GBTA EU Hotel Committee Explores Hotel Program Savings Calculation Methods
*The GBTA EU Hotel Committee contributed the following blog post.*
Do you know the most often-used methods for hotel program savings calculation in Europe? The GBTA Foundation conducted a survey in Europe to investigate how European travel buyers are calculating hotel savings. Based on the survey results, the GBTA EU Hotel Committee created a resource to share the most commonly used savings calculation methods and explain the pros and cons for each savings methodology.
Travel professionals are continuously challenged to demonstrate value of hotel programs in a market with increasing or changing rates. The primary driver behind the GBTA EU Hotel Committee developing this resource was to recommend best practices for specific savings calculations to meet a need for industry standards in this area.
The data analysed came from a survey conducted in Europe between April and July 2016 with 112 respondents: United Kingdom (28 percent), Nordics (23 percent), Germany (17 percent), Spain (14 percent), France (10 percent) and other countries (8 percent). In terms of hotel spend, 30 percent of survey respondents had travel programs that spent more than €30M in hotels, 32 percent were between €5M and €30M and 38 percent had less than €5M in hotel spend.
According to the results of the survey, methods for saving calculations in the travel buyer community in Europe are widespread and there is no single savings methodology used by over 80 percent of respondents. However, the predominant savings calculation methodology is “old contract rate vs new contract rate per room night with no adjustment of market increases” (67 percent). Savings are usually calculated as a lump sum (64 percent) and the most popular primary source of data is travel agency bookings (71 percent). Almost two in five (38 percent) respondents reported savings on Last Room Availability.
The new resource created by the GBTA EU Hotel Committee looks closely at 10 different saving methodologies to provide a better understanding of them for travel management professionals. The primary reason most people are using the predominant savings calculation methodology of “old contract rate vs new contract rate per room night with no adjustment of market increases” is that it is a simple and easy way of doing calculations. It is important to consider, however, that results are not 100 percent accurate if the market has significantly increased its rates. If we compare “old contract rate vs new contract rate per room night with market adjustment” the results will be more accurate, reflecting the value of negotiations, but it will be difficult to talk about savings internally as it includes cost avoidance principles.
It is important that travel buyers agree internally on savings methodology calculations. Do not look to complicate matters, but instead look to demonstrate value. Technology, price audits, hotel program and VAT reimbursement are all key elements to also consider when building or improving your hotel program. The resource also features recommendations on the information to be included in a hotel tender.
The resource is available free of charge to GBTA Members on the GBTA Hub.