, but more transient rooms, along with meeting in a space, because they’re all virtual now, but they want to come together to get collaboration going or meet with a customer privately,” one ROAB member said. “They’re more informal now, and aren’t going through a managed negotiation process, regardless of if they’ve been a managed account before or not.”
Because businesspeople have so many options for meeting now, one member said that they believe it will permanently change the way business accounts are run. “It’s an assumption at this point, but we feel that there are probably not going to be many high-volume accounts moving forward,” the member said. “You have all these alternatives — less physical travel and shorter travel periods and whatnot. So those formerly large-volume accounts that we were dependent on are now going to be split among a bunch of medium-size accounts. Which in a way makes it easier, because you can look at each account differently, and it helps diversify risk.”
Hotels that were built specifically for certain large accounts may suffer the most from this change. “I worry a lot about this,” one member said. “We have hotels located in suburban office parks, and specific accounts were the reason the hotel was built. It will be a struggle to replicate that business without those large accounts.”
Another member said that they’ve been seeing more business travelers booking through Expedia or other channels, rather than booking directly with the hotel. “We’re seeing a slight return, but the data is so muddy because they’re booking these discount opportunities,” the member said. “It makes you question their brand loyalty at this point, because they have been exposed to more opportunities out there, so we’re wondering what kind of impact this will have on their behavior in the long term. Will they continue this process outside of the RFP structure?”
IMPACT ON PRICING
Meanwhile, the lack of business travel is coming into play this RFP season, as hotels are trying to negotiate with account holders. “Pre-pandemic, RFP season seemed to be getting later and later,” one ROAB member said. “So, for us to have already started with major accounts already is a big shift in timing. I think that the large managed travel programs are trying to get in and get done, because demand is going to be increasing from here.”
“We’re seeing large accounts asking for multiyear rate negotiations where typically they wouldn’t have done it, and they’re citing global inflation as the reason,” another member said. “There is a lot more on the line this RFP season than there has been in years prior. It’s a big change for the business segment compared to what we’ve seen in the past.”
Another ROAB member said a consideration for negotiating during RFP season is that many hotels are still struggling to fill positions and don’t have all of their amenities open, so some accounts many not be willing to pay a higher rate. “Even if we’re filling up on business, we still have a labor shortage and a supply-chain issue,” the member said. “You can’t be too firm in your first-year negotiation. Even though you can say you haven’t had a price increase since 2019, you don’t have the amenities to justify it.”
Relating to the labor shortage, another member noted that it forces hotels to either find efficiencies and other revenue sources or drive rates as much as possible. The member said that hotels can try to sign partners into a dynamic pricing situation, which benefits the hotel, as they can push rates now when they need it.
The Hospitality Sales and Marketing Association International (HSMAI) is committed to growing business for hotels and their partners and is the industry’s leading advocate for intelligent, sustainable hotel revenue growth. The association provides hotel professionals and their partners with tools, insights, and expertise to fuel sales, inspire marketing, and optimize revenue through programs such as the Adrian Awards, HSMAI ROC, Marketing Strategy Conference, and Sales Leader Forum. Founded in 1927, HSMAI is a membership organization comprising more than 5,000 members worldwide, with 40 chapters in the Americas Region. Connect with HSMAI at hsmai.org, HSMAI Facebook, HSMAI Twitter, and HSMAI YouTube.
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