The future of purchasing in the hotel industry — Till Runte from Certified speaks with Tanja Dammann-Götsch (Part 1).
The world of purchasing in the hotel industry has developed into a complex and dynamic playing field in recent years. Current global developments and the increasing expectations by hotel guests pose new challenges and opportunities for both established hotel chains and owner-managed private hotels. Today, we’re interviewing Till Runte from Certified, an independent testing institute for the hotel industry. He provides insights into hotel challenges and opportunities, and explains how players in the hotel industry can master the current developments. In Part 1 of the interviews, we focus on the aspect "What makes buyers tick?"
Buying behavior is a fascinating topic that forms the basis for successful business strategies and is a decisive success factor for companies including the hotel industry. Which factors play a role in the purchasing decision when it comes to hotel accommodation and their availability, price, and location?
Various factors play a decisive role in booking a hotel, specifically the quality of the service. The preference for hotels is particularly noticeable in small and medium-sized businesses. Platforms, such as booking.com, influence the way we plan business trips today. In these fast-moving times, we strive to keep bookings on our smart phone to a minimum. We particularly appreciate it when we’re offered options, such as rental cars, restaurant recommendations, or shuttle services. In today's fast-paced corporate world, where managing directors and department heads are already overloaded, smooth travel planning is important. Nobody wants to have to deal with unnecessary details. Location is another relevant factor, especially when international guests are considered. Proximity to the airport to increase travel efficiency is one of the most important features. The easy access to business appointments and event venues also plays an important role. At a time when time management and digitization are becoming increasingly important, the role of these aspects in the hotel industry are not to be underestimated.
Large companies are constantly striving to reduce their costs. Does this also mean that prices need to go down?
First of all, I need to emphasize that not only large companies, but also small and medium-sized businesses (SMEs) are constantly working to reduce their costs. However, this doesn't necessarily mean that prices will automatically drop. The big five factors include price, services, technology, quality, and sustainability. They are closely connected and always are involved in innovation.
And I’m firmly convinced that this is not only the case in the industry. These principles are also important in the hotel industry and for the usually indirect materials that play a significant role, such as kitchen supplies, housekeeping or reception. Companies are undoubtedly seeking to cut costs and increase efficiency. However, these improvements can only be achieved if they simultaneously focus on the important aspects of the big five. Long-term effective cost savings can be achieved when a company provides
- Excellent services
- Customer friendliness for reservations and bookings (for example, through the introduction of a user-friendly app)
- High product quality
- An all-round pleasant experience for its guests, and
- Sustainable practices.
Is the purchaser making life easier by concluding framework agreements with hotel chains?
Definitely yes. Using framework agreements with hotel chains is a practice that is being used more and more frequently, especially in the context of indirect purchasing. These agreements are negotiated within the framework of strategic orientations, which can vary from company to company. In indirect purchasing, various platforms and databases exist on which two to three hotels or hotel chains are available for selection.
It lets an employee book a room directly at work whereby the booking information is seamlessly integrated into the purchasing department's ERP system.
It's important to note that framework agreement negotiations usually take more time as they’re significant agreements that often involve the company's legal department. Such negotiations may take place on an annual basis or depend on the duration of the contract. They just make the purchasing process significantly easier. They contribute to the ongoing digitization of purchasing by offering the option of processing bookings and transactions at the touch of a button. This speeds the process and enables efficient procurement, especially indirect purchasing.
How can an "owner-managed private hotel" score points with large companies? Do you have to be represented in a booking tool?
To score points with large companies as an owner-managed private hotel, a presence in booking tools is definitely a benefit. This is an opportunity to increase the exposure of the hotel and appeal to business travelers. It allows companies to book accommodation easily and efficiently, which is usually a priority for business travelers as I mentioned earlier. Such exposure can give you a competitive edge and increase your chances of being selected by large companies. However, it's also important to offer outstanding service, competitive prices, and, where appropriate, special offers to score points with these same clients.
Does personal contact still play a role in today's world?
In today's business world, personal contact plays an extremely important role, especially during the business development phase. This also applies during framework contract negotiations when the basic arrangements are defined and in case issues arise. In these situations, personal interaction is essential. Apart from these stages, however, smooth and efficient interaction between purchasers and hotels or the relevant offices is crucial. In these situations, you want everything to work quickly and smoothly since business travelers and purchasers often rely on efficient processing.
How strongly does compliance influence the selection process?
In the past three to four years, the selection process and the issue of compliance specifically have become considerably more challenging. In the past, invitations and so-called fam trips were common practice. It's important to operate within tax regulations, as violations can quickly lead to redundancies when buyers or teams accept unauthorized offers. Besides, there are fewer opportunities for hotels and vendors from other sectors to offer such events. The situation in this area has changed considerably and requires strict observance of compliance guidelines.
Are rating platforms a relevant indicator?
Yes, I would agree that online portals for package travel reviews, such as Holiday Check or similar, are relevant indicators. In the hotel business especially, it's extremely important for both buyers and hotel managers to carry out Internet searches quickly and effectively. Rating platforms are a significant factor for this reason. As a buyer or person responsible for the hotel industry, we also often prefer to cooperate with certified hotels. This helps us to avoid potential issues and complaints within the company, especially when it comes to senior levels, for example the board, management, and other department heads.
Would you say a certification system like Certified is too complicated for the buyer?
I think once you have become familiar with such a system, you will find it easy and straightforward. However, I'm not sure whether all companies in the industry are yet aware of these certifications. In this context, effective marketing could play a crucial role in promoting the understanding and acceptance of these certificates.
Are buyers open to information and ideas or do they tend to rely on "association recommendations"?
In my experience, indirect purchasers dealing with the subject of hotels rarely think of the German BME or other association recommendations. Usually, I would first rely on personal experience from the past. I would also consult various Internet platforms, but not necessarily rely on recommendations from industry associations.
In your opinion, is the buyer an "independent thinker" who also asks in-depth questions, or merely an instrument that carries out a purchase request?
Well, the buyer follows a set strategy that is related to the big five in purchasing. No doubt an independent thinker, this person always has an eye on the needs and requirements of the company in mind. When issues arise, the buyer is often the first point of contact for complaints and must therefore be able to contact and support internal clients, such as the board secretary, the marketing department, or the human resource department. However, note that buyers aren’t normally pleased when other specialist departments establish contacts without their involvement. However, this often happens in practice and is something to consider. Specifically, the executive board secretary may have considerable internal influence.
Do employer legal obligations also play a significant role in purchasing, or is it just the price? Is an externally awarded quality seal of any help?
Earlier, I mentioned that price isn’t the only factor. Besides price, the employer's legal obligation of care also plays a significant role in purchasing. An externally awarded quality seal can serve as an instrument to support arguments and offer added value.
In Part 2 of the interview, we’ll look at the sales person’s perspectives: "I want to maintain or increase the price" and "Everything in regular or something different?" Let's talk about this subject, on LinkedIn or in an appointment free of charge. Find more exciting subjects in my book Purchasing in Transition [Der Einkauf im Wandel].
Listen to my podcast for more on future-proof strategies in purchasing.