Trends in hotel procurement – what the hotel industry can expect in 2020

Brexit, trade conflicts and cautious forecasts for the economy are dark clouds on the horizon: Companies will come under even more pressure to save money in the New Year. However, hotel operators should include additional aspects on their priority list as well if they want to win the lucrative custom of business travelers – or keep it.

Text: Astrid Schwamberger

When Martin Stegner Chief Information Officer at Novum Hospitality, thinks about 2020, the 17 new hotels his company plans to launch immediately come to mind. The Hamburg-based hotel group, which is active Europe-wide, particularly wants to push their brand “the niu” more, he says, and he is looking toward the future with optimism: “Corporate customers are already waiting to book our new hotels.” This target group is essential for Novum Hospitality. In Big 7 cities like Hamburg, Berlin or Munich, corporate customers dominate during the week, and other locations, like for instance Rüsselsheim, would be virtually unthinkable without long-term partners from the corporate segment.

But what will be the deciding factors for travel managers at companies in the near future when conducting hotel procurement? Four trends are emerging.

1. Continuous Sourcing

For the longest time, travel managers did just fine negotiating their rates once a year. Now, however, changes are on the horizon. The reason: Not just companies’ requirements, but also prices and availability can change nowadays within a few hours.

This is why business travel expert Rüdiger Mahnicke from consultancy firm Steinberg & Partner is observing a new strategy among internationally oriented companies: They are practicing continuous sourcing. A recent survey by international business travel association ACTE Global also described this trend. This new procedure involves looking at hotel procurement continuously across the entire year. Demand and prices are subjected to scrutiny every month or once a quarter. The trailblazers report cost savings and greater flexibility in their hotel portfolio. In addition, travelers are complying better with travel guidelines and have higher satisfaction levels, according to the study. Furthermore, the workload is distributed better across the entire year, instead of being concentrated at year-end – something that also relieves the pressure on hotel businesses.

2. Augmented Artificial Intelligence

Apart from the time factor, there is a further sticking point in hotel procurement: In order to be able to optimally negotiate competitive rates, travel managers need comparative data that go above and beyond general average figures. An innovative approach to forecasting rates is based on artificial intelligence (Augmented Artificial Intelligence, aka: AAI): Instead of a single algorithm, AAI executes several data models simultaneously and incorporates a number of factors into the analysis:

  • the long-term rate trend
  • short-term local occurrences
  • other companies’ rates
  • travelers’ search and booking data

In fractions of seconds, AAI uses these to identify market-specific patterns, analyze data and scenarios, remove irrelevant points and interpret the results. Without AAI, this is an impossible task for a hotel procurement manager, says Mahnicke; the data cleansing alone is a “huge job,” he says.

3. Daily price check

When striving to ensure the cheapest price, fixed rates for customers from the corporate segment can also be counterproductive, however, for now and again it transpires that the room price falls. “Generally, the price rises the nearer the check-in date gets,” Martin Stegner from Novum Hospitality explains. However, if occupancy does not reach the desired level, for example because a relatively large group has canceled, prices are sometimes slashed. But “diverging prices in a booking channel do not go down well with people making bookings,” Rüdiger Mahnicke knows. The difficulty of explaining this to travellers falls to the procurement team in the end. “This discussion puts great stress on them,” says the sourcing professional.

The solution is a daily price check, from which for example myHRS customers benefit. This involves comparing the room price entered by the hotel for the relevant period and at the same conditions. If the price declines, the guest’s booking is automatically changed. “Corporate customers love this service,” Stegner knows and adds: “However, it doesn’t often happen that we lower prices.”

4. Recommendation Engine

Apart from savings, travelers’ satisfaction continues to be a primary concern among hotel procurement teams. Rüdiger Mahnicke is seeing a trend toward offering individual solutions “since every traveler is an expert when it comes to carving their own path.”

What is new, however, is this: For the first time in 2020, more than 50 percent of business travelers will be Millennials. Having grown up with technology, they are accustomed to receiving suggestions for additional products, for instance when shopping online: “Customers who viewed this article also purchased…” So why should they not be able to book hotel stays using this method too?

One prerequisite for this type of convenient one-click experience is a recommendation engine that among other things “knows” which hotels the respective user has already booked and “knows” their parameters. The person making the booking can be sure of one thing: The first hits will fit their wish list best and also comply with their travel guidelines. “This goes down well with the younger generation,” says Rüdiger Mahnicke.

On the other hand, hotels that appear at the top of the selection list, because they best fulfill individual travelers’ criteria, can expect a click rate of 34 percent. If they rank 20th, this declines to 0.1 percent. CIO Stegner approves of the idea: “We benefit from it too,” for a recommendation can cause a previous guest to return to him time and again and thus secure him pole position, and with it the highest probability of a booking.

 

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