While global uncertainty prevails as we head into 2017, there are some positive upshots for the corporate market from favorable hotel rates, to the marketing race between hotels and online travel agencies, the New Year is the perfect time to strike the balance between cost and traveler comfort, safety and productivity.
Implications of current development
While the global corporate sector remains cautious about the world economy and conditions for business, recent major events will have some positive implications for business travel in the short term at least.
Brexit - the current economic instability, weakening British Pound and oversupply in the London hotel market are likely to assist corporate travel budgets where the UK is a key destination. According to a PwC report, occupancy rates in London are expected to drop to 80%, the lowest level in nine years, with RevPAR (Revenue per Available Room) set to decline by 2.8% in 2016 and a further 0.5% in 2017.
US election - with the current 'unknowns' around future policy directions, the US hotel sector is expecting subdued growth. Chains including Hyatt, Hilton and Marriott are anticipating only a minor to moderate increase in corporate hotel demand, supply and rates, which will be good news for companies and their travel budgets.
Major hotel mergers - while Marriott plans to keep its collective 30 hotel brands for now, corporate travelers will benefit from greater choice, through the reciprocal benefits of the Starwood and Marriott member loyalty programs and the reclassification of existing luxury brands to 'classic' (traditional) and 'distinctive' (modern and boutique). And with Millennials dominating the hotel space over the past few years, Marriott is putting luxury back on the agenda with the creation of the Luxury Brand Group. This dedicated selection of hotels will target the loyal and more lucrative, Seasoned Executive.
Commodities, occupancies and rates - movement in key commodities in 2017 will influence hotel occupancy levels and rates in the relevant regions and cities. Australia's mining sector is showing early signs of a resurgence among mid-tier mining companies which will help renew broader business confidence, investment and travel activity. This confidence could potentially push hotel demand and rates upwards. However, in key oil-driven markets such as Calgary, Houston, Lagos, Abu Dhabi and Dubai, hotel data provider STR has found a correlation between declining oil prices and lower occupancies, with rates in those cities likely to remain stagnant.
Direct vs online booking channels
The Independent Lodging Market Report by Phocuswright and Hammond Hanlon Camp LLC (H2C) predicts that by 2017, 44% of all hotel bookings in the US and 39% of bookings in Europe will be made online, representing increases of 2% and 5% respectively on current online booking levels
Online Travel Agencies (OTAs) will continue to raise the stakes against hotels in the race for traveler bookings, having now established their place in the market for companies on tighter budgets. Companies booking through OTAs need to be aware that with cheaper rates and fares come tighter travel restrictions, less flexibility for booking changes and limited loyalty program benefits.
Hotel industry reaction
In response to these growing online trends and flat economic growth, hotels are expected to use more aggressive marketing strategies, including dedicated member loyalty rates, to secure bookings directly from their customers and regain some share from OTAs.
Innovative alternate strategies are challenging tradition, with AccorHotels introducing its own online booking platform called Accor.com Marketplace. Some 200 independently-owned hotels across North America will be added to Accor's system, giving these smaller hotels an inexpensive channel to reach a wide range of customers.
Corporate travelers will be the ultimate winners in this industry revolution, benefiting from more competitive rates, complimentary extras and tailored services than they have previously experienced.
Movements in ground transport
The rise of Uber has fueled greater corporate interest in ground transport, with increasing uptake of pre-booked transfer services, limousines and car hire. Transfer and limousine services are benefiting travelers with improved comfort and productivity, while car rental is proving more viable for travelers needing to travel further distances.
Next gen mobile technologies
Mobile technologies and apps will continue to be key influencers in the way travel suppliers interact with their corporate clients. Research shows more than 50% of travelers plan to use travel apps even more in the year ahead as their reliance on real-time travel information and gratification intensifies. In addition, statistics provided by Phocuswright and SiteMinder show that while only 8% of bookings are currently made on mobile devices, this figure will soar to 35% by 2018.
In 2017 the industry's response to this demand, particularly that of the 18 to 35-year-old Millennials, will be unparalleled. Innovators in the hotel and travel management sectors will adopt chatbots - computer programs that replicate human interaction by using artificial intelligence techniques - to digitally transform the way they engage with customers at every touchpoint. Guests can use chatbots to message or text the hotel for whatever they need, providing a fun and personalized way for hotel guests to enhance their stay and engage with hotels.
All things authentic
Despite the rise of mobile technology, feedback from corporate travelers shows they are increasingly looking for personal and 'human' service from friendly and helpful staff. Travelers are appreciating genuine relationships and interaction where they stay, and local authenticity in everything from their hotel meals to the decor and artwork. 'Celebrity chef restaurants will continue to emerge in key hotels, to offer more locally contextual dining experiences with seasonal produce from neighboring areas. As a product of mobile technology, travelers can also expect hotel staff to have a full understanding of their needs and preferences and be proactive and attentive in meeting these.
Hotels and travel management companies alike will need to take a more 'business to consumer' focus in their marketing, in which they offer a more complete and trusted solution specific to each customer's needs. This will include a more extensive and relevant selection of inventory, flexible product options and rates, duty of care services and greater value adds that are available from one source and genuinely give the customer everything they require.
Tips for the new year
Armed with the above insights, how can companies better manage their travel portfolios in 2017?
- Ensure you regularly review your corporate travel policies and patterns, so you can quickly adapt your behaviors and suppliers to reduce cost if needed.
- As part of your review process it is essential that you revisit your suppliers, check how their rates compare with those offered by other providers, and identify whether it's time to reevaluate and renegotiate.
- FCM SMARTSTAY and FCM SMARTDRIVE programs provide unprecedented value-adds with every hotel and car booking, at no extra cost. These programs benefit companies of all sizes, whether bringing value to larger companies when negotiated hotel rates are unavailable in a specific destination, or providing value-added hotel services to smaller travel budgets. For all corporate travelers, FCM SMARTSTAY and FCM SMARTDRIVE enhance comfort, safety and productivity.
- FCM Sam is your 24/7 mobile travel assistant. Sam accompanies you during your business trips and gets in touch anytime there’s something you need to be aware of. With Sam, as well as receiving notifications on relevant information you should know such as both air and ground delays, you can also book, change or cancel an air, car and hotel reservation and link to driving directions. As Sam gets to know you better, your communication will become more helpful by sending you restaurant recommendations, cool things to do or information on the places you’re traveling to.
- Help your employees further improve their travel experiences and productivity. Aim to give your travelers the flexibility of choice in accommodation and car rental providers available within your corporate policy, as well as the flexibility to make their own compliant bookings using an online booking tool.
- Ensure your booking processes and online booking tool can help avoid, and alert you to any non-compliant bookings, which can add as much as 30% to your overall travel costs. Out-of-policy bookings also have the potential to put your traveler safety and duty of care at risk.
As we settle into 2017 with an eye on the changes it will undoubtedly bring, remember to focus on choice, flexibility and value in your hotel travel program. With these elements combined, your business can achieve the optimum balance between traveler productivity and safety, and corporate travel that remains efficient and cost effective as the global environment continues to evolve.