Table showing the price development of room rates in front of a global landscape.

Analyzing Normalized Rates in the Wake of COVID-19

In Blog by Janin

Only a few market-participants know what costs are actually associated with a rate. HRS solves this issue via Normalized Rates analysis that provides transparency – a key element for business travel leaders to optimize the hotel procurement process.

Stop Comparing Apples and Pears!

The price of an overnight stay in a hotel, expressed by the rate, is still one of the most important booking criteria for travelers. And for corporate hotel procurement leaders, the rate is also the benchmark by which he or she decides for or against a hotel for the hotel program. With this basic assumption in mind, it is all the more surprising that few participants in the market know what costs are actually associated with a rate. As a result, the actual cost of an overnight stay is usually much higher than the rate.

At a time when business travel leaders are under tremendous pressure to justify all anticipated expenditures as travelers get back on the road, such misunderstanding are no longer acceptable to their CFOs. HRS is helping solve this issue via new, proprietary Normalized Rates analysis that provides the urgently needed transparency.

The Breakfast Challenge, Other Amenities & the COVID-19 Transition

A historical lack of transparency in rates is due to breakfast. Is it already included in the rate? Is it a separate cost at a negotiated figure? Until now, breakfast has been very popular among travelers: According to numerous surveys, hotel guests even consider breakfast to be the most important amenity a hotel can offer. As a result, many companies have negotiated breakfast at the same time, so that when comparing rates, they only had to take this one component into account – unless their entire hotel portfolio included breakfast inclusive rates.

Other factors also make rate comparisons almost impossible: What about Wifi? Does parking cost extra? What costs will I have to pay if I have to cancel within 72 hours of my trip? In short: comparing rates is similar to the proverbial comparison of apples with pears. These are outdated circumstances that have no place in a modern hotel program, especially given the industry-wide, global upheaval driven by the Coronavirus pandemic

As companies have recalibrated their hotel programs in recent months, the new priority of traveler safety and security has hotel procurement leaders almost completely throwing their previous preferences overboard. Instead of last-room availability in a hotel market with sufficient capacity and buffet-style breakfast, which does not arouse the interest of the traveller due to current hygiene conditions, a touchless experience and flexible booking conditions play a much greater role. Cancellation terms are critical given the unpredictable nature of virus-spiking scenarios in key markets. This in turn can vary from destination to destination. A transparent comparison of rates, terms and conditions has never been more important.

A consultant in a talk with a business man who is writing something in his documents.

Normalized Rates Ease Comparisons As Corporations Consider Hotel Partners for the Rebound

Normalized rates make the actual costs associated with the overnight stay visible for the company and the hotel. While clearly distinguishable items such as breakfast can be easily added, HRS forecasts costs due to possible cancellations or erroneous rates. The calculation is based on the enormous amount of data that HRS draws from its Lodging as a Service platform due to its long booking history with global corporations. If the data is available for a single company, HRS can even use the company’s individual booking behavior for forecasting. For example, HRS can now forecast the impact of past cancellation behavior on future overnight stays in each individual hotel. This new level of transparency creates completely new planning requirements – on both the corporate and hotel side.

Best of all, it puts a definitive end to the previous apple-and-pear comparison at a time when managed travel leaders are striving to showcase revamped reporting and more efficient use of allocated travel dollars to CFOs and Chief Procurement Officers.

Read more about Hotel Procurement Strategies in COVID-19 times in our latest White Paper.