hotel rate
hotel rate

Hotel rate negotiations in a tough energy industry



Zara Higgins

General Manager, Scotland


The Background

The lucrative nature of the energy sector over the past years has meant that Aberdeen, UK, maintained its strong position as the city with the highest hotel revenues outside London.

Corporate hotel rates continued to soar due to an excess in demand, and negotiations were tough with a real need for corporates and their travel management companies (TMC) to illustrate their value through accurate and consolidated travel data intelligence.

The 2015 downturn in the energy sector had little immediate impact on hotel rate negotiations, with many suppliers reluctant to lower rates believing the decline was short-lived – even if that meant seeing a huge decline in their bed stock.

The Challenge

The significant changes in the energy industry had a huge impact on organisations across the world. With over 65,000 global redundancies, corporate organisations were looking for ways within their business to reduce costs, and travel being an integral part of their business, the focus for procurement and travel teams was to further analyse this substantial spend.

ATPI Energy Travel faced a significant challenge, to find new ways of helping clients to reduce their travel spend – scrutinising every area of their programmes for additional savings. The Account Management team were proactive in working with supplier partners to re-negotiate clients’ hotel programmes and our own ATPI hotel rate, however, the reductions offered didn’t provide the savings the organisations needed.

The Solution

In May 2015, the Account Management team in Aberdeen put together a strategy for their clients to provide hotel rates more in line with market conditions.

Knowing the buying power of ATPI as a global TMC would be greater than individual corporate rates, the team made the decision to work with one hotel near the Airport and one hotel in Aberdeen City Centre.

The objective was to negotiate a specific ATPI rate in Aberdeen that was lower than any other individual corporate offering available at that time.

The focus point initially was predominately on the Airport area, as this is key for clients flying into and out of Aberdeen airport. The strong relationships with local hotels meant they were open to negotiations, and one hotel in particular recognised the value of setting up a special ATPI room rate.

The hotel agreed on an allocation of rooms for all ATPI clients to access. These ATPI room rates were available through clients’ preferred booking channels – online or offline encouraging travellers to book as normal, within policy.

The Result

The ATPI negotiated rate was an immediate success; clients had the option to use either their own corporate rate or the ATPI allocation – which often proved to be more cost-effective.

Prior to the ATPI negotiated rate – the average hotel rate in Dyce, Aberdeen was £127.69 with seven leading hotels sharing over 70% of the market share between them and the rest of the room nights were being booked into smaller properties and B&B’s.

The new allocation rate was set up in mid-August and from August – December 2015 the average hotel rate was £113.41. However the ATPI negotiated rate secured 74% of the market share with an average room rate of £84.29.

The ATPI Marine & Energy team therefore successfully demonstrated the ability not only to negotiate on behalf of their corporate clients, but also to influence market share as a direct result of ATPI’s buying power.

From the end of 2015, with the economy still suffering, hotels in Aberdeen have faced tough conditions illustrated by patterns such as corporates shifting their crew changes based on availability in hotels near the airport, clients restricting use of taxis to the city centre and more outbound travel to overseas areas such as Iran, Somalia and South Sudan.

With the downward pressure looking to remain throughout 2016, ATPI pro-actively began early on in the tough market conditions to support their clients with cost-saving initiatives and will continue to do so moving forward.

Learn more about ATPI’s sector-specific offering for the energy industry