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Trust is good, checking is better

Study: Insufficient rate audits worldwide

The industry revels in visions of the future, thanks to Travel 4.0 and networking. Unfortunately, the reality of it falls somewhat short of the dream, meaning a negotiated rate has to be transferred from the hotel to the company. Worse yet, until now, hardly anyone has noticed. 

Marina Christensen, Best Western: error source: GDS
Marina Christensen, Best Western: error source: GDS
Best Western

For Inge Pirner, the fun stops short when the topic of negotiated rates arises. “I think it’s shocking that we all invest time in these negotiations and then when it comes to checking the negotiated rates, we realise something is wrong,” comments the exasperated Travel Manager at  IT service provider Datev eG. “And if you then query it with the hotel, the response is ‘Oh, we have a technical problem here’ or ‘It was an accident’.”

Of course, Pirner is focussed on the potential financial loss. But she also has to manage to implement the associated necessary checks, “which I then have to follow up on, to see whether the rates that are uploaded match”. And on top of that, how am I supposed to track – or indeed prove – which categories had availabilities and which didn't?” That has to be demonstrated every time, possibly with a screenshot, which is an unrealistic undertaking, since availabilities vary in the individual booking channels and change constantly.

“So who's prepared to agree on rates if they then aren't adhered to?” summarises Inge Pirner. Since the phenomenon of incorrectly uploaded negotiated rates seems to have gone far beyond just the odd one-off case, VDR have recently launched a “Rate Uploading Task Force”, to identify sources of error and then eliminate these, as far as possible. Pirner: “It’s not just about the rates, it’s also about availabilities!”

Graphic: Kirsten Semmler | Vector data: Adobe Stock

One in six of all corporate rates is incorrect
Indeed, the topic of rate uploading seems to be an urgent matter. In a study carried out by the GBTA Foundation, more than one in six rates turned out to be incorrect. Further analysis of data performed by HRS even showed this value to be more than twenty percent: either the price wasn’t right or additional services were not adhered to as agreed. 

But how is this even possible? How have things got to this point? The radical change to pricing policies in chains ten years ago is one of the reasons. No matter if it was Accor or Best Western, back in 2007, these chains deviated dramatically from their long-term volume pricing policy and suggested that their corporate customers complemented these with daily rates. Rates which then of course were subject to certain restrictions. The clear goal was to achieve maximum utilisation at the maximum price for each available room.

The hotel industry has been yielding to this since the nineties. Yet compared with airlines’ rate models, the pricing policy appeared rather basic. Only the triumphant progress of new media has enabled the hotel sector to apply pricing that can be adapted minute-by-minute to current demand, says Monika Gommolla, in charge of the German hotel chain Maritim. That's exactly what the hotel industry has then proceeded to do, resulting in a situation where the various booking systems are literally flooded with a wave of differing rates for the various room categories and additional services (extras). 

Kate Vasiloff, GBTA Foundation: Audits as a solution approach
Kate Vasiloff, GBTA Foundation: Audits as a solution approach

Insufficient industry standards – a key source of error
Christian Temath, Director of Sourcing Solutions at HRS, also attributes four in ten rates being uploaded incorrectly back to the lack of industry standards. What begins in hotels with up to fifty different room categories extends to currency differences, right through to incorrect calculations about breakfast services. He admits it is no surprise, “if the field for entering extras is communicated via a free text box instead of the interface provided, then errors can easily be transmitted here.” 

And then there’s then the booking paths and channels! Regardless of the way a company receives its negotiated rates, they’ve been communicated in multiple ways beforehand (refer to graphic). Let’s take Best Western’s rates. Indeed, the Sales and Marketing Director for Europe, Marina Christensen, says: “The error rate shocks me.” At the end of the day, both hotels and partners are “extremely interested in avoiding errors, for example in the volume rates negotiated with corporate clients”.

However, she imagines the biggest likelihood of errors occurring is during the momentum which gathers when the negotiated data is transferred from the CRS to other systems. For example, “at this point, GDS sends us a special Rate Access Code, which we then have to link to our data,” explains Christensen and adds laconically, “This is something ‘old school’, to some extent, as GDS and CRS systems have developed historically and inflexibly, and their functions have become obsolete. This often collides with today’s fast web systems that work very easily at the push of a button.” That’s why Best Western are continuing to focus on process and transfer chain automation in order to minimise error rates, Christensen goes on to explain.

But is that enough? At the end of the day, an error can occur at any point in the process chain – perhaps even during the RFP stage. All it needs is a hotel operator or his key account manager to make a numerical typo. Or it could even occur right at the very end of the process, because a company uses its travellers as the final stage of compliance checking. The conclusion? You’ll notice an incorrect rate.  

Graphic: Kirsten Semmler | Vector data: Adobe Stock

Rate audits? Of course! Well, sometimes...
But is this really the case? HRS and GBTA Foundation wanted to find out more and surveyed Travel Managers across the world about how they handle negotiated rates. And lo and behold... incorrectly uploaded negotiated rates are just one side of the coin. The flipside reveals the rather half-hearted approach to the issue taken by corporate staff. In fact, according to the study, hardly any Travel Managers assumed that their hard-won negotiated rates applied to travellers correctly, without exception. Nevertheless, the main issue lies with checks rather than a laissez faire attitude. 

Even though ninety percent of all respondents stated that rate audits must be carried out regularly, hardly any confirmed that such regular checks were performed. Quite the contrary, in fact. More than half (56%) only checked their rates when they were uploaded into the respective booking systems, perhaps once a year (refer to graphic). Only a minority (3%) checked on a week or monthly basis (6%). But what exactly do these checks look like? More than half (52%) of Corporate staff perform these internally, and indeed manually, a further 36% rely on the vigilance of their travellers and hope they will report such errors. 

Quite simply, this leaves Kate Vasiloff stunned. As the Director of Research at the GBTA Foundation, she was jointly responsible for the study and now feels obliged to shake things up. “Companies are simply throwing money away,” she says, absolutely appalled. “Just because they aren't performing these checks!” And why not carry out such a simple step, when they've spent so much time and energy on the negotiations in the first place? Allegedly because they have no capacity for internal audits or outsourcing. “But these arguments are wrong,” Vasiloff emphasises. Simply by performing professional rate checks, companies would recoup huge amounts of money. Her plea therefore is, “audit and invest in your back-end systems!”

Real-time auditing in focus
“It's not a sexy topic, but it has huge potential,” concedes Sarah Busse, HRS Director of Sales Strategy & Steering. And it may be that many Corporate staff truly need the GBTA-HRS study to be aware of the importance of this matter, on the provider side, feverish work has long been carried out on developing checking mechanisms to go beyond the GDS rate audits that have been deployed as standard until now. The HRS team, for example, have recently automated auditing corporate rates as part of their sourcing solution. The company also has great expectations from the real-time rates auditing and filtering process, which is envisaged in the next step. 

And the “Rate Uploading Task Force” in the VDR (business traveller association)? They have also decided to push forward the topics of standardisation and testing. Something that fits perfectly in line with the slogan, “Trust is good, checking is better.” 

Download the study at:


Illustration: Adobe Stock

Groundhog day

Interview: HRS Rate Protector


Corporate rates are negotiated at length... But does an entirely different rate end up in the system? Annoying, but it’s no wonder in view of the lack of industry standards and inconsistent processes. However, HRS have ways and means of addressing – and correcting – these errors, according to Director of Sourcing Solutions, Christian Temath.

As part of a worldwide study with the GBTA Foundation, you discovered that a sixth of all rates have been uploaded incorrectly. What’s going wrong here for companies?

On the one hand, of course, there’s the matter of direct costs. The study, along with internal data analyses, have shown us that rates set too high are on average, 14% higher than the negotiated price of an overnight stay. Through internal data evaluation, we have determined that the error rate is actually over twenty percent. That's because there are also missing or incorrectly priced additional services, such as breakfast, of which 16% are incorrectly priced on average.

Christian Temath, HRS: Driving forward automation
Christian Temath, HRS: Driving forward automation
Michael Pröck

But how is it possible for error rates to be so high?

The issue of data transparency has been gaining importance within corporations for years, and there is more and more demand for it in the field of travel management, too. In any case, in many places, it is still a manual process, because there is no an auditing tool and as a result, there is an incredible number of rates and booking channels. And often, there is a certain degree of tiredness, if a Travel Manager has spent six months negotiating a rate – then they simply want to leave the issue behind. For this reason, the uploaded rates are not checked, or only rarely. 

And what solution is HRS offering its clientèle?

Purchasing is one thing, getting the right quality is another. A significant proportion of my negotiated rates are not available or incorrect – and that’s where I had negotiated for six months.
As part of end-to-end strategy, we have therefore begun automated auditing in the service portfolio around sourcing. By means of this service, we will address all the errors that arise through rate uploading. There is also no standard for seasonalities, such as breakfast being billed since this is entered in a free text field, or incorrect room categories having been uploaded. 

So how exactly does the service work?

The system automatically compares the uploaded rates with the parameters negotiated and in the event of deviations, initiates a correction process with the hotel. In this way, we can significantly reduce the error rate and we are also seeing the result that many error sources are predicted in advance when the next batch of rates are uploaded, so the proportion of incorrect rates reduces gradually. Through Sourcing, we optimise the hotel program by means of the completed negotiations – and aim to break old habits in hotel procurement, with this new approach.

What does this mean?

Thanks to our analyses, we know that there is an imbalance in the hotel programs: the large global chains dominate, even though they only represent a small part of the market. There are risks associated with this. The ongoing consolidation in this sector shifts the bargaining power in some markets, to the detriment of corporations. Furthermore, the cost of acquisitions has to be reflected. As a result, chain-wide discounts are offered, which is great for the chains but represents a risk for corporations, who lose out on planning security.

This is where HRS comes into play. As a mediator, we know the hotel market inside out – and that offers potential for customers to extend their “hunting ground”. In addition to existing hotels, which corporations frequently continue to request, we also look for alternatives outside of the global chains – always keeping in mind the needs of the customers. Here, independent hotels, but regional and local chains too, provide a significant lever. In the first round of bids, hotels that are already in the system have a few percentage points of advantage compared to the previous year’s rate. That is – together with the following back and forth – almost a ritual. 

And the alternatives you select, are they cheaper than the existing hotels?

An evaluation of these gives us a point of comparison to benchmark data from other corporations. But new hotels initially tend to orient themselves around the pricing of existing hotels – which doesn’t really bring any real dynamism. Then HRS had an idea... why not approach the hotels BEFORE the sourcing season and request a competitive price? Sort of a pre-qualification round. We offer that rate in the new HRS Market Place, where we especially support these independent hotels with information and advice, so that they have a fair chance to get into the corporate customer sector. These hotels are generally not as familiar with the RFP process as the big chains. Without individual advice and support, the response rates in this sector only lie around ten to thirty percent. So our goal is always to create a win-win situation for both the hotel and the corporation. 

We give a good hotel (that may have previously been overlooked in these invitations to tender) market information such as, “The existing rates are here, the needs of the customer are described – if you go in at five percent less, then you have a good chance of getting your foot in the door with a major customer.” And we say to the customer, “look at this rate, should we invite this hotel to tender?” And the answer is usually “Of course”, and THEN a new dynamic is created that breaks the pattern. In addition, the pre-qualification step results in massive process optimisation as the bidding rounds are reduced.

Back to rate uploading and auditing. We still seem to be a long way off having a completely error-free idea of the results of negotiations?

The objective is real-time audits and a filter that automatically pinpoints incorrect rates until they are fixed. We're working on both. We want to shine light into the dark and HRS Rate Protector is helping to make the industry think about the issue of the supply chain. That’s because the GBTA results clearly show that rate auditing is more important than many companies previously thought.