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Increase business travel savings with dynamic hotel policy

Posted: 30 September 2021
Business Travel Savings With Dynamic Hotel Rate Cap

By John McLellan, Senior Product Manager and Natasha Samuel, Director, Product Marketing

As businesses continue to re-evaluate their travel programs and what their return to travel may be in the future, travel managers are looking at new ways to optimise their existing travel spend without increasing cost. Many businesses have already significantly reduced business travel costs but are looking for further solutions that deliver increased return on investment for their business travel programs.

That’s why we’re really excited to announce Egencia’s brand new feature - dynamic hotel rate cap policy.

Built by Egencia’s Data Science team and powered by machine learning, our goal is to help customers prepare for the next phase of business travel where budgets may be tighter and deliver a solution that’ll help optimise their business travel savings.

Static rate caps and the market

Most companies set static hotel rate caps in their travel policies, fixed per night rates by city, town, or country.  In most cases, this means significant research time for the travel manager, and may involve analysis of the previous year’s spend and average daily rate spend. In addition, this might involve research at a local market level to understand what a suitable rate cap for the company’s corporate travel policy is.

However, the challenge with fixed rates is they’re simply that – fixed. Unless a company has the time to do the research, many rate caps aren’t updated on a frequent basis, leading to significant missed savings as the market rates fluctuate and a stagnant travel policy.

Also, as a result of the pandemic, many hoteliers are negotiating dynamic hotel rates, instead of traditional static rates, for corporate agreements. So, there continues to be volatility in the market, with pockets of high and low demand in turn impacting pricing and availability.  Some hoteliers are also rolling their corporate agreements with corporate customers into the next year (2022) and foregoing negotiations for new corporate rates.

Building the next evolution in hotel policy for business travel

In 2020, Egencia’s Data Science team analysed the potential for business travel savings if we built a dynamic hotel rate cap feature for customers. The team analysed thousands of hotel bookings and at the same time, investigated how to personalise each individual customer’s travel policy.

By February 2021, the first model was ready, and we launched a pilot with customers in North America and Europe to gather feedback on the user experience, including reporting capabilities customers need to reflect the value of the feature in their travel program.

Save time and save money

During the pilot, customers realised an average of $20 for each booking made where dynamic hotel rate caps applied.  Gone are the days of static rate caps where businesses risk losing savings as travelers book hotels with higher rates.

And it isn’t just savings...

By applying dynamic rate caps you’ll benefit from a range of other features including:

  • Activating the feature is a one-time setup by the travel manager. Customers have the option to mix and match hotel policy to suit their business needs – keep static rates in some locations, activate dynamic hotel rate caps in others. Whichever works best for their travel program.
  • Travel managers can customise strictness of rate caps by specifying the minimum star rating for median rate calculation. For example, a higher minimum star rating translates to a more generous rate cap.
  • Many customers have several corporate travel policy groups for different types of travelers, such as executives, sales teams and road warriors. The feature is personalised to each of the travel policy groups.
  • Once activated, the adjusted median market rate cap will be reflected as part of the booking experience and when a rate is out of policy, the traveler or traveler arranger sees a clear explanation as to what the policy violation is for a given hotel and rate.
  • Coupled with Egencia Smart Mix, travelers and travel arrangers will continue to benefit from a fast, efficient hotel booking experience (in less than five minutes on average!).
  • Travel managers can track savings with detailed reporting and visual dashboards.  They’ll have transparency of the median rate, the booked rate and how savings are measured and personalised to their travel policy groups, with Egencia Analytics Studio.

The days of manually researching and setting hotel rate caps is over.

Egencia’s dynamic hotel rate cap policy feature uses machine learning to deliver even more personalisation and savings in customer travel programs, automatically adjusting hotel rate caps based to the market median. Travel managers save time and gain business travel savings without sacrificing compliance.

Read more about corporate travel savings from Egencia.

Looking for better business travel solutions? Get in touch with us.