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How to evict squatter rates

Nomura

Carlson Wagonlit Travel clears out Nomura's unwanted hotels

Background

Lurking like an unwanted guest that has outstayed his welcome, squatter rates are often an unseen scourge on companies' hotel programmes. They are a tactic used by some hotels that have knowledge of a client's rate access code to load their negotiated rate onto the GDS. As the codes rarely change, the hotel can keep that rate active even if it the property is no longer part of the client's programme. Worse still, if the hotel is part of a chain, it can distribute this code to other properties that want to attract the client's business.
 

The drawbacks of squatter rates are:

  • Travel bookers see many more hotels offering their company rates but can't tell whether they are in their programme 
  • They dilute volume at preferred properties and potentially make negotiations more difficult the following year
  • These rates have not been negotiated with specific properties and are not managed
  • Travellers might be misled into thinking they are going to a preferred property, which meets certain standards, such as proximity to local office – but they are not
  • Nomura, a Japanese financial holdings company, wanted Carlson Wagonlit Travel to stop the squatter hotels from appearing in its online property searches.
     

Challenge

At its annual review of Nomura's hotel programme, CWT Hotel Solutions Group suggested it run a squatter audit. Nomura travel manager Carol Neil immediately understood the advantages of this and was eager to go ahead. However, the price of the audit was a concern and she was hesitant as the precise outcome was unknown.
 

CWT account manager Simon Brown was also keen that his client should minimise the potential damage of squatters to its hotel programme. The challenge was to understand more about the value of the audit and what it would deliver.
 

Solution

Simon liaised with colleague Jaclynn Reinhard, consultant at CWT Hotel Solutions Group, to find out what was behind the cost of the squatter audit. Armed with information about the potential value, examples of previous audit results and details of the cost to CWT, Simon was able to explain the benefits to Carol. She agreed to the audit with the proviso that if fewer than 50 squatters were found, CWT would only charge back the exact cost of performing the audit.
 

"This showed the customer that we wanted to do this for their benefit," said Simon.
 

The purpose of the audit was to empower CWT Hotel Solutions Group to take action on a supplier management level to maintain an online hotel programme that supports Nomura’s strategy, compliance levels and travel policy.  
 

It identified squatters by searching more than 100,000 hotels in the GDS. A preliminary results deck was produced within a couple of weeks and CWT Hotel Solutions Group contacted squatter hotels to request that Nomura rates be removed.
 

Result

Nomura's hotel programme contains 350 properties. The audit revealed:

  • 2,570 squatter hotels
  • 57 chains with squatter hotels
  • Nomura travellers had stayed at 110 squatter hotels across 79 cities and 40 countries


"This was a real 'wow' moment for the client," said Simon. "They were genuinely astonished that so many properties were found to have a rate loaded."
 

Nomura had booked 585 room nights in these squatter hotels in the year to June 2017. With only a rate cap defining where they could stay, this could have taken market share away from key properties and impacted future negotiations. Not only this, but the average room rate difference was $20.50. This is a missed savings of $38,098, dwarfing the money spent on the audit.
 

Since being contacted by CWT Hotel Solutions Group, 88.6 per cent of hotels with squatter rates loaded have removed them.
 

Client verdict

Nomura travel manager Carol Neil said: "I was amazed at the number of hotels that were squatters and not in the Nomura programme. Left unchecked this could have significantly increased our overall hotel spend over time. Although reticent at first, I am delighted that Simon proposed and encouraged me to look more closely at doing a squatter audit because the final results far exceeded the ultimate cost to Nomura."
 

She added: "As best practice, I believe squatter audits should remain a key part of how Nomura manages its global hotel programme."
 

Conclusion

As part of a good housekeeping regime, CWT hopes to run squatter audits for Nomura every two years to maintain an excellent online hotel programme.
 

Simon added: "This has shown the benefit of CWT to a highly valued customer, as well as enabled us to have deeper conversations on the shape of their interactions with CWT Hotel Solutions Group for future programmes."