Could Direct Bookings Help Drive Value for Procurement?

Travel procurement tends to get people hot under the collar. But should procurement be more open to direct bookings to drive greater value?

This article is based on a study conducted by Software Advice, available to read here.

In the hotel room booking wars, online travel agencies (OTAs) seem to be giving up a little ground. This represents a great opportunity for small, boutique and independent hotels.

Hotels that sell rooms through OTAs must pay a commission, so direct bookings mean higher profit margins. For many years, hotels gave up that extra profit in order to reach a wider audience.

However, new data shows that many rates are now cheaper when booking directly through the hotel website.

What Is Causing Cheaper Direct Bookings?

The true cause of this shift is hard to nail down, though some experts think a combination of a couple key factors may be leading to cheaper direct bookings:

• Effective regulation against rate parity clauses. Regulations against rate parity clauses – contract language that forces hotels to maintain the same rates on all distribution channels – may be having an effect. This means some hotels could offer lower rates on their own website.

• OTAs are willingly easing up on commissions. OTAs often charge hotels an average of 15 to 25 per cent per booking, so it’s easy to see why hotels would want travellers to book direct. It’s possible the OTAs believe reducing commission rates won’t matter, since their volume of business is so high.

This shift is an opportunity for small and independent hotels to educate potential guests, and market these cheaper direct booking rates to them.

Taylor Short, Hotel Market Researcher for the hotel information systems reviews company, Software Advice, believes that incentives could be the key to attracting customers.

“Hotels and resorts want to attract organisations and groups for the revenue and sales potential when the group is on property. Because of this, hotels will often use software to manage incentives offered to guests, such as free wifi or rate discounts, for those who book in groups,” says Short.

“To compel group over individual bookings, hotels will try to tailor packages to the groups they see most often. For a business networking group, for example, they may offer free transportation from the airport, discount on drinks, or a round of golf. There are things to offer that can help deliver a better, more personalised experience.”

Driving Direct Bookings

Shifting consumer habits to looking at a wider range of options presents an opportunity for small hotels to educate travellers that booking directly can be cheaper and more valuable.

There are a number of tactics smaller hotels can use to help drive customers to websites, and boost brand loyalty. These include:

1. Compel website visitors to book direct with pop-ups or calls-to-action (CTAs).
2. Offer incentives on the website.
3. Arrange OTA widgets so that rates capture visitor attention.
4. Focus on what they can offer vs. bigger brands.
5. Prepare for the long game.

Changing Habits and Procurement

So if consumer habits are changing, it’s probably fair to say business travellers are looking for similar options. But where does this leave procurement?

Travel procurement is one of the ‘hot buttons’ for organisations. Procurement need to find the right balance between value for money, and ensuring that their staff are getting a good experience.

Every year, millions of pounds are spent outside of travel management systems. This maverick spend, which can be up to 20 per cent more expensive than through authorised sources, further hinders procurement’s position. Maverick spend comes in all shapes and sizes, and organisations need to be aware of why it is happening so they can combat it.

However, as travel options, in particular accommodation, open up with businesses such as Airbnb, procurement needs to stay in step with changes. This doesn’t mean allowing staff to book directly themselves, but not staying with preferred suppliers because they happen to be on a list.

The difficulty for procurement lies in how organisational travel is booked. Large organisations tend to use a travel management system, or agency, to collate bookings.  Smaller organisations might be more flexible. However, if processes are in place, then it’s likely to be more difficult to justify a change.

However, it doesn’t stop procurement looking at smaller hotels who may offer added extras that employees will enjoy. If direct bookings could offer greater value, then it’s worth considering working with these suppliers in the future.