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Sourcing trends for your accommodation programme.

by Lone Konradsen & Emma Slocombe.

buildings in black and whit with cyan highlight

With the majority of our customers either reviewing or in the process of reviewing the travel policies*, it is a popular time to be assessing the overall accommodation and travel needs of the business. Understanding travellers’ accommodation needs is extremely complex right now, making the task of establishing a suitable programme ever more challenging.

Using our recent customer survey results* and their experience in forecasting customer buying and traveller behaviours, our Head of Customer Insight, Lone Konradsen, and Emma Slocombe, Preferred Programme Manager, share the current sourcing trends for accommodation and what travel managers should be considering when building their own travel programmes.

Knowns and unknowns in the context of the sourcing process.

Given the current climate, sourcing is not a straightforward answer. With many businesses, coming to grips with what their new 'normal' looks like in the context of business travel, this is an ever-changing picture with changes in restrictions and new variants emerging. Following our recent customer survey*, we found that 45% of customers were not expecting substantial travel until 2022 - which just shows that there are still a lot of unknowns.

Likewise, industry suppliers are in a similar changeable marketplace:

  • Some may not survive the pandemic.

  • Some are tied into government exclusive-use contracts supporting quarantine measures.

  • Some have sufficient staffing levels and some do not.

All of these factors will impact the local economy and likely what supply is available in an area. This is why understanding the context and reviewing your 'knowns' vs. 'unknowns' is so important when building your own accommodation programme. We would recommend thinking about things like:

  • Which locations see volume now and which will in future?

  • Which areas of your business are travelling now?

  • Which areas are not and won't to the same degree again?

The key is to establish as many ‘knowns’ as possible. Ask yourself what do your business travellers need right now? It is worth engaging with different stakeholders across the business to understand what their plans are longer term. We would also recommend a regular review of market conditions, but as a rule of thumb, negotiate a fixed rate or roll-over your current rate - and do this annually.

For the ‘unknowns', make sure you have a way to monitor the situation so you can proactively manage and address any increase in requirements.

Hybrid pricing strategy.

Unless you have a firm grip on what your demand is going to be like in the 12-18 months ahead, it is definitely worth taking a hybrid approach to your pricing strategy - know your markets and know your demand. Once you have an idea of the demand, then focus on fixed rates for where demand supports it and dynamic pricing where it doesn’t.

ARRs (Average Room Rates) are increasing. In some locations, the ARRs are approaching or exceeding 2019 levels. As the supply / demand ratio has shifted over the last 18 months, a hybrid approach right now is likely to be a good solution for most customers. However, it is worth keeping a close eye on the rates and, if your demand continues to increase in early 2022, you may want to review or negotiate fixed rates.

Hybrid pricing strategy for travel 2019 vs 2021

It is important to note that few, if any, customers are in a position right now of forecasting their requirements 18+ months in advance. By focusing on negotiating fixed rates in core locations, your ‘knowns', and taking advantage of Consortia rates or any Dynamic programmes, like the Agiito Accommodation First programme, for other locations where you currently have lower volume, is a sensible solution.

With Accommodation First, our customers benefit from having access to rates in over 1,700 hotels, across 600 locations, this can be used to support customers negotiated programmes but could also be used exclusively until there is an understanding of demand.

Working closely with our partners and customers, the programme has a hybrid approach, offering fixed and dynamic pricing that works with the ever-changing markets, not to mention a range of soft value adds for the traveller.

Ultimately, it is about having a relationship with your supply chain, either directly or via your TMC. Make sure to have those conversations with your key suppliers so you find the best solution that allows you to manage your budget, whilst still recognising a more fluid demand pattern.

Shifts in accommodation types and locations.

Travel during the pandemic has been very heavily driven by 'essential' travel, which has impacted the accommodation type and location, but also the duration. We have seen the average length of stay increase from 2.1 nights in 2019, to 2.6 nights in 2020 and then further to 2.9 nights in 2021. However, we must consider the type of businesses and that it is limited sectors that have been undertaking ‘essential’ travel during the pandemic.

Average length of stay stats 2019 vs 2021

In order to understand the demand of where and how long your employees will need accommodation for - now and in the future – you need to find out what has changed for your business during the pandemic and what will change in the next 12 months?

It is also worth considering the duration requirements which can impact the accommodation types in your programme. Although one-night stays are still the majority duration period for business travellers. We’ve found that these have dropped every year between 2019 – 2021 for our customers (from 63% in 2019 down to 51% in 2021). So, if you are able to retain some of that longer stay business and not revert to a 'one-night stay' as the norm, you could consider including longer stay options like serviced apartments within your programme.

The extra questions you should be asking.

It is worth thinking about what additional questions you should be asking as part of your sourcing process. Factors such as cleanliness, sustainability and diversity, equity and inclusion are now critical and businesses are prioritising these within their RFP.

The fact that our customers ranked sustainability as the highest priority for the next 12 months, with other CSR considerations also high on the agenda for 2022 shows how important is it to consider for your accommodation programme.

If you are looking to add questions in your RFP, then we would suggest you:

  • Set the scene to the suppliers and tell them why you are asking.

  • Question why it is important to your business and what are you yourself doing in that space?

  • Be as generic as possible and limit to specific areas that are critical to your business objectives.

  • Don’t ask questions for the sake of asking questions, ask them because it will help you or your business make better decisions.

So, what is important to your business right now? Has anything changed in response to the pandemic? What have or are you as a company doing in that space? By engaging with your stakeholders, you will identify the factors that will help you make a sourcing decision, meet company procurement objectives and safety requirements, as well as any other considerations you need to build into an effective and meaningful accommodation programme.

Accommodation sourcing graph by CSR
*Source: Agiito Customer Return to Travel Survey – August 2021.

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