With over 8,000 highly skilled employees, operating over 60 drilling installations in 16 countries, Seadrill drills and extracts oil & gas for many of the world’s leading energy companies. Seadrill has particular focus on the harsh environment and deep water energy fields. Seadrill’s turnover in 2013 was US $5.3 billion and the company is listed on the New York and Oslo stock exchanges.
The Challenge
When ATPI Energy Travel was appointed as Seadrill’s global TMC, it was quickly identified that each operating region (North Atlantic, Gulf of Mexico, Brazil, West Africa, Asia Pacific and the Middle East) and its London headquarters all booked their own local preferred hotels.
Hotels nurtured these local relationships and in turn booking hotels became part of people’s everyday roles.
Operating locally, with varied booking processes meant that there was no consolidated method for measuring value or identifying opportunities. As a result, it was obvious that Seadrill’s considerable hotel expenditure was very fragmented, which weakened its negotiating power with suppliers. The procurement of preferred rates and benefits was focused on individual hotels (rather than global coverage) and often depended on personal relationships. Beyond this was the recognition from a duty of care perspective that Seadrill could better track their employees’ whereabouts if they were booked through a mandated programme.
The Solution
As part of the process to assess the current situation, ATPI Marine & Energy undertook a two-week study of Seadrill’s total hotel expenditure using data extracted from employees’ expense claims and booking information. This showed that in most locations, staff stayed at a wide range of hotels with varying rates. High room rates were a reflection of poor availability as well as preferences for more luxurious options.
Analysing improvements, ATPI Marine & Energy identified over US $500,000 could be saved annually through consolidating spend into fewer hotels and by the hotels themselves participating in a global procurement process.
Working closely with employees globally, ATPI Marine & Energy shaped Seadrill’s requirements into three categories of travellers that stayed in hotels. The expected number of room nights by location and by traveller category were calculated using the previous year’s booking information. Sources of value, such as WiFi, breakfast and transfers to and from the hotel, rather than room only rates, were identified.
Following the above, ATPI Marine & Energy used its knowledge and inventory of over 500,000 hotels to form a list of target hotels for each postcode area that was deemed suitable for negotiating Seadrill rates.
Hotels were invited to tender and made aware of their competition. To ensure the hotels recognised the value of being a Seadrill preferred partner, management information (MI) was shared with them which included forecasts and room nights needed in the relevant postcode areas.
The procurement process included various bidding stages, with the last stage inviting hotels to bid for exclusivity in their local area. As well as best value rates, Seadrill also secured a combination of allocation
and last room availability – crucial for their most important locations.
Seadrill has also benefited from the ATPI Group’s rates and Approved Hotels. Available to all ATPI Group clients these complemented Seadrill’s own rates by increasing the number of negotiated rates. They continue to offer benefits when travel is to new destinations not yet included in the global programme.
In 2014, Seadrill introduced its hotel policy across the world with target savings of $500,000 – this set room rate thresholds and mandated the use of ATPI Marine & Energy for all hotel bookings. In a world of geo-political change and with a workforce constantly travelling, the global hotel programme has improved Seadrill’s ability to know where employees are when unexpected events occur and from a duty of care perspective, this knowledge is often more valuable than the savings achieved.
The Result
By consolidating Seadrill’s hotel programme and using a bespoke hotel system to identify opportunities, ATPI Marine & Energy has proactively improved cost savings month after month. In the first quarter of 2014 alone, Seadrill saved US $224,000 (7%), compared to its accommodation costs for the same locations a year earlier. Seadrill has now revised its 2014 annual savings target from US $500,000 to US $1,000,000.
We have revised our hotel savings expectation from US $500,000 to US $1 million for 2014 after ATPI’S excellent savings performance in the first quarter.
Neil Cooper, Director of Global Supply Chain at Seadrill
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