Anthony Faso
Newly appointed global account director of business travel for Millennium Hotels and Resorts Anthony Faso recently spoke with Management.travelabout how buyers and hotel companies are seeking common ground in this challenging market. He touched on rate negotiations, a dynamic pricing approach and other topics.
What are you experiencing so far during the corporate rate negotiation season?
A number of companies have been flexing their muscles a bit more than others. A number really are partnering and embracing the relationships they had with their vendors, not only with hotels but also with airlines and car [rental companies], and really understanding that the relationship has been key to making it through a tough time. That is a give-and-take that you need to have to find that balance between what's good for your company and what is going to work for your vendors. The better the relationships with your clients, the more understanding there is and you don't necessarily have that tug of war with a number of companies that have just gone straight for bottom dollar. Initially, that was a tough pill to swallow because [buyers] understood that the economy was in a free-fall state. They adjusted their purchasing habits and instead of really comparing apples to apples, they were pitting hotels against each other--just looking at rooms against rooms. They weren't looking at all the value-adds, they weren't really comparing everything equally and it was really about the bottom line. Some hotels resisted at first, and that was the advantage of being in a boutique environment. If you were a boutique hotel or a smaller hotel that had the wherewithal to make the change, you were able to turn on a dime quicker. In some cases, [boutique hotels] drove the market down because essentially there were a number of smaller and midsize companies that were able to make that move [to boutique hotels]. Some [buyers from] larger companies--having the relationships on a national or global [scale]--didn't necessarily make the move as readily, but they did put pressure on their vendors simply because they understood that their travel needed to change. Their travel volume was going down, but they also needed to find more cost-effective ways of traveling. The other thing is, they weren't really able to promise any particular volume. That is where 2010 changes, because a number of large companies are consolidating their programs to be more vendor specific where they could steer some of that business--whether they will be successful in it or not is a whole other story.
How do you make sure your rates are still competitive?
We have created a dynamic pricing model where we are offering the best available rate to our corporate clients. We may negotiate a rate, but if we have a lower rate available they will be able to see that lower rate and book it. That has been a tremendous help, and it is very attractive to clients because they know they are getting a very good deal. This is done in a few other hotel companies, so it is not necessarily reinventing the wheel, but keeping competitive with what is out there is really key. The better you communicate to your clients, the better you know your customer and the customer knows you.
What are the major deal breakers?
"Green" has taken a bit of a backseat this year. In the last couple of years, it was very important. This year, it is really geared toward price point and proper price-point placement within your market. The more educated a hotelier is on his or her backyard, that puts him or her in a much better position. Value-added items that could have an impact on the overall travel for a company is definitely on the top list of agenda items. The other thing is the additional number of companies that are asking for parity in terms of the transient rate being available for groups of certain sizes. A number of meetings RFPs would be separate, but [clients] are integrating those questions into the transient RFP and they are asking if hotels will agree to offer the transient rate or guarantee it for groups of a certain size. That's not necessarily a deal breaker, but because they understand that during certain peak periods price point fluctuates so greatly, they are looking at every avenue to try and save some money. The other thing is, certain industries have more long-term business for projects or client-related projects, and that is certainly something that has become more open this year. They are asking for specific long-term rates to be locked in over a certain length of time.
Where do you expect to fall at the end of the season?
A number of companies have asked for decreases in rates, but that is really on a case-by-case basis. Expectations for a number of companies will be to stick to flat [rates] or minimal increases. Customers certainly look at how you have partnered with them over the last year, how you went into the negotiation cycle in 2008 to 2009 and how you have reacted to the drastic changes over the last 11 months. If they see hotel companies that have made adjustments over the year, have given them more availability or added value items, they take all of those things into consideration and you will be able to realize some increases from some of your key customers. There are some hotel companies that are looking at some moderate growth from 2010; not everyone is predicting doom and gloom. The big question is where the volume is going to be--looking at your prognosis of where things are going to be six months from now is very different.
What will be the long-term impacts of the changes that occurred in 2009?
Like anything else or any other downturn, that cycle will start to turn back and we are already seeing occupancy levels in New York growing right now. It really is looking at keeping that growth momentum moving forward, but then slowly growing the price point, and that is going to be something we are going to revisit next year. In many cases, clients have trimmed a lot of fat out of their organizations. The policies that have been put in place over the last 18 months may be permanent and some may not be; it depends on how short the memories are. We really need to manage relationships with clients to ensure that when the bubble bursts again they are positioned correctly. Customers understand that things will circle back: They will see their industries grow, and, as their industries grow, their travel needs will start to grow. We will start to slowly develop back into a more stable pricing environment, but it is going to take a long time for hotels to get back to the previous levels they were at.