Denise Lodrige-Kover
Managed travel accounts face another year of higher hotel rates as travel demand stays strong. Hilton Hotels Corp. is one company exploring dynamic corporate pricing models during the current request-for-proposals cycle. Management.travelrecently spoke with Denise Lodrige-Kover, Hilton vice president of business travel sales and strategic partnership accounts, about relationships with managed travel programs. An excerpt follows.
Given Hilton's interest in dynamic pricing, in which negotiated prices represent discounts off floating best available rates rather than static rates, some suggest that business travelers should consider booking hotels earlier, á la the traditional strategy when looking at airline pricing. Is that a valid point?
No, it really is not valid. Most business travel trends are that travelers book two or three weeks in advance. Or maybe one week in advance. It all depends on market conditions at the time. The rate is going to be determined on what is happening in the marketplace, whether there is high demand, and so forth. But it really does not mean that if you call two weeks in advance you will get a better rate or if you call one day in advance you will get a worse rate. It depends on the rate of the day. Sometimes it works out, and sometimes it does not. It is 50-50. So you do not have to change your booking behavior at all. It is not like how the airlines used to be, when you had to hurry up and call in advance. What accounts need to do is educate their travelers that they are working in concert with Hilton, and at these hotels, the rate will float. A lot of people think the travelers won't understand this. Some of them won't. But the majority of travel that takes place today already is in a dynamic pricing environment. If you buy our BAR rate, or our AARP rate, or our AAA rate, all these rates fluctuate. A good percentage of our business travel sales business is in a floating environment. It is not as foreign to travelers as some assume. Travelers adapt to it very well and are pretty savvy today. In our beta tests, we did not have challenges with that at all.
What lessons have buyers and suppliers brought to the RFP process this year to make it more beneficial for both sides, and is there any appetite for multi-year deals so the cycle does not have to be repeated every year?
Some out there are beta testing dynamic pricing as a way to shorten the RFP cycle--shorten, not eliminate. RFP season starts in about June. It used to start in September or October, but it keeps moving up. It goes all the way until even the first quarter when you may still be negotiating with people. Now you are into March or April, and at the same time, you are preparing for the next RFP process, because there is a lot of preparation work that needs to be done ... We shy away from two-year deals on the business travel sales side. The marketplace changes quite a bit, year to year. Our customer base changes every year, as well. And economics obviously play into it. We are not ready to forecast our revenues for the following year at that point. And we like to understand the big strategic picture of every customer that we deal with. So there are multiple factors that can change. We always want to deal in fair market conditions of today.
We have heard of corporate accounts working with their preferred hotel chains to guarantee availability in the event of emergenciesas part of risk management planning. Does Hilton work with clients in that manner?
We don't. Our customers have talked to us about that, but our perspective is that when a disaster happens, you never know what the need is going to be. For example, in New Orleans, FEMA needed that building. It was extremely important for the government to get it. So we do not like to guarantee because you do not know what the disaster is going to be. You don't know what the immediate need is going to be, beyond making sure the emergency crews are being taken care of. So, we do help in a disaster, field everyone's calls, etc., but we do not make guarantees.
Given Hilton's increasing focus on overseas markets, how are you helping larger clients develop global programs?
We just merged with our international division, Hilton International, and are working with a lot of our customers now on a global basis. We did, in the past, have a number of global agreements, but it was just through alliances. It makes it easier for us to do business together now because we are not two separate companies. There are a lot of global programs out there, and we are collaborating with our international division on a daily basis. The more you can consolidate a program, the more benefit it is to a company. Certainly, location plays an important part in the hotel business. Everybody knows that. But it is also being able to offer price points that meet their needs. We believe we are strategically complete now, and we are looking at international developments big time. We will be taking our Hamptons, our Homewoods, our Hilton Garden Inns, our Embassies and our Doubletrees all overseas. We have a lot in the pipeline domestically, and now we are making that happen overseas. [Corporations] work on travel management programs just as much overseas as they do here.
What other methods does Hilton employ to enrich relationships with managed travel programs?
You can take people from being tactical to strategic, but it is not real easy to do overnight. It is something we impart upon our national sales team: Be strategic with the customers and work in collaboration. We have taken it one step further and formed a formal strategic account management program. We have five people deployed against some of our accounts that are important to the financial health of our company. They have the ability to move market share and we are always looking for ways to save money together by working across the enterprise. While travel certainly is one component, we are working in all areas. It could be in the diversity area, or the technology area, the legal area or the procurement/supply management area. It is a great program that has been doing extremely well.