Victory for value: good deals drive bookings for corporate travel
IN-DEPTH: Corporates are getting savvier about the way they choose and procure accommodation, and a key influencer today is value for money. Firms are trying to extract more for their hotel stays by cashing in on value-added incentives, according to Jani Kaskinen, CEO of Hotelzon. EyeforTravel’s Ritesh Gupta finds out more about the current trends.
Recent data released by hotel distribution technology provider Hotelzon has highlighted the growing popularity of five-star hotels with business travellers. The statistics collated by the company for the second quarter of this year indicated that business travellers are making the most of discounted rooms, with a 16% increase in use of luxury properties.
Travel managers have been optimising their spend and bagging the best deals in an uncertain economic environment. Commenting on the way business travellers are spending, Jani Kaskinen, CEO of Hotelzon, says lower occupancies means five-star hotels are discounting their rates, and coming up with more attractive deals and packages at the same price as other four-star accommodation.
“When it comes to the RFP (requests for proposals) season, hotels are dropping rates as the corporate market is perceived to be guaranteed unlike the more fickle leisure market,” says Kaskinen.
At the same time, bookings with three-star properties are down by 38% year on year. This again underlines Hotelzon’s findings that corporate travellers are making the most of discounts and special offers being offered by the luxury category.
The data represents transacted room nights by Hotelzon’s global corporate and agency travellers.
Tracking the trends
Across the board, room rates have increased by 2.4% year on year with average transient accommodation rate per night now €125.13.
However, for the third quarter, which Hotelzon says traditionally sees a softening of rates, rates in 2012 are set to decrease by 1.9% to €122.79.
“Rates across Europe have been on a downward slide as the recession spreads globally. As the Eurozone crisis has deepened and the UK and EU GDP growth slowed, levels of confidence in business travel have lowered significantly, along with hotel demand. Corporates have been tightening their belts, and saving on spending is key; video conferencing and corporate trip avoidance is on the up,” says Kaskinen.
According to Hotelzon’s latest data, lead in times (the date of enquiry to the date of the hotel stay) for bookings have increased slightly; accommodation is now being confirmed around 14 days prior to arrival. This is a welcome change as over the last couple of years, companies have been cautious on several counts. One of their decisions is around lead times and booking terms. Companies that prefer early booking consider advantages such as preferential rates and availability of rooms. But at the same time, organisations aren’t committing until the last minute as they want to minimise the risk of, for example, an event being cancelled. So they have opted for shorter lead times.
The key changes that Hotelzon has witnessed from business travellers are a real focus on value and return on investment. “Corporates have turned to packages, as they offer value for money and convenience,” says Kaskinen.
Hotelzon’s research highlights how business travellers are making the most of discounted rooms. “In corporate travel, this often means volume based discounts throughout the year… additionally, packages have come to the forefront of hotels’ offering, along with value added incentives and short lead offers,” says Kaskinen.
With business travel likely to be depressed by the economic slowdown, hoteliers have realised more than ever the importance of capitalising on and strengthening their relationships with long-term clients.
“In 2011 and 2012, London saw a spike in new five-star properties; if there is a post-Olympic travel dip coupled with weak demand for business travel, it could prove difficult for hotels to trade and their sales teams will need to work much harder for the same share of the market. However, much of all of this depends on whether the economy perks up,” explains Kaskinen.
Expectedly the summer of 2012 has proven to be one of the most productive periods, with the UK taking the global centre stage. Corporate business travel in the capital remained strong.
• London properties maintained market share during the Olympic period, however transient rates increased by 9% to €184.13 * per room per night. (*between 27th July and 12th August)
• Corporate rates were most affected in Birmingham during the Olympic period, with a reduction in average room rates of 18.7 percent to €83.28*, a clear indication that corporate displacement of business from London during the Olympics did not come to fruition.
Corporates have to work out deals or contracts especially for cities where occupancy is consistently high throughout the year. Also, they have to ensure sufficient coverage in terms of location and room availability depending upon their operations or requirements.
Overall, corporates are getting savvier about the way they choose and procure their accommodation and the deciding factor is value for money. “Business travel is an emotive topic and if a traveller can get a five-star accommodation offering at a very competitive price then they will,” says Kaskinen.