Travel Solution Inc. has announced key findings resulting from an analysis of nearly 500 negotiations completed in late 2002 as corporations secured preferred hotel rates for 2003 business travel.
In the past, corporations and hotels negotiated preferred rates using phone, fax and mail-based processes which took place over weeks and, sometimes, months. Recognizing the inefficiencies associated with this practice, vanguard travel and procurement managers sought to improve these processes by using a combination of RFP automation tools and commodity-focused procurement platforms. However, this resulted in a process that was equally difficult to manage and one in which hotels called into question the fairness of applying generic tools to a unique industry with specific requirements.
With the launch in May, 2002 of ProcurePoint Enterprise Transient? and its OpenBid? negotiation platform, corporations and hotels had available to them for the first time a domain-specific, full-spectrum solution, enabling full-cycle process automation of hotel procurement from sourcing through to dynamic, real-time negotiation. ProcurePoint’s platform integrates procurement best practices as they relate to the hotel industry, which—combined with a client service team—helps companies maximize operational efficiencies and structure fair and effective negotiations.
Unlike RFP automation tools or commodity-focused auction engines, ProcurePoint Enterprise Transient allows companies to negotiate critical variables associated with hotel accommodations. Analysts estimate that these variables, such as telephone and Internet access, parking, complimentary breakfasts and other amenities, account for up to 30% of the total hotel spend.
Highlights: Process Improvement, Cost Reductions, High Hotel Participation Rates
During the second half of the year, fifteen financial services, high technology, consumer, health and consulting companies (including eleven of the Fortune 1000), worked with ProcurePoint to negotiate preferred hotel rates for fiscal year 2003. 496 online negotiations were completed—from sourcing and RFP automation through to closed bid negotiations or OpenBid reverse auctions—for more than 450,000 room nights worldwide, with an approximate value of $100 Million USD. Corporations reported major process improvements, compressing the entire cycle from several weeks or months to an average of twenty days, including the time required to structure competitive sets, create and distribute RFPs and complete the negotiation process.
In addition to process improvements, ProcurePoint clients reported year over year savings in room-rates alone ranging from 7.2% to 17.6%. This figure does not reflect negotiated variables such as Internet and telephone access. These savings contrast with recent NBTA forecasts that business travelers should expect a 2% increase in hotel rates in the year ahead.
Hotels showed strong support of the ProcurePoint process, which ensures that only comparable properties are included in competitive sets. More than 30% of all negotiations were conducted using the OpenBid reverse auction platform. Within these transparent negotiations, 92% of all invited hotels participated. In total 1,466 properties in 50 countries participated in negotiations.
“Leading corporations and hotels recognize that the way they’ve traditionally conducted these annual negotiations is inefficient,” said Ed Sarraille, ProcurePoint president and CEO. “But, until this year, they have not had appropriate tools available to them to make things better.” Sarraille continued, “Our product comes at a time when the influence of procurement and corporate finance within travel departments is growing. That hotels have been so willing to participate speaks to the fact that fair and domain-appropriate online negotiations offer a streamlined way for them to win business and better understand—and react to—their competitive environment.”
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