10 important aspects during a new corporate contract negotiating
Hotels often negotiate “tons of” contracts each year and it's easy to forget important aspects in the process. We will highlight some of the most important aspects that you should consider to be a winner during the contract season.
Contracted business a large incoming revenue stream
For most of the hotels contracted business is a large amount of the incoming revenue stream and its very important to have a good strategy during your negotiating. If you don’t focus on the right aspects, it will be hard to reach the revenue and profit goal in the end of the year.
Since there are many different of contracts for a hotel, and different aspects to consider pending on which type of contract it is. This article will focus on the Corporate contracts. However, many aspects can be implemented and considered during other segments as well.
It’s not only about location and price
The corporate business often gives the hotel a good and stable base which give you the opportunity to increase the rate for other segments. You can assume that the most important criterias for a Travel Manager at the company is the location and price. However, winning business isn’t always about the closest location or offer the lowest rate. And even if those are 2 of the most important criteria, there are many other aspects you should consider when to negotiate.
10 important aspects to consider for new corporate contracts
Guidelines - First of all, set guidelines for your corporate business. This is something that the commercial team should do together. What type of corporate business do you need at the hotel in order to increase the profit. For instance; Should you contract companies that have a volume less than 50 nights? Simple guidelines on which discount or rate you can give pending on potential volume. Some company you want for branding?
Potential Volume and weekday pattern - If nothing specific is presented from the company. Always assume that the potential volume is at least 40 % less compared to what's presented. Hotel business is probably one of few where you actually negotiate with potential and not actual volume. Weekday pattern (in Scandinavia) is around, 60 % Tuesday & Wednesday, 35 % Monday & Thursday, 5 % Friday, Saturday & Sunday.
How many preferred hotels - You need to know how many preferred hotels the company will have in their hotel program within the destination who will share the potential volume.
How do the company work to implement the contract - The implementation is often tricky when it comes to corporate contracts. Certainly since more and more of the company guests book their own stay online. Therefore, it’s important to talk about the implementation plan before you sign the contract. If it’s a company with high volume of nights they usually have a online booking tool provided from a travel agent where the company should be able to set simple guidelines to book your hotel. For instance, will they have a pop up window with guidelines to book your hotel, or is the employees at the company forced to give a explanation in the system if they book some other hotel that’s not in their preferred program. Ask this kind of questions.
Show the value of all the things you give away for free - In the hotel industry we are not the best to show the value of all the attributes we include for the company in the contracts. Today most of the companies demand attributes like; same day cancellation, LRA, invoicing, availability in all different booking channel. Even if you include this in the contracting, explain the value so they don’t take it for granted.
Booking/Distribution Channel - Which platform will they use for bookings. For instance; consider to give a better discount/price if they book through your own homepage compared to the GDS.
Kickback - Instead of a dynamic discount of fixed price, suggest kickback on the actual bookings. This will probably motivate the company more to implement the agreement. A good strategy is to offer 2 options to choose from. For instance, 8 % discount or 10 % kickback. This will be a win-win deal if they chose 10 % kickback. The hotel will most likely receive more volume and revenue and the company will save more money.
Lead Time/Length of stay - Consider to give a higher discount/lower fixed price if they book early or if they stay more than 2 nights.
Added service - What can give the company extra value in the contract. Example; Discount in the restaurant or laundry, transport to the airport. Be creative.
Miss out on conference or groupstays? - Something you need to consider is if you will miss out on the companies conferences or groups if you don’t have an corporate agreement. Travel Managers will more and more focus also on conference for the future.
Demand Calendar is a strategic profit management tool that have functions for all different roles in the commercial team. The system will help your team to set guidelines for your corporate business and emphasize teamwork and to get everyone becoming committed to the team goals.
The system automatically collect internal and external data to fully understand your business and how to make it more profitable. Demand Calendar will take away time consuming data collection so the commercial team can focus their daily work on activities that will increase the hotels profit.
Let your team have access to the right information so they are able to make better decisions and make your hotel more successful.