Corporate travel is growing on rate, not on travelers
Marriott's corporate room nights fell last quarter while its rate rose. The discounts hotels still grant for volume are priced for a customer who stopped sending more people.
by Markus Busch
The corporate production reports come around in the fall, ahead of the rate conversations. Most of them will read well this year. Revenue up on the top accounts, the program working, the discount earning its keep.
Read the room nights instead.
The chains already found it. Marriott's corporate business grew last quarter on rate while its room nights slipped — in its own words, mid-single-digit rate increases offsetting slight declines in room nights. A segment that sold fewer stays and charged more for them. Host Hotels, which owns the kind of big urban houses that live on that customer, described the same shape: corporate revenue up 4 percent, driven by rate. It isn't universal. Hilton's quarter grew on occupancy as well as rate, and Host counted room-night growth in New York, Washington and Chicago. But Marriott's own read of next year is rate up, room nights down slightly.
Your program is priced for a customer who kept growing. Every part of the machinery assumes it. The room-night estimate at the top of the RFP. The tier that deepens the discount as that estimate rises. The production report you review in the fall. The grow-with-us conversation that justifies the whole arrangement.
That estimate is the buyer's forecast of his own travel, and it was written when travel was still climbing. If an account projected 800 nights and has delivered somewhere near 650 two years running, you are holding a discount you granted for 800. The rate increase you pushed through this year covered the gap in revenue. It left the terms exactly where they were.
The traveler who still comes is a different guest. A trip that survives approval now is a trip that had to be worth the money — the client visit that closes something, the inspection that couldn't happen on a screen. Fewer of them, each carrying more. She arrives with more riding on two nights than the Tuesday regular ever had riding on forty, and she is the one guest in your building whose company will read a report on how it went. So the account's worth to you has moved off the volume. It sits in the rate you hold and in what happens between her check-in and her checkout.
Before the fall conversation, put the delivered room nights beside the estimate that set the discount. Two years of them, side by side. If the gap is real, the tier has been wrong for a while and nobody has repriced it.
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