Improving Hotel Procurement

ProcurePoint touts process, cost savings from online negotiations for preferred corporate hotel rates

Sausalito, CA  January 15, 2003 ProcurePoint Travel Solutions, a provider specializing in the online sourcing of corporate hotel lodging, this week touted the process improvements and the time savings it said could be achieved by moving travel negotiations onto the Internet.

ProcurePoint said it analyzed the results of nearly 500 negotiations completed in late 2002 as corporations secured preferred hotel rates for 2003 business travel. The analysis showed that companies using the provider's online tools were able to compress negotiation cycle times and also achieve price reductions at a time when travel costs looked set to inch upward.

The provider launched its Enterprise Transient solution and OpenBid negotiation platform last May, providing corporations with an automated process for hotel procurement from sourcing through to negotiation. ProcurePoint argued that its solution, unlike request for proposal (RFP) automation tools or commodity-focused auction engines, allows companies to negotiate critical variables associated with hotel accommodations  such as telephone and Internet access, parking, complimentary breakfasts and other amenities  variables that analysts estimate account for up to 30 percent of the total hotel spend.

During the second half of the year, 15 financial services, high-technology, consumer, health and consulting companies (including 11 Fortune 1000 companies) worked with ProcurePoint to negotiate preferred hotel rates for fiscal year 2003. The companies completed a total of 496 online negotiations for more than 450,000 room nights worldwide, with an approximate value of $100 million.

According to ProcurePoint, the corporations reported significant process improvements, compressing the entire sourcing and negotiation cycle from several weeks or months to an average of 20 days, including the time required to structure competitive sets, create and distribute RFPs, and complete the negotiation process.

In addition to process improvements, the companies reported year-over-year savings in room-rates ranging from 7.2 percent to 17.6 percent, figures that do not reflect negotiated variables such as Internet and telephone access. These savings contrast with recent forecasts from the National Business Travel Association that business travelers should expect a 2 percent increase in hotel rates in the year ahead.

The provider asserted that hotels supported the ProcurePoint process, which seeks to ensure that only comparable properties are included in competitive sets. More than 30 percent of all the negotiations were conducted using the OpenBid reverse auction platform, and within these negotiations, 92 percent of all invited hotels participated. In total 1,466 properties in 50 countries participated in negotiations.

"Leading corporations and hotels recognize that the way they've traditionally conducted these annual negotiations is inefficient," said Ed Sarraille, ProcurePoint president and CEO. "But, until this year, they have not had appropriate tools available to them to make things better."

Sarraille continued: "Our product comes at a time when the influence of procurement and corporate finance within travel departments is growing. That hotels have been so willing to participate speaks to the fact that fair and domain-appropriate online negotiations offer a streamlined way for them to win business and better understand  and react to  their competitive environment."

For more information on solutions for travel and expense management, see "Expense Reports Made Inexpensive," the Net Best Thing column in the December 2001 issue of iSource Business.