Buyers Angry At Forte Hikes
Buyers Angry At Forte Hikes
By Amon CohenLondon - Top U.K. travel managers are threatening to withdraw their business from leading British hotel group Forte following steep price increases for its Posthouse brand.
Rates for top corporate clients at the 78 three- and four-star properties have been raised by 13 to 34 percent, effective May 6. Examples include a room at the Gatwick Airport Posthouse rising from 50.40 to 71.10 and the Aylesbury Posthouse shooting up from 53.10 to 71.10.
Forte also has moved over some properties from its lower-value Crest brand, effectively hiking its prices as well.
Travel managers are unhappy not only about the severity of the increases; they also claim that the new tariffs replace existing agreements made with Forte's former management for 1996-although Forte says that existing contracts will be honored. Furthermore, they object to having been presented with the new rates as a non-negotiable fait accompli.
"The hotel market is buoyant at the moment, but when we do deals with chains, we expect them to remember the bad times as well as the good times," said Mike Whyman, Pilkington's worldwide travel manager. "We shall certainly look at other opportunities." Whyman said he might consider smaller hotel chains and independents as alternatives.
Glyn Farrell, Lloyds Bank personnel, travel and facilities manager, added his voice to the chorus of complaints. "If prices are going up the way Forte says, I will move my business if I have to," he said. Lloyds and its sister bank, TSB, spend between 500,000 and 1 million annually with Forte, which accounts for about half of the 65,000 room nights that they use in the United Kingdom.
Farrell acknowledged that the corporate rates agreed upon with Forte's former management were subject to change in the event of either party being merged or acquired. However, that does not excuse the nature of the price rises, he said.
"We all accept price increases from time to time, but to come in and hike the rates by such a large amount is unacceptable," he said.
Farrell added that the Forte representative who told him about the changes "gave me the impression her hands were tied and these rates were not up for discussion."
Andrew Fletcher, company secretary of British Aerospace's military aircraft division, said his firm already had stopped using the Posthouse at Farnborough.
"Many corporate buyers may well vote with their feet and direct their business elsewhere," said Fletcher, who is chairman of top U.K. purchasers' grouping the Business Travel Liaison Group. The BTLG's 25 members spend a total of more than 500 million annually on travel.
Granada chief executive Charles Allen said the increases were necessary because former Forte management had undervalued the Posthouse properties.
"Our pricing is still competitive," said Allen, who added that the increases were required to pay for 40 million of improvements over the next two years. "All we are doing is bringing our margins up to 7 to 8 percent," he said. "I am looking for long-term relationships with clients, and unless I charge a better rate, I cannot invest in the properties to maintain that relationship."
Allen denied that the increases were needed to pay for the 3.8 billion acquisition of Forte and Granada's promised improvement of the company's profits by 100 million. He also said that existing contracts with corporate clients would be honored.
In the background of the Posthouse increases is not only Granada's acquisition of Forte but the strength of the U.K. hotel market. Forte's occupancy rates for February and March were 84 percent in London, up 5 percent from the previous year, and 68 percent for the U.K. provinces, also up 5 percent. Sales from January 1995 to January 1996 were up 10 percent to 277 million in London and up 7 percent to 328 million in the provinces.
Nearly 90 percent of respondents to a survey of U.K. hotels by BDO Hospitality Consulting reported increased occupancy in 1995, and 80 percent of them also achieved increased room rates. It is for this reason that Allen found qualified sympathy in some quarters of the travel industry.
"Rates were going to go up anyway as the U.K. economy starts to move again," said Derek Jewson, head of purchasing for Unilever. "Other hotel chains are looking to raise rates as well."
Even Jewson, however, expressed concern over Forte's hikes. "An increase of 5 to 7 percent would be reasonable, but 15 percent is too high," he said.
But Maurice Segal, chairman of Expotel Hotel Reservations, said the increases seemed fair. "Corporate clients have had it too cheap for too long, and I told [former Forte chairman] Rocco Forte that last year," he said.
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