Buyers Segment The Softening Long-Term Market

Buyers Segment The Softening Long-Term Market

By Maria P. Vallejo

The travel program at Texas Instruments this month will define a new segment of travelers--those hitting the road for the long term--and roll out a program just for them.

Until now, the Texas Instruments hotel program was "concentrating on regular corporate business travelers, not on long-term needs," said Tammy Garcia, manager of supplier strategies for the TI travel department. "We had people staying at full service hotels. Now we found a way to save money."

The change in approach is expected to reduce TI's average corporate rate in the three cities involved in the program--Dallas, Houston and San Jose--by 30 to 35 percent, and save the Dallas-based company as much as $600,000 a year. About 12 percent of its total hotel spend, amounting to $2.4 million a year, goes to stays of seven nights or more in those cities, according to Garcia.

Industry insiders said that what's happening at Texas Instruments is part of a larger trend of corporate buyers negotiating with extended stay and interim housing firms. Although these are not new products in the hospitality industry, this year they have become stronger competition for mainstream hotel companies. They offer corporations the carrot of roomier accommodations at 35 percent less cost--and buyers and their travel managers are responding.

In the past, extended stay companies were reluctant to negotiate with corporate customers and to further discount their already-low rates. But occupancy levels in the sector have been steadily declining, and now suppliers are more willing to talk.

In 1997, the average occupancy for extended stay properties was 74.7 percent; in 1998, the number declined to 71.6 percent, a fall of 4 percent, according to Smith Travel Research's 1999 report (see chart below). Upper tier occupancy averaged 77.8 percent in 1998, down from 79.6 percent in 1997, while the lower tier averaged 66.6 percent last year, down from 68.2 percent in 1997.