Lodging Issues In Government Electronic Travel Systems

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» Posted by on Apr 10, 2014 in Electronic Travel Systems, Hotels | 0 comments

As the U.S. Federal government embraces electronic travel systems and begins to move their travel bookings to these systems, we see a number of problems arise. Some are common to all migrations to booking tools (and away from agent based travel) and will be eliminated as the traveler becomes more comfortable with the systems with continued use. However, I would argue the unique nature of government travel and the government traveler create issues rarely seen in the corporate world, and may continue to confound the system, and the traveler attempting to use them.

First, look at the history of how government travelers book lodging vs. air and car. For a number of years, surveys by SGTP and others have shown that the travelers routinely book air and car though their travel agents, but move to other channels to book their lodging. Why? It’s the 64 dollar question for hotels. Loyalty points, not wanting anyone to know where they are staying, better rates, “they can’t tell me where to stay” and “I just always do it that way” are reasons travelers give for booking outside the system, the old system that is.

Moving to electronic systems now forces the traveler to actively bypass the hotel booking to go outside the system, and then re-enter the system to enter the hotel details of the trip for reimbursement. This is double work to make their arrangements outside of their system, yet they continue to do this. What’s unique about government is they have exceptionally high usage rates on their air and car programs (through agents or e-systems) making the lodging gap more pronounced than we see in the commercial world.

Since moving to the e-systems reduces the human interaction and communication in the booking process, I suspect this gap will increase rather than decrease. What’s to stop it? Not using the system defeats the purpose of building it and reduces the economy of scale gains it was intended to deliver. In the corporate world companies have tried draconian methods (non-reimbursement, termination threats) to force compliance with e-system use, with mixed results. In most cases the “corporate will” is not determined enough to keep up these high pressure tactics. In the government world, reimbursement is an entitlement and can not be used as a threat. There has been talk about “mandating” hotel programs to improve compliance, but so far the travel regulations only require “consideration” of government lodging programs and traveler behavior remains the same.

Secondly, consider the booking tools currently used by government. Hotels are listed in a static display for creation of the PNR and approval, and only then is the reservation made across the GDS. The gap between selection and booking can be hours. This results in hotels having sold out, changed reservations and travelers not getting hotels they want. Again, the system and unique rules of government actually work to defeat compliance and force the traveler to more efficient solutions. Moving to live inventory could solve this issue, but an examination of the impact on hotel inventory must be considered prior to this move. Most government air and car contracts allow cancellations and changes without penalty. Hotels however, are not under contract for last room availability and decrementing inventory prior to funding could have very negative consequences.

Finally, as the government move to electronic systems and travelers book their travel rather than agents, hotel commissions will probably disappear for government reservations. Currently, government counts on this revenue stream to offset transaction costs with the agents, and removing it will require contract re-negotiations. At the same time, the corporate world has largely eliminated commissions in favor of net pricing. Government’s instance on depending on commission requires hotelier to maintain two rather than one revenue model for their properties. At some point the extra cost involved may outweigh the benefit of government business and hotels will no longer participate in government programs. We see this happening now.

In summary, moving to electronic travel systems is happening now in government and the potential efficiencies will continue to drive their release. Adoption rates will clime for air and car bookings, but the jury is still out on lodging. Historically government travelers have often booked outside their agency systems and this trend continues. In addition, complications created by the electronic system reduce efficiency that is available elsewhere. Finally, lodging companies are unwilling to support one-off programs. As commissions evaporate from the travel transaction model, programs stuck in the old paradigm (like government) may find themselves left off the table.

By Scott Lamb

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