Does the cap fit? How to manage fluctuating hotel rates

Man at hotel computer

Business Travel News predicts another volatile year for hotel pricing.

Given the dynamic nature of hotel pricing today, we turned to Travel Managers in the Egencia Connect Customer Advisory Board and the Egencia business travel management consulting team for their advice on managing hotel rate caps or per diems.

Making hotel rate caps work for you

Gone are the days you can set your hotel rates at the beginning of the year and then forget about them. Although hotels rates do fluctuate, the consultants at Egencia advise that setting hotel rate caps can be extremely helpful, especially during the infancy of a managed travel program. They can help travel you set policy, understand market trends, and establish savings targets.

If just getting started, define a default hotel rate cap value that can be used worldwide for your travelers. Then, refine this amount for the cities or countries where your travelers are visiting the most to ensure that they can find good hotels at a reasonable price.

For example, Priscilla, a Global Travel Manager, says, We travel often to high-priced cities where rates fluctuate frequently so we go with the highest logical rate in those cities. In all other cities, we use $275 as the guideline not to exceed.”

Aligning hotel city caps to negotiated rates

Rosemary, Senior Manager Global Travel, finds per diems useful, but says, “We have to adjust them throughout the year for certain high-priced markets like New York City and Tokyo. We base our hotel rate caps on our negotiated rates so they are always in policy when compression drives pricing up. This allows us to make sure people are still spending within reason.”

Jennie, Travel Manager, shares, “Like Rosemary, we base our hotel city caps on our negotiated rates. We only change per diems seasonally in cities where we have high volume.”

Uncovering savings in a mature program

As the travel managers above noted, hotel rate caps are often set according to negotiated rates for a company’s most visited cities. You may also be able to uncover additional savings in mid markets where volume is significant, but not enough to warrant a negotiated rate. For those markets, you may want to reach out to your account manager to request a per diem analysis based on Egencia Business Rates.

One last tip. Don’t forget amenities

While negotiated rates and industry data provide great benchmarks when setting per diems, they may not include amenities. Accounting for common amenities in your per diems (breakfast, parking, WIFI), will give you a better idea up front of how much you are going to pay and may provide more choices for travelers.