Travel buyers are reporting success in lowering hotel rates globally and upping inclusive amenities for 2010, even in cases where they already had gone back to the table midyear for additional negotiations.
In looking at rates for a group of Carlson Wagonlit Travel's buyer clients, 2010 hotel rates globally are about 6.6 percent lower than 2009 rates, and North American hotel rates are down by more than 8 percent, said Monica Eiden, the agency's project manager for global hotel solutions. Although many buyers face lower volumes this year, they gained savings by consolidating programs, which increased competition among hoteliers.
"Hotels knew if they didn't put their best foot forward and reduce rates like their competitors did, they would be removed from the program," Eiden said. "It was clear that hotels wanted business, putting in value-adds like parking or access to the concierge level."
Patricia Carlin, purchasing manager for global card and travel for Dublin, Calif.-based Sybase, said she was able to lower rates in many of her markets, particularly in North America. In many cases, she was able to secure rates through 2011 and gain such new amenities as meals in some locations, she said.
"We had gone back three times and negotiated during 2009, but this went smoothly," Carlin said. "People I'm working with aren't as panicked as we were in 2009, so we're trying to develop partnerships."
Unlike a year ago, when many buyers waited to assess the market, most appeared to wrap up negotiations by the end of 2009, Advito vice president of business solutions Bob Brindley said. Most clients saw healthy declines with minimal instances of rate increases, with final results beating Advito's forecast, he said.
"We saw clients expand their solicitation list to increase competition and increase their negotiating leverage," Brindley said.
Negotiations produced a wide variety of agreements this year, with many buyers opting for dynamically priced base rates or tiers of rates within a certain property, said Bjorn Hanson, an associate professor at New York University's Tisch Center. "There seems to be a greater dispersion of results for 2010 negotiations than in any time anyone can remember," he said.
Initial bids for New York hotels included rates 15 percent lower than they were in 2009, said CWT's Eiden. Those lower rates also came with last-room availability, which had been difficult to obtain without a hefty premium in the years of the seller's market, she said.
New York was somewhat challenging for Sybase's program, Carlin said, but she was able to secure LRA and Internet access in rates across the board. "It wasn't as successful as some other areas, but it wasn't quite as expensive as it's been," she said.
Other markets with significant corporate rate decreases included Austin, Chicago and San Francisco, Eiden said. Advito's Brindley said the biggest drops were in traditional meetings markets, while secondary cities' rates were more stable, because they were less inflated during the boom years.
Outside of North America, buyers had a more challenging environment, Eiden said. While overall rates in Asia fell about 9 percent, buyers faced increases in such emerging economies as Laos and Pakistan, she said
(see Editor's Note, below). Part of that stemmed from security issues, with buyers opting for lower-profile properties rather than the large, well-known chains in those countries, she said.
"They do have strict policies around safety and security," Eiden said. "They might not have the ability to pick the Marriotts, because they could be high targets, and instead will go to small mom-and-pop-type places or five-star hotels with increased security."
Outside of those countries, buyers fared better in Asia, she said. They saw about an 8 percent decrease in rates in both China and Singapore and about a 6 percent decrease on average in Japan, according to CWT.
Sybase's Carlin said Asia, along with South America, was a particular challenge for her program as well. However, she was able to add some properties for the first time in Thailand and Manila. "We don't have our travel program consolidated there, so we did some reporting out of our expense reporting tool and approached those properties," she said. "We'll see how it goes."
Negotiated rates also increased in Africa, about 2.5 percent overall, including such countries as South Africa, Tanzania, Algeria and Ethiopia, Eiden said, adding that in most cases, the rate increases amounted to only a few dollars above rates around $140.
Hoteliers expect this year to be fairly stable in terms of rates, after which they hope to begin pushing for increases. Loews Hotels chairman and CEO Jonathan Tisch said in January at the Professional Convention Management Association's 2010 Annual Meeting in Dallas that most hotels financed during better economic times were completed in the past two years, while most other construction projects were put on hold. "In terms of 2011, the supply side starts to take care of itself, which portends to a robust recovery," he said.
Analysts said that, barring any major world events, they do not foresee a need for constant rate renegotiations this year to keep up with market conditions, as was the case in 2009
(BTNonline, March 30, 2009). At most, some hotels might opt to shave $20 or so off their rates to compete with other corporate negotiated rates in their market and regain share, Eiden said.
"I don't foresee the large renegotiation effort happening in March and April as it did last year," she said. "Hotels that are struggling to reach financial goals might reach out to clients, but I think things are going to just be the status quo for the next 12 months."
Beyond that, buyers could see stability within their hotel programs for quite some time, analysts said. "It's a little early, but indications are that there won't be a big increase, but there won't be big corrections, either," Advito's Brindley said. "There may be a period of pricing normalcy as the economy recovers and pulls out of the recession."
Editor's Note: Due to a later adjustment in data provided by Carlson Wagonlit Travel to
BTN, this story originally inaccurately reflected the agency's negotiated hotel rate performance in India for 2010. CWT's negotiated rates there fell 16 percent compared with 2009 levels.