Chicago - Attendees at the National Business Travel Association's International Convention & Exposition here this month publicly wrangled with the potential consequences of controversial pricing initiatives. Though it couldn't compare with the overwhelming response to the continuing spat about airline content in global distribution systems
(see story), the hot-button issue of dynamic hotel pricing elicited plenty of strong public response.
One educational session featured several sharp exchanges between hoteliers and buyers, and coincided with the release of a white paper by the NBTA hotel committee designed to raise awareness of the contentious pricing model, which allows for floating, instead of fixed, corporate negotiated rates.
During the session, Denise Lodrige-Kover, Hilton Hotels Corp. vice president of business travel sales and strategic partnership accounts, asserted that decisions on dynamic pricing should not be made without first becoming educated on the subject. "There is not enough education to make assumptions," she said. Hilton's Lodrige-Kover went on to dispel some dynamic-pricing myths, specifically that hotels were interested in pursuing dynamic pricing in order to increase revenues. She said that the dynamic-pricing model often leads to suppliers and buyers breaking even, and is more a response to the arduous request-for-proposals process. Further, she denied hotels would intentionally raise best available rates to better absorb percentage discounts. "Hotels rely upon many market segments to maximize revenues," she said. "Therefore, we cannot afford to raise BAR rates to affect one market segment. The hotel industry has high integrity." The latter elicited cheers from supplier attendees. Lastly, Lodrige-Kover tried to assure buyers that analysis of dynamic pricing was achievable, and reports that show year-over-year comparison spend between static and floating rates could be generated
Mary Bastrentaz, senior director of travel and meeting services for Accenture, followed Lodrige-Kover with a report on a dynamic-pricing pilot program she implemented in conjunction with Hilton. "In five months, there was never a huge swing in rates," Bastrentaz said. "Where the nightly rate was higher than other preferred rates, that city was in a sold-out situation." Bastrentaz said she would continue to employ and expand dynamic pricing in her hotel program. She also said that dynamic pricing simplified rate-loading.
However, the third speaker, Eric Peter, Johnson & Johnson manager of travel services, categorically reeled off why dynamic pricing was, in fact, not the answer. He rejected the claim that dynamic pricing would reduce costs, resources and time or eliminate the request-for-proposals process. He also added that budgeting for dynamic pricing would be nearly impossible and begged of the panel, "How do you audit rates?" In closing, Peter asked if dynamic pricing was good for your company, to which he replied: "We're a long, long way off." At that, the small contingent of buyers in the room erupted in applause, so much so that they needed to be quieted down. It was obvious that many buyers in the session were unswayed by Lodrige-Kover and Bastrentaz's backing of dynamic pricing.
The session was closed by Maria Chevalier, vice president of hotel relations and travel procurement services for BCD Travel, who said,"One size does not fit all. You have to ask, 'Is dynamic pricing right for me?' " Chevalier said that the strength of dynamic pricing lied in the fact that discounts would apply to a greater amount of inventory, and there would be greater access to discounted best available rates. Conversely, she said, the model was new and would take time to explain to management, and such issues as rate caps had not been discussed thoroughly, nor had a consensus been reached on the frequency of rate changes.
The NBTA hotel committee's white paper on dynamic pricing was designed to allay buyer concerns over the topic, but not force them to submit to the model. "The term dynamic pricing has quickly generated a lot of industry buzz and has even become contentious," said NBTA hotel committee chair Brian Nichols, who also serves as hotel and ground transportation manager for Deloitte Services LP. "Our goal was to cut through the hype and provide a clear, straightforward guide for travel managers to make a sound business decision."
The hotel committee also provided a primer on last-room availability. The paper puts forth a standard definition of LRA to better facilitate negotiations on the subject. "The term is so commonly used, yet often not defined, so it's important for all LRA discussions to include a clear, agreed-upon definition, "said Sam Schisler, vice chair of the hotel committee and global hotel program manager for Limited Brands.
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At the convention—which NBTA said was its largest to date, with 1,200 business travel buyers out of 5,200 attendees, and suppliers filling 100,000 square feet of exhibition space—NBTA made several announcements regarding its educational and research efforts that included enhancements to its Managed Travel Index and Benchmarking Tool, the formation of a global risk management committee and three new global events.
Currently, 150 companies are using NBTA's Managed Travel Index and Benchmarking Tool, which was introduced last year, to measure the effectiveness of their corporate travel programs through the collection of data and benchmark comparisons. In addition to the ability to benchmark program structure and policy through partnerships with Smith Travel Research and SH&E Consulting, MTI enables users to view hotel data from the top 95 metro markets in four hotel tiers and to drill down geographically within the top 25 markets, as well as graphically compare average ticket price to any U.S. carrier's ATP on any route.
"You can also revise answers to get a new score. We track every time you do that and do some research to determine best practices," said Daphne Bryant, NBTA Foundation director. Attendees were able to test the tool and its enhancements at the organization's booth.
Bryant said the organization also is in discussions with a mega agency to put 200 U.S.-based clients into the tool, which would help create a larger database.
NBTA at the conference also announced the formation of the global risk management committee, dedicated to helping members managed travel-related risks. The committee is "very important and necessary for today's travel manager," said NBTA president Suzanne Fletcher. The group will address such topics as domestic and international security and health and safety issues.
Further announcements centered on NBTA conferences that include a Corporate Travel Buyer Think Tank this September in London, the Mexico Corporate Travel Conference in January 2007 in Mexico City and a Latin American Corporate Travel and Technology Exchange in Sao Paulo, Brazil in March 2007, in partnership with the Brazilian Business Travel Association.
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Fletcher also announced a proposed bylaw change that would give suppliers a greater voice in NBTA decisions. Currently, the Allied Council president and vice president serve on the 14–person board. The NBTA president appoints the Allied Council president, who appoints the vice president. Under this proposal, supplier members would elect two of their own as board members in addition to the president and vice president, making it the first time they can vote for board representation. The board passed this proposal at its meeting in Chicago before the convention. The measure needs to be formally ratified by the direct buyer membership before it can go into effect. "We are communicating to the direct members what this actually entails," Fletcher said. "Our intention is to have a special vote between now and next year's convention for the direct members to vote on this proposal. If it passes, at next convention we will elect the two new board members."
Three travel buyers were elected to three-year terms as directors-at-large on the NBTA board during this year's election at the convention: Kari Knoll Kesler, global meetings solutions manager for Honeywell International; Shelley Lewchuk, corporate travel supervisor for Canadian Natural Resources Ltd.; and Gary Polito, corporate travel manager for Bose Corp.
Fletcher also announced the creation of the European Regional Council of Paragon, which occurred at a meeting in Frankfurt in late spring. The group is a subset of the Paragon Partnership, which is made up of 11 buyer-led national associations, with a significant number of them located in Europe. Those members, according to Hank Roeder,NBTA's vice president of domestic and global operations, "felt that, particularly with issues involving the European Union, it would be good to have an organization to focus on that under the umbrella of the partnership. The whole group discussed it and we are moving forward. I have hired a lobbyist/research person who has had some experience working for E.U. ministers in the transportation arena. She gave a report on significant issues in the European Union at that meeting. There's no chairman of that group, but NBTA acted as the secretariat for this past meeting, just as other groups in the partnership did for previous meetings. Right now, we're collecting information and looking into using the collective power of the group to try to sway decisions by European officials."
NBTA president Fletcher also has joined the board of Business for Diplomatic Action, a group focused on improving the image of U.S. business. NBTA executive director Bill Connors serves on its advisory council.
"I am so honored to be on their board," Fletcher said. "The first meeting was in February. When I walked into the room, I thought, 'Oh my gosh, this is a who's who of America.' Incredible companies and huge global names. It's an effort to deal with our image abroad, and who would be a better point person than those who are sending people out every day? The concept is nonpolitical and that's key. We need to use our corporate travelers as our diplomats and ambassadors." Fletcher said the NBTA Foundation is making a contribution to the group.
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The escalating car rental taxes that have united the major car rental providers in an opposition effort are poor tax policy and can even be detrimental to the local economies that they're supposed to help, according to a study released at the convention.
The study, prepared for Enterprise Rent-A-Car by William Gale, deputy director at The Brookings Institution, and Kim Rueben, a research associate at the Urban Institute, examined the effects of the dramatic increases in car rental taxes in recent years, particularly in those areas where local and state taxes pile on cumulatively. In Chicago, for example, renters are faced with a 17 percent total tax—a 5 percent state tax, a 6 percent metro, pier and expo tax and a 6 percent Chicago lease transaction tax, on top of a $2.75 per-rental city tax.
These taxes, however, often are without justification, according to the paper, particularly when used to finance sports stadiums and other civic projects. The paper also suggests that fixed day fees, which several municipalities and states have adopted, are not well-designed. Fixed fees effectively impose higher tax rates on cheaper rentals that are generally made by lower-income households, according to the paper.
Car rental revenue is cut by the taxes, the study showed, looking particularly at the Kansas City, Mo., market, which imposed a $4-per-day tax on rental cars. Car rentals dropped after the tax was imposed, and it even drove some renters across the Kansas state line to escape the tax, which cost Missouri revenue.
"Because it was so large, the Kansas City car rental tax offers a very clean test of the impact of such taxes on local consumers and business owners," Gale said in the paper. "The evidence indicates that the excise tax is borne by rental car customers, it significantly reduces the demand for rental cars and it shifts rental car activity from Missouri to Kansas."
Battling car rental taxes has become a top priority for NBTA, executive director Connors said. Besides bringing in major car rental companies, it also will work with members to fight regional tax issues as they arise.
The paper supported Connors' position that local companies bear the brunt of the car rental tax, since most of the business is done locally.
BNSF Railway director of strategic sourcing Carol Devine, the immediate past president of NBTA, said it's particularly evident to her company, which is based in Fort Worth, Texas, where the car rental tax rates actually exceed the base rate.
"It's the 80-20 rule," Devine said. "Eighty percent of my rentals are done in my home city, because everyone's coming to see the headquarters office."
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NBTA conferred its fourth NBTA Icon award to Marilyn Carlson Nelson, chairman and CEO of Carlson Companies. NBTA president Fletcher cited "her unrelenting commitment to promoting a new model for corporate responsibility in American businesses."
Carlson Nelson, who serves as vice chair of the U.S. Travel Advisory Group, which focuses on U.S. marketshare of international travelers, noted, "Travel, although the travelers are coming to our country, is an export, and affects the U.S. balance of trade. Secretary of Commerce Carlos Gutierrez actively is working on solving such visa problems as lines at consulates and wait times."
Previous NBTA Icon recipients were Siemens' Hanna Murphy, Hilton's Bob Dirks, and OAG's Joe Laughlin.