Travel Budget Extortion: What Can We Do About Policy-Breaking Events? AKA 'The Dreamforce Effect'
Another year, another 45,000 people making their way to San Francisco for the latest iteration of Dreamforce.
Everyone knows that hotel pricing gets out of control that week. So, out of curiosity, I checked prices about a week before the event.
The cheapest room I could find was $754 per night at a hotel nearly 20 miles away from the conference center. If you think about an enterprise-level company that sends 50+ people to Dreamforce, you’re looking at a bill of thousands of dollars per person for the week — just for a place to stay.
Under normal circumstances, the rates would never fit into your travel policy. These policy-breaking events are exceptions you have to make.
And the pricing is borderline extortionate.
But Dreamforce is just one example. There are all kinds of policy-breaking events that rob travel budgets throughout the year. We need to talk about what we can do about it.
The math behind budgeting for policy-breaking events
Call it the Dreamforce Effect. The Taylor Swift Effect. The World Cup Effect. Insert any mega event you can think of that brings a massive influx of hotel demand to a city and you know that prices will spike out of control.
In the runup to Dreamforce, The San Francisco Standard called it Hotelmageddon. To put it in perspective:
- Kayak data shows the average cost of a hotel in San Francisco is $288 per night during high season.
- The San Francisco Standard found that a Marriott at Fisherman’s Wharf that’s typically $200 per night runs up to $1,400 per night during Dreamforce week.
- Salesforce Ben recommends Dreamforce attendees plan to spend $500 per night for a room (with the expectation that rates can vary significantly).
At best, you’re looking at a 2x price spike in this example. And at worst, it could cost your company upwards of 5x the standard hotel rate in San Francisco.
Dreamforce is an extreme example to use because of the nuances of San Francisco’s lodging market and the sheer size of the conference. But the same scenario plays out at different scales in any major city when a mega event comes around.
When your job is to build policies that optimize travel spend for a company, what exactly can you do to mitigate these costs?
3 unsatisfying ways to manage the cost of policy-breaking events
No one in the travel management equation is incentivized to address the cost problem for policy-breaking events.
Hotels get better and better at dynamic pricing every year as AI-powered predictive analytics improves. And your travel management platform makes money on the margins of trips you book — so they’re thrilled when you book these ultra-expensive stays.
I’ve talked to leaders who own travel budgets at Zendesk, MongoDB, Adyen, Deel, and more about how they manage this problem. I’d summarize the answers into three main approaches (none of which are particularly satisfying).
- Annual planning and negotiating. The enterprise-level companies that know they’re attending mega events like Dreamforce every year will have partnerships in place with local hotels. The preferred rates will probably be blacked out for the week of something like Dreamforce. But getting the hotel blocked a year in advance gives you the best chance at minimizing costs.
- Doubling up on rooms. I’ve talked to some companies that have employees stay two to a room when budgets are tight. They don’t force employees to attend the event — but it’s a “take it or leave it” kind of policy. In this scenario, you’re essentially sacrificing employee experience for cost cutting. Maybe acceptable for a scrappy startup, but possibly more trouble than it’s worth for larger orgs.
- Taking it on the chin. You look at the total cost to attend an event and build the overspend into the budget for next year. You’re essentially accepting the status quo that this is the cost of attending headline events.
All of these approaches are attempts to make the best of a bad situation. Maybe you look at it as the cost of doing business — a budgeting frustration that comes up once a year.
But as more companies become increasingly distributed, the budgeting problems around mega events are extending to standard business travel as well.
How the economics of policy-breaking events extend to standard business travel
Policy-breaking events like Dreamforce or Microsoft Ignite provide the most extreme rate hiking examples. You want to attend from a business strategy perspective and have to accept that you can’t control the pricing.
But what about distributed companies trying to book standard business trips and team gatherings? This concept of travel budget extortion extends to these situations, too.
More and more, we’re seeing distributed companies set budgets for internal meetups. In that case, it’s thrust upon department leaders to organize events. They’ll log into your travel management system, select the dates they want, multiply the cost by the number of people on the team, and check the total against the budget.
If it’s within budget (regardless of total cost), they’ll book the trip.
They aren’t thinking about whether or not they’re booking rooms in London during Wimbledon and prices are 20% higher than normal. Or that their rates were 15% higher for the gathering in New York City because they booked the week of New York Comic Con. Or that the Taylor Swift concert in Seattle caused a 50% increase in the per-night hotel rates.
And truthfully, you don’t want the managers in your business thinking about all these nuances. You want them to have a frictionless booking experience so they can focus on their actual jobs.
Instead of trying to restrict your travel policy further and risk hurting employee experience, introduce an alternative accommodation option that makes them happy (and saves you money).
That’s what we’re building Roamr for.
Breaking the cycle of travel budget extortion
Let’s go back to the Dreamforce example and walk through an alternative option for employees attending the event.
When you book with Roamr, we pay your employees to stay with their friends and colleagues on work trips. So, instead of booking a hotel room in San Francisco, they would choose to stay with someone local. Here’s how it works.
- We work with you to set a standard budget in a city to align with your travel policy. Let’s say your rate was set at $450 in San Francisco.
- For any Roamr stay in that city, you get a 30% discount on the rate. In this example, you’d pay $315 per night, saving $135 per night on a normal week in San Francisco.
- Both the host and the traveler get $135 each in cash as well.
- Your employees get to decompress from the business environment and you reduce your travel costs.
This model applies regardless of what’s happening in the city at the time. So if suddenly rates are $750 per night on average for Dreamforce week, you’re still only paying based on the standard rate of $450 we had previously set. You save that 30% in the example plus the delta between that rate and whatever the hotel rate is.
On a normal week in San Francisco, you’re saving $135 per night. But during Dreamforce? You’re saving that $135 plus $300 extra per night (or more).
That’s an alternative to the usual travel budget extortion we see around mega events. And it applies year-round to your standard business trips as well. No blackout dates or unexpected rate hikes.
This is the kind of alternative employees want and companies need in a new era of corporate travel. If you want to learn what kind of savings you could get with Roamr, reach out and we’ll run the numbers based on your company’s data.
