QUESTION TIME
Chris Pouney of Severnside Consulting, answers buyer Mark Avery of PricewaterhouseCoopers’ two queries over the issue of VAT-inclusive and exclusive quoted hotel rates
Chris pouney Director, Business Travel, Severnside Consulting
Having studied travel and tourism at University College
Birmingham, Chris joined American Express Business Travel supporting a wide variety of clients in industries as diverse as automotive, retail and entertainment. In 2003 he was appointed travel manager
at fi nancial giant Citigroup, fi rst as European travel manager then as senior vice president – global lead for travel, where he won a number of internal awards for his innovative approach to service delivery. Chris left Citigroup in 2009 to set up
Severnside Consulting using his considerable expertise to support a variety of organi- sations. He passionately believes in developing the business travel industry through stakeholder collaboration and working to close the gap between buyer needs and supplier delivery. Chris splits his time between Worcester, the UK and Dubai where he is currently working on a research project on managed business travel in the Middle East. Chris is a frequent contributor to industry publications, is a regular speaker/moderator at industry events, and often lectures at universities to help develop the future generation of travel leaders.
Q. Are we ever likely to see standardisation of hotel inventory in terms of rates showing inclusive or exclusive VAT for the UK? A. I think the answer of this question beautifully demonstrates the complexity of our industry. By way of a background, around the mid ‘noughties’, London hotels, particularly those in the five-star bracket, started loading rates in the GDS excluding UK VAT. Once a few major hotels did this, the rest had to follow, of course, in fear that their rates would look expensive when viewed against their competitor set. Hotels point to the fact that other major European
cities, their competitors for lucrative MICE business, either loaded rates ex-VAT, or had significantly less VAT applied to their charges (in France, for example, it's 5.5 per cent). Hoteliers additionally argued that as the bulk of their corporate travellers could reclaim their VAT anyway, they were actually behaving in a more cost transparent way to the end user. For the rest of the UK, competition against major European cities typically doesn’t apply so much so rates stayed inclusive of VAT. In defence of the hotels, in the four years since
2008, UK VAT has varied between 15 and 20 per cent so actually a VAT inclusive rate through this time would have created an admin nightmare for travel managers and hoteliers alike. Looked at from a buyer's perspective though, the
story is very different, with a number of challenges having to be faced by the current approach. More cynical travel managers out there suggest it is a ploy to keep their rates below the finance director’s radar of £200 a night. The current process creates
information would be used during the decision process, travellers would have no surprises at check out, and post-trip data could consistently report room and tax rates, whether the hotel was in London or not. More importantly, in these days of demand management, and enforcing policy before the money is spent, internal processes could correctly and consistently report travellers as out of policy.
“Hotels point to the
confusion and possible error at all points of the transaction, from the RFP process, to the traveller decision making process. The present scenario sees the risk of travellers being hit with bills at check out 20 per cent more than they expected to pay and, worse still, being reported as out of policy when they thought they were in policy. VAT is not always fully reclaimable of course, with
fact that other major European cities –
their competitors for
lucrative MICE business – either loaded rates ex- VAT, or had signifi cantly less VAT applied to their charges”
some industries (such as financial services) not able to reclaim in full, and almost never passed back to the individual traveller cost centre within an organisation. The end user, in effect does pay VAT, with their company centrally claiming back the VAT. Buyers’ needs are actually straightforward. They
If you have a business travel issue you would like advice on from an expert, email us at:
help@thebusinesstravelmag.com
would want their preferred hotels to load rates as per their wishes and most would want VAT consistently applied at all UK hotels. That way, the correct
Q. How does a buyer navigate these seemingly treacherous waters? A. Well, like a lot of issues, technology and communication seem to be the answer. 1. Do the appropriate due diligence when negotiating rate. Hands up all those buyers who have ever had to frantically re-negotiate a rate/remove a hotel from an approved hotel list when an error is discovered by a fraught traveller at check out? 2. Insist that hotels load rates
to your internal requirements be it inclusive or exclusive of VAT. Communicate early and be consistent on this point. A well thought of customer who is a strategic partner of the hotel or chain should succeed here. 3. Audit early and often. This
helps ensure that your rates have been loaded as requested. 'Rate-
squatting' does go on, most often by the big hotel chains – see our Debate feature in the last issue. 4. Work with your TMC and GDS provider. The
major GDSs are all developing technology to apply the total costs including taxes to the room night so this can be used at the point of sale, either by your TMC or on an SBT to make the correct decision. In turn, policy rules will be able to apply the correct controls based on total price. 5. Review internal expense reclaim processes. Is VAT broken out systemically or manually by the user?
30 THE BUSINESS TRAVEL MAGAZINE
Page 1 |
Page 2 |
Page 3 |
Page 4 |
Page 5 |
Page 6 |
Page 7 |
Page 8 |
Page 9 |
Page 10 |
Page 11 |
Page 12 |
Page 13 |
Page 14 |
Page 15 |
Page 16 |
Page 17 |
Page 18 |
Page 19 |
Page 20 |
Page 21 |
Page 22 |
Page 23 |
Page 24 |
Page 25 |
Page 26 |
Page 27 |
Page 28 |
Page 29 |
Page 30 |
Page 31 |
Page 32 |
Page 33 |
Page 34 |
Page 35 |
Page 36 |
Page 37 |
Page 38 |
Page 39 |
Page 40 |
Page 41 |
Page 42 |
Page 43 |
Page 44 |
Page 45 |
Page 46 |
Page 47 |
Page 48 |
Page 49 |
Page 50 |
Page 51 |
Page 52 |
Page 53 |
Page 54 |
Page 55 |
Page 56 |
Page 57 |
Page 58 |
Page 59 |
Page 60 |
Page 61 |
Page 62 |
Page 63 |
Page 64 |
Page 65 |
Page 66 |
Page 67 |
Page 68 |
Page 69 |
Page 70 |
Page 71 |
Page 72 |
Page 73 |
Page 74 |
Page 75 |
Page 76 |
Page 77 |
Page 78 |
Page 79 |
Page 80 |
Page 81 |
Page 82 |
Page 83 |
Page 84 |
Page 85 |
Page 86 |
Page 87 |
Page 88 |
Page 89 |
Page 90 |
Page 91 |
Page 92 |
Page 93 |
Page 94 |
Page 95 |
Page 96 |
Page 97 |
Page 98 |
Page 99 |
Page 100 |
Page 101 |
Page 102 |
Page 103 |
Page 104 |
Page 105 |
Page 106 |
Page 107 |
Page 108 |
Page 109 |
Page 110 |
Page 111 |
Page 112