Inside Your Travel Policy & Understanding Hotel Rates

The Importance of a Travel Policy

A travel policy is a comprehensive set of guidelines designed to manage and control a company’s business travel arrangements and expenses. It outlines the procedures and acceptable parameters for employees to follow when booking travel, including accommodations, airfare, ground transportation, and other travel-related expenses. A well-crafted travel policy is crucial for businesses of all sizes, as it ensures the efficient use of resources, supports budget management, and enhances employee safety and comfort during travel. Here’s a breakdown of what a travel policy should include and the benefits of having one:

What a Travel Policy Should Consist of

• Booking Procedures: Guidelines on how to book flights, hotels, and rental cars, including preferred booking platforms and approval processes.
• Approved Travel Expenses: Clear definitions of what expenses are covered, such as meals, lodging, transportation, and any per diem allowances.
• Expense Reporting and Reimbursement: Instructions for submitting expense reports, required documentation, and timelines for reimbursement.
• Travel Safety and Security: Policies related to employee safety while traveling, including emergency contacts and procedures.
• Compliance and Ethical Guidelines: Standards for ethical behavior and compliance with local laws and regulations.
• Preferred Vendors and Loyalty Programs: Information on preferred airlines, hotels, and rental car companies, including details on corporate loyalty programs.
• Sustainability Practices: Guidelines to encourage sustainable travel practices, such as using public transportation or booking eco-friendly accommodations.

Benefits of Having a Travel Policy

• Cost Savings: By negotiating rates with preferred vendors and setting clear guidelines for bookings, companies can significantly reduce travel expenses.
• Policy Compliance: A travel policy helps ensure that employees follow consistent procedures, leading to more efficient travel management and cost control.
• Duty of Care: It demonstrates a company’s commitment to the safety and well-being of its employees by providing clear guidelines and support for travel.
• Streamlined Processes: Simplifies the booking and expense reporting process for employees, saving time and reducing frustration.
• Budget Management: Helps businesses forecast and manage their travel budgets more effectively.
• Sustainability: Encourages responsible travel practices that align with the company’s sustainability goals.
• Employee Satisfaction: Clear policies and procedures improve the travel experience, leading to higher employee satisfaction and productivity.

Get Familiar with Hotel Pricing Dynamics

Understanding hotel pricing dynamics is crucial for policy makers, travel managers, and business executives who oversee corporate travel policies. This knowledge helps in crafting policies that are not only cost-effective but also flexible and accommodating to the needs of traveling employees. Here’s a breakdown of what understanding hotel pricing dynamics entails and how it can be beneficial:

What are Hotel Pricing Dynamics?

Hotel pricing dynamics refer to the various factors and strategies that hoteliers use to set room rates. These rates fluctuate based on a multitude of variables including demand, seasonality, competition, and even local events. Understanding these dynamics is key to identifying the best times to book, the types of rooms to reserve, and how to negotiate better rates.

Key Factors Influencing Hotel Rates

• Supply and Demand: The basic economic principle of supply and demand plays a significant role in hotel pricing. Prices tend to rise when demand is high and fall when it is low.
• Seasonality: Prices can vary significantly depending on the season, with peak tourist seasons typically seeing higher rates.
• Events: Local events, conferences, and festivals can cause spikes in demand, leading to higher prices.
• Location: Hotels in prime locations (e.g., city centers, near major attractions) often charge more.
• Amenities and Rating: The range of amenities offered and the hotel’s star rating also influence room rates.

Benefits of Understanding Hotel Pricing

• Cost Savings: By recognizing the patterns in hotel pricing, policy makers can book accommodations during off-peak times or leverage knowledge about events to secure better deals, resulting in significant cost savings.
• Better Negotiations: With a deeper understanding of how hotel pricing works, businesses can negotiate more effectively with hotels, securing discounted rates or added benefits.
• Flexibility and Employee Satisfaction: Crafting a travel policy with a solid understanding of hotel pricing allows for greater flexibility, ensuring that employees have a comfortable stay while also managing costs effectively.
• Strategic Planning: Knowledge of pricing dynamics aids in strategic planning, allowing businesses to forecast travel costs more accurately and allocate budgets accordingly.

Four Types of Hotel Rates

1. Best Available Rate (BAR) A popular revenue management technique used by hotels around the world, Best Available Rate is determined by expected room demand as influenced by local events, time of year etc. As such, this rate fluctuates nightly and represents the best non-negotiated rate available at the time of booking. BAR is sometimes referred to as Best Unrestricted Rate (BUR) and Best Flexible Rate (BFR).
2. Last Room Availability (LRA) Under LRA, a special client rate has been pre-negotiated with the hotel for all rooms in a specific category group. Therefore, any room that falls within that category up to and including the last room available, will be priced at that predetermined rate.
3. Non-Last Room Availability (NLRA) NLRA is an agreement between a hotel and client whereby the negotiated rate is available to travellers only at the discretion of the hotel. This means that during peak periods, hotels can block NLRA rates and charge a higher rate to maximize revenue.
4. Dynamic Pricing Dynamic pricing is simply a discounted rate off the BAR rate. For organizations that reach a certain room night volume, a fixed discount can be negotiated with the hotel. Under this pricing structure, the discounted rate fluctuates in line with BAR fluctuations.

Benefits of Contracted Hotel Rates

If your business is a high volume accommodation user, you may be eligible to negotiate a contract rate. While volume targets and spend thresholds vary with local market conditions, generally speaking, if your organization produces 100 room nights per annum, you can negotiate a contracted rate. In certain key global markets, such as New York, minimum room night commitments can be as high as 500 before a hotel will extend contracted rates.

Once a contract is in place, the hotel will offer your firm a rate based on last room availability (LRA) or non last room availability (NLRA). Which rate the hotel offers is based on a variety of factors including volume commitments, market conditions etc.

While LRA is usually a premium rate, it ensures last room availability at your predetermined contact rate within that room category. If your agreement is based on NLRA, the nightly rate may be lower than LRA, however, if the hotel becomes fully booked this rate will be closed out and you’ll be subject to the BAR rate at the time of booking.

With an endless array of third-party websites, you might stumble across a cheaper last minute rate. Before booking through these channels, it’s important to understand the benefit of using your contracted rate, even though it may be more expensive.

Does Online Booking Help?

Firstly, booking online doesn’t count towards room night targets for your organization. So while booking through a website may save you money in the short run, over the long run, you are diminishing your firm’s ability to garner even better-negotiated rates. Secondly, contracted rates have built-in flexibility ideal for business travellers such as 24 hour or same-day cancellation. Finally, if your meeting is cancelled unexpectedly, online rates will often be non-refundable leaving your business on the hook for extra travel expenses.

Perfect Your Travel Policy 

A well-informed travel policy that incorporates an understanding of hotel rates is essential for any business looking to optimize travel expenses while ensuring employee satisfaction. At Worldgo, we specialize in assisting businesses in crafting the best travel policies tailored to their specific needs. With our access to exclusive globally negotiated hotel rates, we provide a unique advantage, ensuring that your travel policy not only meets but exceeds your financial and operational expectations. 

Let Worldgo be your partner in navigating the complexities of corporate travel, leveraging our expertise and resources to secure the most advantageous terms for your business.