Margaret Bowler, HRG (5Q Interview)

Hogg Robinson Group global director of hotel relations Margaret Bowler recently spoke with Management.travelabout the lodging industry's gradual climb to higher worldwide occupancies and implications for the corporate travel industry. She discussed revived hotel yield management techniques, including renewed use of minimum-stay requirements and other restrictions, as well as expectations for 2011 rate negotiations and other industry trends.

Hotel company executives recently have said that they expect rates to soon increase. How would this impact corporate accounts?

We have always said 2010 was going to be the year of change--at what speed we didn't know. That was very much dependent on where the market went in regard to occupancies. What we have seen in a lot of cities around the world is that occupancies are stabilizing, which means hotels have the ability to use their yield management systems. Therefore, things like minimum-stay restrictions slip in and rates get closed. In effect, corporate travelers may be staying at a preferred hotel, but at what price? In 2009, we saw some yielding coming in toward the fourth quarter, but there was no consistency to it. Things definitely seem to have turned the corner. Although a lot of corporates have a locked-in price for this year, [the issue] is whether or not they get availability and how much availability they get at that price because it will be on room nights. There are things that hotels do--like minimum-stay restrictions--so if you want to book Monday, Tuesday and Wednesday, they will give you your rate, but if you want two days, you're not going to get it. We are definitely seeing availability getting tighter and hotels adjusting their pricing.

What are you expecting for the 2011 negotiation cycle?

[Clients] may have to add additional properties in order to get the availability and the room type at the rate they want to pay. Others may have to pay increases, but it's really still too early to say what is going to happen in 2011. But if you look at what has been going on for the last 18 months, obviously [hotels] have lost a lot on average price so they are going to be pushing for increases. There is a lot of ground to gain, but it's all about supply and demand. Right now, corporates are still benchmarking. They still want to check that they have the best prices. It's only certain markets that are beginning to pick up; others are still soft and corporates will continue to review the prices that they have and that they are achieving what they should be. It's an ongoing process, but next year, absolutely, the hotels are going to be looking to increase price. At what level, who knows?

Are corporate clients returning to the luxury segment?

All markets have been affected and rates have obviously come down, but they haven't come down anywhere near what happened after Sept. 11. They have all learned the lesson that if you are offering a service with a higher staff-to-guest ratio you cannot compete with a three-star hotel. Now, there were special prices negotiated for corporate bits of volume, but apart from that the bar rates haven't dropped considerably. As for all other hotel types, hotel occupancies are picking up. They have the ability to increase rates as well. Until December of this year, corporates will do OK just as long as they can get availability, but that is where the hotels will start to use the minimum-stay restrictions. You see [room] upgrading in hotels, but the issue there is that, from the corporate point of view, they obviously want the best price. When you actually get the traveler at the desk, they think, 'Well, that's marvelous, I am really important and I am going to take that.' The issue now is to get their expenses paid. Hotels do still upsell or offer upgrades to an executive deluxe room suite or whatever it is, but these aren't things that are being endorsed by the corporates--it is ultimately costing the company more money.

Has the rate loading process improved this year?

It's the same old, same old. Some do it very well but there are still some issues with rate loading and hotels loading incorrect rates into global distribution systems. It is something that the corporates still need to look at because there is this misconception that the GDS holds all of the rates; it doesn't. The GDS basically pulls rates from all of the hotel companies' different systems, so it is very much down to the individual hotel groups to load correctly. Given that more business travel is done on self-booking tools, when [hotels] actually load a rate and put in the description, they need to make it consistent because some hotels put in rates that say 'nice view.' Who cares? Is it single or double? Is it nonrefundable? There are more restricted rates loaded and corporates won't be able to see them. Also, as some are now booking [restricted rates] to get the cheaper price, travelers need to understand that once they put their card in, that money is gone. There's also the issue of what we call squatter rates. If I was a hotel group working with a corporate, and they only selected two of my hotels, because I have the rate-loading information I could put rates into the system to appear that they are for a company's preferred hotel when in fact they are not. The only change appears to be that Amadeus seems to be taking it a little bit more seriously. We were asking the GDSs, 'If we give you a corporate rate program, why can't you limit who is not allowed to load?' And of course the GDSs really don't care because all they are interested in is the number of bookings that were made.

Some hotel companies announced plans to drop some properties from their portfolios, causing those properties to undergo rebranding. In other cases, hotel companies have sold properties. How do these activities impact corporate programs?

It doesn't so much. If I have hotels in a program, a corporate will select that hotel by location and price--whether it is branded one thing or another, it doesn't tend to make a difference. If it's not smooth, the travelers may turn up expecting a Hilton and it's actually not; that's up to the hotel group to communicate so that systems can be updated. The only issue would be if a hotel is closing down and it can't be booked anymore. From the consumer point of view, if they've got a Starwood Hotels & Resorts reward card and not one from Marriott International, the driver is for the individual traveler, but not so much for the corporate. This whole rewards culture of travelers, that's not really a driver for putting it into the program. It is something that supports the program, but it really shouldn't be the driver as to where people stay.