Buyers Report A Flattening In Group Fare Negotiations
<B>Buyers Report A Flattening In Group Fare Negotiations</B>
By Chris Davis
Very few meeting buyers this year have been able to negotiate better group and meeting airfares with major carriers than last year, despite a market strapped by some notable corporate travel cutbacks and declining airline profits, according to a Meetings Monitor survey.
Only 7 percent of respondents to the survey said they were receiving greater group and meeting air discounts in 2001 than they were the year before, compared with 17 percent who believed so in a Monitor poll taken a year earlier. About 24 percent responded that the airlines were offering smaller discounts, similar to the previous year's numbers.
Airlines denied they are offering lower discounts, and nearly 70 percent of buyers said they have similar fares to last year's. Yet, the Monitor seems to indicate that meeting buyers have gained little, if any, leverage in negotiations even when compared with 1999 and 2000, when the airlines enjoyed record occupancies and profits.
At least some of this can be attributed to the prominence of zone fares, which one-third of respondents said they employ. Airlines often set zone fare prices at least a year in advance, offering some resistance to market fluctuation.
Zone fares were the second most frequently used meeting discount, behind the airlines' standard discount of 5 percent to 10 percent off the lowest applicable fare. But a fair share of buyers were able to negotiate far better packages, including more than 20 percent off the lowest fare and a growing number received net rates on meeting and zone fares.
"We will look at both our negotiated zone fares and our corporate agreement, as quick turnaround meetings may be booked after all the carrier's bucketed zone fare seats for a given flight may be taken," said Mike Doran, director of travel services at Madison, N.J.-based Schering-Plough Corp. "Our domestic cost per mile is 31 cents for transient travel and 21 cents for zone fares. If we manage it well and have advance notice, we will do well with zones."
Doran said that overall discounts are about the same as they were last year, once all negotiations and concessions are tabulated. Doran occasionally will eschew free tickets for volume booked in favor of hard discounts on fares, but such soft concessions can be helpful, he said.
"We prefer to keep those in place for planners that need to be onsite for meetings," Doran said. "That can remove hard costs from our internal meeting budget."
A smaller chunk of respondents, like Doran, take advantage of airlines' practice of offering a free fare for a certain number of bookings, usually 40 or 50. Less than 10 percent indicated they successfully negotiated free fares for less than 40 bookings, though buyer interest is high.
"We are looking for more free passes on airlines, more than the typical one for 40 or 50 booked seats," said Palm Inc. manager of global travel and meeting services Vickie Smith. "We analyze where the meeting will take place and the volume of attendees. Usually, we'll wind up using zone fares if the meeting location benefits the company. Otherwise, we'll go for a deep discount and net rates."
Smith professed optimism about the immediate future of air negotiations, noting that hotels have become more amenable to deals.
"We're just now starting to see the tip of the iceberg in terms of better air negotiations," Smith said. "The airlines are still cautious about offering deep discounts, since they'll be going into the summer, which gives them a lot of vacation travel. They have not felt the pinch like hotels have, and they're hedging their bets."
Noting that corporate meeting buyers are bringing a higher degree of sophistication to the negotiating table than in years past, airline group sales managers said they are not offering lesser deals.
"We have not offered lessened discounts on meeting airfares," said Penny Chen Lawless, manager of group and meeting travel at US Airways. "We're actually working very aggressively to try and meet the needs of corporate meeting buyers by offering more flexibility in the products they can use. We offer net programs once in a while if after evaluation we determine that we can. It's based on a variety of factors, including market share and the number of available seats on routes, and we decide that on a case-by-case basis."
"Year over year, we view the negotiating climate as very similar," said Bob McNally, general manager of meeting, association and incentive sales for Delta Air Lines. "There is no scaling back on what Delta is offering. As the Monitor results indicate, 76 percent of your polled participants claim to be receiving greater or similar discounts. Many corporations are taking an active role in managing their meeting airfares, travel managers and meeting planners will continue to negotiate the best rates available and Delta will continue to aggressively pursue their business."
McNally added that Delta also has not changed its policies on determining discounts for corporate meeting business. Those discounts, he said, remain based on air volume and market share, the latter of which is determined by both transient and group business.
One aspect of meeting air management most buyers have not abandoned is the practice of booking attendees under the terms of negotiated transient contracts. About 39 percent of respondents said they never do so, but a majority does at least part of the time, including about 16 percent who don't use any meeting fares at all.
"We use our corporate transient discounts exclusively," said Marianne Goodman, corporate travel manager at Keane Inc. of Boston. "We've analyzed the airlines' zone fares and other meeting packages and our transient rates are better on all routes."
US Airways' Lawless said this trend is highlighted by the increasing move to closed meeting and transient contracts.
"It's a big part of the program, as it's natural for the corporate meeting side to fall into that, but we're working with them in a more coordinated effort," Lawless said. "More companies are looking closely at their corporate agreements to have more joint transient and meeting programs for easier use and a better discount (Meetings Today, Feb. 26). We try to be comparable to the transient side, and if a given corporation has a certain percentage discount on transient travel, we might entertain offering it on meetings.