Starwood In Cross-Brand Effort

By Starwood In Cross-Brand Effort / July 30, 2000

Starwood In Cross-Brand Effort

As the hotel RFP process got underway for 2001, BTN hotel editor Bruce Serlen discussed the present negotiation environment with David Ogilvie, vice president of global corporate travel for Starwood Hotels & Resorts Worldwide, which includes the Sheraton, Westin, St. Regis, Four Points, W and Luxury Collection brands.

BTN: How does Starwood's being a large, multibrand company affect negotiations with clients?

David Ogilvie: Almost all of our global customers negotiate with us across all the brands. Some customers may have limited need for the St. Regis brand, for instance, but when our global account directors present to a customer, they present the total Starwood picture. In other words, we don't have any customers coming to us just as Sheraton or just as Westin. At the same time, some customers may deal locally with a specific hotel, but in our global sales organization, they're dealing with us as Starwood.

BTN: Is ensuring consistent rates, therefore, a problem?

Ogilvie: We try to ensure absolute rate integrity around the world. So that when our major corporate clients negotiate with our global sales team, the rate we quote them in whatever city around the world is the same as the rate that would be quoted to that company locally. In fact, we've worked hard to prevent situations where a travel buyer would get one rate calling the local property and another rate calling the national sales office. This doesn't mean that we discourage properties from having a relationship with companies across the road. We just insist that they maintain rate integrity.

BTN: Recently, there's been considerable rebranding of Starwood properties in a market such as Philadelphia. How do you deal with any confusion this kind of strategy might create among travel buyers, no less travelers?

Ogilvie: Down the road, this strategy will make the portfolio stronger, which is why we make the changes. But I have to admit that we caused confusion in Philadelphia. In situations like this, our approach is to communicate with travel managers in a timely way as changes occur. At the same time, we communicate to the travelers through our frequent guest program. As for whether we will renegotiate rates when a property within the portfolio in a certain market changes brands, say from a Sheraton to a Four Points or from a Sheraton to a Westin, it depends. If there are changes in the standards and services offered, yes, we would. Not all the time, because sometimes customers are happy with where their travelers are and aren't particularly concerned. But if a customer wants us to revisit it, we will.

BTN: Are more clients interested in consolidating their transient and group business for negotiating purposes?

Ogilvie: Increasingly, they're looking at what their total spend is from both the group and transient side. As a result, we're holding many more meetings with our corporate strategic partners, where we have not only the Starwood corporate transient sales people, but also the group sales people. We're all in the same room and we're looking at the big picture. We certainly look at the overall picture a lot more now than we used to. And that helps us in how we develop and quote our rates in different cities across all the brands.

BTN: What about clients interested in negotiating on the basis of total spend as opposed to room night spend alone?

Ogilvie: That's increasing too. Customers can get a lot of this data from their credit cards. However, they don't all have total compliance on their credit cards, so they're not always capturing those numbers. Then too, credit cards still don't break out the total charges on a line-by-line basis. That's something I believe is a priority and something we're working on with the credit card companies. It would be a big step in helping our corporate customers.

BTN: Last month, Starwood introduced Folio Express to provide travel buyers with full hotel folio data electronically. Doesn't this provide line-by-line hotel charges?

Ogilvie: Yes. Folio Express also will be a big help to us in determining what that total spend is. It was developed in response to travel buyers' longstanding interest in having a paperless expense reporting system for their travelers, but there is that subsidiary benefit.

BTN: Since it was rolled out, how have your clients received Folio Express?

Ogilvie: We've seen tremendous interest. As you mentioned, this is something travel buyers have wanted for a while. We beta tested it with a handful of companies in 32 of our hotels earlier in the year. It's now available in more than 100 hotels, across all our brands, and expect it will be available in all 780 hotels by year-end. The data get transmitted from the hotel and populated directly into the traveler's expense report at the company. But as of now, not all companies have expense reporting systems in place that can accept the downloaded data.

BTN: How widely used is the electronic NBTA form by your clients?

Ogilvie: About 50 percent of our clients are using the form, which we think is great. The more clients we can have using it, the better it will be for everyone. Not only will the RFPs get done in a more timely manner, but the whole process, which can be complicated, will get simplified. About 70 to 80 percent of our clients who use the form include addendums. But we can work with addendums as along as the clients are using the basic form. As the NBTA continues to refine the process, some of the information now requested in the addendums likely will be included in the core document.

BTN: How long does it take you to process RFPs?

Ogilvie: We ask companies to get their RFPs to us in a timely manner. Some already were sent by late June, but if we can get them by September or October, we'll have adequate time to get all the properties to complete whatever documentation is necessary. We ask for three to four weeks to complete RFPs. Should clients need a faster turnaround, we certainly try to accommodate them. Incidentally, all of our hotels worldwide update the information requested by the NBTA form on our Web site monthly, so that we can be sure our information is current.

BTN: How much of an issue do you have with clients missing their volume projections? How do you monitor this?

Ogilvie: Our contracts are written agreements. Clients get the rates based on achieving certain projected room night volumes. At the half-year mark, which has just passed, we look at those volumes and, if the property is experiencing room nights that are considerably lower than what was projected, we'll discuss with the client what happened. Do we increase the rate? Not necessarily. We want to have open dialogue with customers and take into account what they've been doing for us elsewhere. Perhaps there's a very good reason their travel dropped off to a particular destination in the first half of the year or they expect it to come back in the second half. Similarly, their travel in another destination has gone way up. So we don't want to make a categoric decision that just because you're down in a city, we're going to take your rate right up. We evaluate the whole partnership, but there are times when it is deemed necessary that a rate adjustment is in order.

BTN: Is the reverse of that situation also true?

Ogilvie: There have been customers who have come to us and said, "Our volume has gone up considerably to what it was. Could you please revisit the rate that was quoted," and we certainly will do that. So it can go both ways. Often the volume numbers the customer is using and our data don't match. What we do then is take both sets of data and analyze them together to come up with what we feel is an accurate picture. Remember, there are travelers who will book a property and not even mention that they work for XYZ Corp. Consequently, the customer is losing credit for that stay right away. However, if the traveler was a member of our frequent guest program and used the membership card, the stay is automatically attached to that customer, so we pick it up. That, in turn, can help corporations better understand how much business they're doing with us.

BTN: Starwood has the technology in place to allow travelers to book hotel rooms directly through their company's intranet at the negotiated rate. How does this system work?

Ogilvie: Customers can have hot links directly into our Web sites and book at the preferred rates right into our hotels. It's being used in a limited way today, but usage is going to grow. Some clients use the hot links just for information, so the traveler can go in and learn about the hotel. They then go back to whatever booking engine they're using or book with a travel counselor. They want choices. I'm not sure why, but the percentage of business travelers who book an airline on the Web is much higher than with hotels. They still may want that touchy feeling with hotels, to learn a little more about the property from an actual person at the front desk. Of course, in many cases the call is routed into a central reservation system.

BTN: In the past few years, the hotel market has favored the seller. Do you see this continuing in 2001?

Ogilvie: I'm not sure it's been totally a seller's market because there are some cities that have seen fairly large percentages of supply growth, not necessarily in upscale hotels but in the midscale segment. But even when you have supply growth in the midscale sector, it can affect people who are in the upscale brands. Then there are markets where there has been limited supply growth and continued demand growth. Also, demand in some of the bigger cities can be affected by how much convention business they're going to be doing. In fact, there are some cities in 2001 that could be softer in convention business, in which case it's going to affect the rates quoted for the transient market. Then, too, you really have to look at it as different pockets around the country and around the world. A market could be composed of submarkets. The situation could be different, for example, in midtown than at the airport.

BTN: In negotiating for gateway city hotels, how important has last room availability become?

Ogilvie: We offer last room availability to our best customers, to our true strategic partner accounts. But I want to be clear how it actually applies. If a hotel has both standard and club floor rooms, for example, we will quote a rate on the standard rooms with LRA, so it applies right up to the last room. We also will quote a rate, which obviously is higher, for the club floors that also will have LRA attached to it. LRA, however, is very much connected to anything that happens with rack in the hotel. So as long as the rack rate is open at the property, meaning it is not truly physically sold out, then we apply LRA to those room types.

BTN: Is this pressure on rooms the result of yield management at the hotels that's increasingly more effective?

Ogilvie: You're right that yield management in hotels has gotten very sophisticated in the past few years. It's something that had to happen to make sure hotel companies could continue to do well. We try to make it extremely fair for our best customers, which is why we offer them last room availability. We don't want them getting yielded out of the properties. But yield management is something that's very necessary and it is here to stay. Obviously, we are going to continue to use it.

BTN: Are you seeing increased interest in negotiating for blocks of rooms?

Ogilvie: Many of our corporate customers, particularly in cities that have high demand, are looking at room blocks. Consequently, we are working with them to offer this. It can be three, four or five rooms a night. It varies by customer. Typically, when we do a block, it's with a 48-hour cut-off. So up until 48 hours prior to arrival, those three, four or five rooms are available to that customer. Usually, it's for every night. Certainly in some cities it's not as much of a requirement to have it every night. Most often, travel buyers are looking to have it for those peak nights of Tuesday and Wednesday.

BTN: You've mentioned your frequent guest program a number of times. What's the advantage that this program offers travel buyers?

Ogilvie: We work with all our companies to enroll their frequent travelers into the Starwood Preferred Guest program. Indeed, we place a lot of importance on making sure that as many of these travelers as possible are part of the corporate preferred program, which is a level of the card. Most companies are responsive to us wanting to enroll travelers. The biggest benefit is that when we issue a card to a corporate traveler, that number is tied into the corporate rate. It's another way we make sure the company is getting credit for all the travel it's doing with us.

It also ensures the traveler is getting the right rate. When the traveler then stays at a Starwood property on leisure travel--paying for the visit as opposed to using points--the company gets credit as well because it's reflected in the company's total spend, which we use in determining the kind of negotiated rates we can quote that company. In fact, for most of our corporate accounts, we offer special leisure rates to attract their travelers to our hotels on their leisure time. Consequently, it's to travel buyers' advantage to have their travelers stay at our properties on vacation.

BTN: Now that high-speed Internet access is becoming a standard in guest rooms for business travelers, what do you see as the next wave of hotel technology that will be geared to this traveler?

Ogilvie: As we're out talking to customers, they're excited about remote checkins, meaning that we can handle checkin and key issuing and print out a bill from remote locations. As a result, we're developing a plan right now and expect to launch an initiative by year-end. The remote location could be an airport bus as the traveler is going into the hotel or it could be in the lobby though not at the front desk. There are many ways you can do remote, so our people are looking at different variations. Kiosks are another option, but we haven't decided yet if we'll have people available at different locations to take guests through the process. Much of this is brand-driven, of course. At a St. Regis, for example, you still want that personalized attention of a traditional checkin. Ironically, these travelers are often high-tech people, but when it comes to hotels they're paying for the personal touch.

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