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WORDS MOLLY DYSON


EXCLUSIVE INTERVIEW


SMARTER SOURCING


Tobias Ragge, chief executive of hotel solutions provider HRS, tells BBT why corporates are starting to outsource their hotel programmes, and discusses the importance of transparency in the travel industry


T


RADITIONALLY, CORPORATE TRAVEL MANAGERS have committed to the RFP process with their hotel part- ners once a year, striking deals with both old and new suppliers and hoping their negotiated rates would be served over the coming 12 months. But Tobias Ragge, chief executive of HRS, believes that’s all about to change. HRS had a monumental year in 2018, winning contracts with Siemens, Airbus, Amazon and the UK’s Crown Com- mercial Service, among others. Why are big organisations outsourcing their hotel programmes? “I think people have realised that in order to get over the biggest challenge, which is leakage and adoption, they need to change because something hasn’t worked,” says Ragge.


FRAGMENTATION AND COMPLEXITY


“If you look at the stats, there’s a 72 per cent adoption rate for air, but only 42 per cent for hotels on average. The major drivers for this have been fragmentation and complexity. There are nearly 700,000 properties across the world, but only about 25 per cent of them are affiliated with chains that would traditionally operate on the GDSs. “If the content isn’t available on those systems, the GDSs can’t really help corporates because they are lacking the resources to get these smaller hotels onboard – you have to have a lot of boots on the ground in those tertiary markets to sign deals.”


Ragge says companies are starting to realise that by outsourcing this responsibility, they can let the experts navigate this complex landscape for them – something that could be especially useful for procurement managers who work across a variety of categories other than travel. “These people don’t want to know why hotel sourcing is so complex, or how to fix it, because they don’t have the time,” he claims. “The industry is facing the same problem – trying to do more with fewer resources. You can do one of two things – you work 24/7 and say goodbye to your family to try to fix it, or you work smarter and find somebody who can help you become more of a strategic procurement manager.” HRS has been singing the praises of continuous sourcing, whereby the traditional RFP process is thrown out and buyers are able to react to changes in their business as and when they happen rather


buyingbusinesstravel.com


than a year down the line. Ragge says this can also help travel managers ensure properties are delivering the rates they’ve promised.


He says this also solves a lot of problems for the hotels themselves. “We heard from a few suppliers that they’re getting annoyed with the cumbersome RFP process, where you typically have three rounds of bidding when hotels first give the buyers a ‘wish rate’. That, in itself, is confusing because if the cus- tomer doesn’t have the budget, then why wouldn’t we cut out much of that process and just give them a target rate?” In October, Ragge spent time on stage at the ACTE Paris Global Summit and Corporate Lodging Forum calling on the industry to be more transparent. “Cus- tomers don’t know where their suppliers are making money,” he clarifies. “We’re not being entirely honest with customers about why certain solutions are being proposed. Why are we using content via the GDS and not investing in direct con-


PROFILE Tobias Ragge is chief


executive of family-owned HRS, a role he has held for ten years. He joined HRS as executive assistant in 2004, and became head of marketing in 2005. He previously worked at Lufthansa from 2002-2004, working in strategy and alliance management, among other areas.


nects? The honest answer is, it’s a commercial investment and takes a lot of money to set up, and you’re not usually compensated in the same way as you are with the GDS. That’s the simple dynamics of the situation. “There’s a lot of back-end rebates and overwrites, but


that’s not very transparent. It wouldn’t be an issue if it didn’t have so much influence over the customer. We nor- mally see two biases – the connectivity angle, where cor- porates are only worried about getting access to content; and the monetisation effect, whereby they’re biased to the systems that allow them to manage their costs.” He concludes: “Corporates are catching on to the fact that there might be something going on behind the scenes and that is creating a feeling of distrust. That’s when you start getting travel managers giving up and introducing open booking. I don’t think that’s the right solution because managed travel can add a lot of value to corpora- tions when it’s done properly.”


2019 JANUARY/FEBRUARY 47


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