Companies are choosing reverse auctions because the process is more transparent, reduces negotiation time with suppliers, and they can achieve true market prices.

Speaking at a Business Travel Expo seminar in Hong Kong, BTI Asia-Pacific regional director, Mr David Pettigrew, said: “Reluctantly, I have to admit as a travel supplier that in a number of reverse auctions my company has been involved in, we have seen the real price emerging very quickly.”

Simply put, a reverse auction is an online bidding process where a company invites suppliers to bid and the prices go down. The major advantage is the savings in time and costs.

However, Mr Pettigrew said a number of factors must be taken into consideration, not least of which was the traveller who, at the end of the day, had to live with the results.

He said: “The corporation must also make sure they have the ability to implement the new suppliers into the travel policy. Weigh up the costs of changing to a new supplier in terms of service and, increasingly, safety and security.”

GetThere Solutions associate director, Mr Bruce Tan, said a number of factors must come into play before reverse auctions were worthwhile. “Reverse auctions work best when times are bad and suppliers are trying to fill the rooms. Tying a corporation in, even on a lower price, is one way to do that.

How it works Company X wants to conduct an auction. It has to go on an e-procurement site and register. A web page is then set up for Company X. It would put its requirements on the site - number of room nights, in which cities, etc. A time would also be set for suppliers to show interest, say 10 days. Then Company X would send out an e-mail to all the suppliers the company currently uses, as well as those which have expressed interest, and invite them to the site and bid at a specified time. Suppliers log on to the site and the auction is held. Company X can act as the auctioneer itself or hire a travel management company to do so.

“Travel managers must also do due diligence beforehand to ensure quality suppliers. Go through the RFP (Request for proposal) process and assess all the hotels, only then can you hold an auction and invite suppliers to participate.

“Start slowly in one market, with one block of rooms, then roll it out slowly in the region.”

Get There does not do reverse auctions. A widely-used site is www.ariba.com.

Not surprisingly, suppliers are sceptical about a process where they get driven down to the bottom line. Mr Pettigrew said most suppliers “were not ready but they better get ready as it was proving irresistible to travel procurement people”.

Mr Tan said: “It changes the nature of doing business as the supplier no longer has the bargaining power to drive rates higher. That is why I would also like to see intangibles, such as service and location, be considered as well.”