Challenges and priorities for the Procurement industry
Posted On 14th/Mar/2018 By Natasha Jones
In my capacity as up and coming chair of the HBAA accommodation committee, I was recently invited to join a group of buyers to discuss travel at an industry event hosted by the Chartered Institute of Purchasing and Supply (CIPS). It’s not often I get to spend time with buyers in their own environment and I was very encouraged by what I observed.
In the opening session, Director of CIPS Andrew Coulcher, shared some of the challenges and priorities for the Procurement industry over the coming year with Head of Travel Industry Body ITM, Scott Davies doing likewise for travel. There were a surprising number of commonalities; safety and security, building trusted long standing partnerships and identifying value all featured heavily in this open and varied discussion. We learned that for buyers, travel often falls into the ‘too difficult bucket.’
Cost saving was never too far away and its clear that this element of Procurement is not going away any time soon. One buyer shared with me that their primary task for 2018 was to save 15% on their T&E spend. What is interesting is that with only around 2-3% of your cost going to your TMC it is very clear that you are not going to save that amount of money if you just tender your travel agency, or push a higher percentage online. Companies will need to change the specification, or influence our travellers to behave differently – what I now know as ‘demand management’ in Procurement speak.
The final session saw me, along with a hotel Revenue Manager share some insight with the delegates to help them buy better, increase value and reduce cost. After all, to obtain the best value you need to understand the position of the other side.
Now as a background, the Revenue Manager in a hotel is the person that a buyer needs to get to know very well, as these are the people who decide what rates you pay and whether you get a room at all.
The discussion I think surprised a few buyers.
Business hotels are generally full midweek, or more precisely from Tuesday to Thursday. If you try and negotiate a year over year discount when your business has reduced then you are unlikely to succeed. In fact if your business has grown you will still probably fail, because on a Tuesday, Wednesday and Thursday night, a hotel can often sell out their hotel 3 times over and so will choose to sell rooms to those buyers paying the highest amount.
As explained by a revenue manager, buyers will need to ‘SELL TO THE HOTEL.’ That is to say, you need to become the buyer of choice. Knowing how much you spend on food and beverage (F&B) will put you in a strong negotiating position. Taking this a stage further and agreeing a dinner bed and breakfast rate, whilst also ensuring that the hotel can guarantee a lucrative F&B revenue, will make you very attractive to a hotel, as will understanding, and combining your meeting spend with that of your ‘transient’ rooms. Finally understanding the nights of the week you stay, plus influencing this into the ‘shoulder nights’ of Monday and Thursday will make you very popular indeed.
A good travel management company can help you here, providing benchmarking, intelligence on your travellers behavior and identifying lower cost rooms when they become available and guiding you on how to implement your policy effectively using the right combination of superior service and cutting edge technology.
What I learned:
- Cost saving starts with cost visibility. One cannot come without the other
- Procurement professionals normally manage multiple categories, and need good suppliers to help deliver their objectives in each category they manage.
- Travel is complex, and buyers need good suppliers to help them understand it – we also need to get better at explaining ourselves.
Advice for buyers
- Travel is a series of categories rather than just one. Reducing cost in hotels will require a very different set of tasks than in hotels or meeting – come and talk to us and let us share our expertise
- Data is meaningless without intelligence – we employ fantastic account managers to help bring your data to life and identify what actions you need to take to increase value
- Benchmarking is a valuable tool and is an area we can provide input
- Yield management (from airlines and hotels) can be seen as a ‘dark art‘ and TMCs such as ours can help you plan a demand management strategy to limit increases or in cases reduce cost