Hotel Attachment Rates | What are you leaving on the table?

October 4, 2010 at 9:35 am 3 comments

by Tony | A special thanks to Michael Boult, Chief Commercial Officer of Lanyon for his contribution.

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If you’re new to corporate travel, you must find some of the terminology quite peculiar. We regularly discuss “leakage,” but aren’t referring to those toilet paper battles incited by a makeout session with a bag of Olestra potato chips. We often ponder “hotel attachment rates” but aren’t discussing the percentage of guests who check out from a property with bed bugs latched onto them. Let’s save “leakage” for another day. In this post we’ll explore why hotel attachment rates are so important.

In order to level set, let’s define a “hotel attachment” as any booked PNR that includes a hotel reservation. Therefore, if a company’s employees book 10 trips, and only 5 of them include a hotel reservation, the company has a 50% hotel attachment rate. The rough calculation is simple, but for accuracy purposes, it’s important to back out certain items from the calculation, such as day trips, rooms booked as part of a meeting block, or stays during which the traveler bunked with a family member or mistress (what, you don’t think it happens). Just because a hotel reservation is not attached to a PNR isn’t always a problem –but in many cases, it indicates that the traveler is going rogue by booking through an OTA (Priceline.com) or directly with a supplier (Marriott.com)

Who cares? If you’ve found Carrying On and are reading this posting, then you should. Whether you are a TMC, a corporate travel buyer or a road warrior, this is important. I’ll explain why, and in a subsequent posting, I’ll provide some practical suggestions that will help steer your organization toward higher attachment rates.

TMC

It’s the worst kept secret of the travel industry. TMCs make good money via preferred relationships and through exclusive consortia deals with lodging companies. This one is simple – if someone doesn’t book through the TMC (whether online of offline), the TMC loses out on a commission.  In some cases those commissions are shared with the client, or are used to offset the expense of running the travel operation. Either way you look at it, not getting them is never a good thing for the TMC.

Corporation

For this one, we’ll work through an easy word problem.  Don’t worry; even though I had a huge crush on my 5th grade teacher, Ms. Sophia, I was terrible at these things as a kid. For this one, we’ll leverage data from BTN’s 2009 Resource Guide, Benchmarks and Best Practices for Large Volume Travel Buyers.

Hotel looks to be the holy grail. Not only does it have the least compliance out of the big three (air, car, hotel), but it also has suppliers that are most willing to negotiate (I realize that a strengthening economy has brought these numbers down, but relatively speaking, Hotel still likely represents the best opportunity). The same study also revealed that the Average Negotiated Savings for hotels ranged from 1-50%. If we assume a 20% savings for preferred booking and assume that 100% were preferred (even though we know that only 62% were), then the pre-discounted rate was $195. From this data, we can calculate that companies save more than $39 per night when booking at a preferred property. It seems like a no brainer for the corporation – increase compliance, leverage volume to negotiate better deals and save money. Increasing the hotel attachment rate is key to this happening and in part two of this posting, we’ll share some tips on how this can be done.

One big gap exists today because corporations tend to fixate on the “transient RFP” process, and many consider it THE necessary step in managing hotel spend. Unfortunately, in this customer driven economy, failing to maintain a fluid and customer-driven hotel sourcing process dooms the program to miss huge chunks of demand and subsequent downstream bookings. An annual sourcing process that uses historically poor spend data as a basis for negotiating next year’s rates is a guarantee that the bigger picture will be missed.  It is important not to limit hotel sourcing activity to the annual “silly season,” and the usual markets and suspects.

Traveler

“What’s in it for me,” the traveler asks. In a world without mandates, the corporation and the TMC have no chance of winning unless they somehow can convince the traveler to get with the program. The “good corporate citizen” response is not sufficient. Road warriors need to understand the benefits of booking preferred properties through the appropriate channel. While they might get additional points by booking at a vendor website, or at times even beat the company hotel per diem, when spend leaks from the program the impact is mostly negative and this needs to be shared.

The other factor that might be a little closer to home for an end user, but that is often overlooked or not considered, is how the travel program assists the traveler in times of crisis.   For the most part things usually go off without any major hitches, but when things do get sideways, knowing where you are staying is a key component to providing support, and is another benefit to booking within the program.

Ultimately, it all comes down to user experience. Travelers are busy, they are creatures of habit, and they will follow the path of least friction. If you provide a technology that enables them, you will be rewarded by higher adoption rates, increased hotel attachment, and greater cost savings. Stay tuned for part 2 of this post – we’ll delve into some of those qualities to look for in a technology that truly enables, rather than constrains.

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Entry filed under: Business Travel, hotels, Tony's thoughts, Travel ROI, User Experience. Tags: , , , , , , , , , , , , , , , , , .

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3 Comments Add your own

  • 1. Honduras  |  March 16, 2011 at 6:48 pm

    Well said. I never thought I would agree with this opinion, but it appears that I’m starting to see things from a different point of view. I have to analyse more on this as it seems very interesting. One thing I don’t understand though is how everything is related together.

    Reply
  • 2. Saudi  |  March 16, 2011 at 7:49 pm

    Nice site, keep up the good work, my colleagues would love this. I read plenty of blogs every day, and for the most part the authors lack substance, but not in this case. I just wanted to make a quick comment to say I’m glad I found your blog, I’m gonna bookmark the carryingon.net web site. Thanks

    Reply
  • 3. Tony D  |  March 20, 2011 at 11:03 am

    Glad you found us, and also glad you enjoyed our postings. True to our name we intend to continue carryingon, so feel free to join the fray.

    Tony D

    Reply

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