Time for hotels to renegotiate corporate agreements for 2023

04 August 2022
The pandemic is over, and the business travel segment is recovering. Corporate travel has been non-existing due to government and corporate restrictions for the past couple of years. Leisure has driven the recovery for hotels which means that the balance has shifted from business travel to leisure travel. Hotels are still waiting for international business travel to recover.
Many hotels prolonged the current corporate agreements during the pandemic and applied a wait-and-see approach. However, now the business travel volume has increased, it is time to start talking to travel managers and renegotiate contracts. Here are some ways hotel salespeople can get prepared.

The new way of work impacts business travel

The pandemic changed the way of working forever. It is crucial to understand the difference between digital natives and analog natives to understand the shift in perception of work. People that are older than 35 years are analog natives. They grew up in an analog world and are analog in their thinking. They had to learn how to handle the digital world - some more successful than others, but all think analog and translate to digital when they have to, just like a language. Most people think in their native language, and when they speak another language, they translate from their native language. Analog thinking about work is that work can only be done at a specific place - an office. The digital natives cannot see that work is related to a particular location. People can work from anywhere in the digital world since work is about getting something done. So when analog CEOs say it is time to go back to the office, the digital natives do not understand, quit and start working for a company that thinks digital. When people started to leave the big corporations, almost all old analog CEOs had to change their minds about office work and scrap their analog-based rules. Therefore, the new way of working is here to stay, and as the share of millennials and gen Z in the workforce grows, more people will work remotely.
 
The way we work has an impact on business travel. All routine meetings where the participants know each other will shift from physical to virtual meetings and, therefore, not require physical travel. Employees save time and frustration, and the company saves money. However, analog natives do not speak the digital language well enough. They cannot interpret body language, tone of voice, or other clues in the digital world, as well as in the analog world. Therefore, the native analogs think that meeting physically will build culture and team spirit and encourage creativity. They are right that companies must bridge the analog and digital divide. Increasing physical meetings is an opportunity for hotels to get reservations for more and longer meetings with the only purpose of bonding and having a good time. The customers will therefore require a lot more creative selling from hotels and a better understanding of their needs and requirements.

Find the new needs and requirements

The generic room nights will probably be fewer, while overnight accommodation related to meetings will increase. The world is never at a standstill, some companies grow, and some stagnate, so all companies are different, which means that the salesperson needs to find out if the customers' needs have changed and what they think about the future.
 
Hotels now have an opportunity to provide more products and services to fulfill corporate customer needs. Therefore, all salespeople should at least ask their customers or potential customers the following questions.
 
  • What are your thoughts about the future of business travel in your company?
  • Will the travelers stay shorter or longer?
  • Will the travelers work in the office or from the hotel room?
  • Will the travelers have virtual meetings from their hotel room?
  • What type of products and services are you looking for for your travelers?
  • Will the booking window, stay patterns, or booking channels change in the future?
  • Will the hotel room nights increase or decrease?
  • What type of meetings will your company arrange?
  • Will meetings increase or decrease?
  • What type of products and services are you looking for during meetings?
 
By listening to the corporate customers, the hotel can adjust their products and services and understand volumes and stay patterns. For example, hotels might discover a decrease in demand that they need to replace with leisure guests.

Pricing

Demand and supply will always be the primary driver for hotel room rates. However, the high inflation rate will likely increase rates to a new level, but it all depends on the demand and supply in every destination. Therefore, revenue managers need to understand the recovery of the hotel's destination and then set rates based on demand, supply, and inflation.
 
Many companies have a hard time finding employees and especially the right employees. Therefore, they need to take much better care of their employees and ensure as convenient travel as possible when travel is required. It is a low price to pay a little bit more for a better hotel room than risking losing high valued employees because of saving on convenience and comfort for the employee. Hotels that have been well maintained (and refurbished) during the pandemic will be able to charge a higher rate. In addition, the willingness to spend on gatherings and meetings is probably higher since this is now a way for bonding and teambuilding.

Maximize flexibility

Finally, hotels should strive to maximize flexibility in all contracts. For example, stick to dynamic pricing, avoid last room availability, update cancellation rules, and speed up payments. The contracted volumes will likely be lower than pre-pandemic and, therefore, open for higher flexibility in terms and conditions. However, hotels should always put their customers first and build solid long-term relationships. Hotels need to handle the flexibility carefully and rarely use the built-in flexibility, only when the hotel needs to act on other opportunities that are too big to dismiss.