In the prevailing macroeconomic climate, companies are starting to cut back on business travel expenses. As the financial situation worsens and spreads across the rest of the world, corporations will be forced to search for savings across their entire travel spend.
However, eliminating travel completely is not an option for most companies. Yet they are still in a position to reduce costs.
At many companies, hotel spending processes are still very fragmented and generally go through many different reservation channels, making it difficult for corporations to control lodging costs. For example, when an individual employee calls a hotel to make a reservation, there is no way to ensure that the appropriate corporate rate will be applied. There can be huge variations in prices and costs if companies do not take a systematic approach.
Some companies outsource these tasks to a travel management company (TMC). While TMC’s can help control travel costs, their services are not free. In some cases, the savings TMCs provide are offset by the cost of using them.
Due to their reliance on sophisticated global distribution systems (GDS) for air ticket reservations, TMCs generate more revenue from the air ticket sector than from hotel bookings, so they inevitably pay less attention to lodging costs. Traditionally, TMCs would rely on information from a GDS, which has limited hotel resources, to service their clients. Thus the cost for booking local independent hotels or hotels in second- or third-tier cities becomes far more expensive due to the higher labor costs involved in the process. Also, it is unlikely that clients will get good hotel rates from a GDS, as these rates are not negotiated directly with TMCs.
The online option
For companies that want to cut costs radically, online hotel booking services are a better option. As a rule, online hotel reservations systems do not charge transaction or management fees, while the large turnover volumes they generate enable online vendors to negotiate especially low rates. These conditions offer highly flexible pricing options to clients, and bookings can be made according to the best-buy principle: The least expensive, fully flexible rate always applies.
Statistics prove that switching travel booking from offline to online can save money. Offline bookings can be up to three times more expensive than online bookings.
National Air Traffic Services (NATS) in the UK is a perfect example. After NATS switched to the HRS online booking system, its online adoption rate increased from 10% to 70% in a year. Its average room rate per night for business trips decreased from US$232 using a TMC, to US$114, achieving a total reduction of 38%. A further saving of 17% was achieved through other process efficiencies.
Mixed market
However, while the internet is cluttered with hotel booking sites, not all providers are alike. Some are little more than forwarding websites. Others are more sophisticated. For example, a viable online booking provider can directly negotiate corporate rates with individual hotels on behalf of clients and provide "implant agents" who work at client offices to help them best leverage booking services and enforce travel policy. Therefore, when selecting an online booking service, be sure to do a little due diligence.
Online transactions by credit card used to be a big issue for Chinese internet users but the situation is improving. More and more Chinese people are getting credit cards and using them for online transactions. While HRS currently allows customers to make direct reservations online without credit cards, the plan is for online credit card transactions to make up an increasing portion of total transaction volume over time.
Online booking is the future for hotel reservations in China. In Europe, 48% of all hotel bookings are done online; in the US the proportion rises above 60%. While the online adoption rate in China is still in the single digits, the potential for growth is enormous.
Vivian Han is public relations manager for Hotel Reservation Service (HRS) Asia Pacific. HRS operates a global electronic hotel reservation system for business and private travelers based on a database of more than 230,000 hotels worldwide.
