As The Market Turns, Hotels Reach Out To Buyers

<B> As The Market Turns, Hotels Reach Out To Buyers</B>

By Maria P. Vallejo

The pendulum is starting to swing back from seller's to buyer's market, forcing hotel companies to restructure their staff and readjust their sales and negotiating techniques to meet the increasing expectations of travel buyers.

The hospitality industry is still considered to be operating in a seller's market within a healthy U.S. economy, but with supply overtaking demand in certain markets (see story, page 22), and hotel stock prices dropping (see story, this page), travel buyers are beginning to get some bargaining leverage again. Hotels are planning to simplify and customize negotiating processes and bookings by reconfiguring sales forces and improving technology.

The revision of sales and marketing forces to handle preferred corporate transient accounts is becoming an industry trend. Some companies are regionalizing their sales and marketing teams to provide better nationwide coverage of their customers' needs, while others are increasing their staff numbers and creating new sales positions.

"There's a greater need for us to commit more resources and people to the market," said David Crowl, vice president of Four Seasons Hotels & Resorts, based in Toronto.

As hotels grow in number and technology improves, guests and travel buyers' expectations increase accordingly. They expect a greater level of personalized and expedited service. The years of long delays in answering customer questions or rerouting buyers to alternative offices are no longer acceptable. Customers expect, if not demand, a single point of contact, speedy service and improved account management.

With the significant number of mergers and acquisitions that took place last year, many hotel companies are using those opportunities to rearrange their sales force for a greater focus on corporate business. Bass Hotels & Resorts, Hilton Hotels & Resorts, Doubletree Hotels, Four Seasons, Radisson Hotels & Resorts, Omni Hotels, Prime Hospitality and Starwood Hotels & Resorts have moved their management staff into new positions and rearranged their sales organizations to better reflect these goals.

These hoteliers said they are undergoing a full transformation to meet the needs of travel buyers, who want reasonable rates, services and amenities. That's especially true now that they have endured a strong seller's market that left many feeling battered by the hotels' strong hand.

"The overall objectives for most corporations in the United States are similar," Crowl said. "They want to consolidate travel, and they want to obtain very good value for their customers and travelers."

Better rates are just around the corner because of large injections of supply in certain markets that caused occupancy to plummet and rates to follow.

"You're getting some pressure on occupancy levels, where people are beginning to negotiate very aggressively for rates," said analyst Ted Mandigo, president of Chicago-based T.R. Mandigo. "The properties that have historically had a portion of the long term markets in the midpriced areas now are losing that to newly developed long term properties that are aggressively pricing their new markets."

Low occupancy and willingness to negotiate for reduced rates commonly are associated with secondary and tertiary cities. With the new supply that entered the market and shifts in business practices, some primary business destinations--including Chicago, Houston and St. Louis--are dropping their rates.

The Chicago market represents both an overabundance of new supply and changes in business practices. About 4,000 new hotel rooms were added this year to the base supply of 30,000 rooms, Mandigo said, and another 10,000 rooms are under construction. Some conventions have not renewed their business and some major companies have relocated their offices.

Four Seasons Hotels experienced almost a 20 percent increase in corporate customers in the past year. The company restructured its sales and marketing staff so some employees work exclusively on corporate transient business. "It's been helpful for me to have one point of contact for all different properties," said Amanda Somers, Coca-Cola Enterprises Inc.'s travel specialist.

Adding four staff members will reinforce existing sales teams located in Atlanta, Chicago, Los Angeles, New York and San Francisco. The North American team has eight senior staff members.

"A lot of sales offices for years have focused on the group market and they've had a minimal number of people focused on the transient corporate market," Crowl said. "The trend for Four Seasons has been to dedicate more experienced senior people to the corporate market."

Omni Hotels, based in Irving, Texas, also added a business development team specifically designed to seek out small-to-medium-sized corporate accounts and develop initial relationships.

"We'll look at companies that produce 1,000 rooms as good customers," said Dennis Hulsing, Omni's senior vice president. "There are some companies that set their standards to 100,000 rooms, so the medium ones of 5,000 get left out."

Unlike its counterparts in the sales and marketing offices, this junior level team is dedicated to researching new and previously lost corporate accounts. They work off files on earlier customers who produced only marginal revenue for Omni and search for new ways to make them more valuable.

The company also will disperse its national sales force to reach potential customer markets without much representation. Omni opened a national sales office in San Francisco early last year. Another possible office location is Kansas City, whose accounts are currently being handled by the Chicago office.

Other future changes include separating Omni's advisory board into transient/consortia and group/meetings categories. Officials believe they will gain better insight into the specific needs and expectations of their different market groups by segmenting their advisory members, who serve a three-year term, based on their purchasing preferences. It was through this group that they learned about their clients' technological and negotiating needs.

Prime Hospitality Corp., owner of Amerisuites, Homegate Studios and Suites, and Wellesley Inns, introduced a new national sales effort and created five regional sales offices. The initiative is expected to help Prime reach 250 national accounts by the end of 1999. Offices will be located in Atlanta, Chicago, Las Vegas, New York and Washington, D.C. Office locations were chosen based on their proximity to major national accounts to provide more personal service to those accounts.

The Atlanta office, responsible for corporate accounts in the Southeast, opened last year. The remaining offices will open by February 1999. The New York office will oversee corporate and travel industry sales. The Chicago office will handle corporate customers in the Midwest and the Las Vegas office will manage Western corporate accounts.

"These initiatives reflect our primary and immediate goal of building solid relationships with every major business travel agency and travel consortia in the country," said MaryLou Pollack, Prime's vice president of national sales.

In an effort to meet the needs of corporate buyers both domestically and internationally, Hilton Hotels Corp. joined sales and marketing forces with Hilton International last year. The merger resulted in a single brand logo for global name recognition and expansion of the Hilton Honors guest programs overseas.

Last month, the company promoted three Hilton executives into the newly created positions of regional vice president of sales and marketing. The executives report to Steven Armitage, Hilton's new vice president and managing director of sales (<I>BTN,</I> Aug. 3). The executive group will focus on northeastern, southeastern and central U.S. markets.

New dedicated corporate sales and marketing staff members who can negotiate lower rates are not enough. Hotel companies are delving into the latest technologies to keep up with their customers who want to communicate, negotiate and book reservations electronically or via the Internet. Most hotel companies now are equipped with electronic mail capabilities. Buyers expect their suppliers to respond to their inquiries in a timely fashion, which in this day and age means instantly.

E-mail also is linked with another issue facing the industry--the electronic request for proposal process. As more hotels and corporations shift to the electronic RFP, e-mail becomes a necessity in transferring bidding information. Radisson is using the Lanyon Product for its RFP process this negotiating season, but offers customers the option of receiving the information they need on paper or computer disk, or via e-mail.

Following the technology trend, more hotels are concentrating their efforts on creating site links or interfaces between the hotel's Website and corporate clients' private intranets. The link or dedicated corporate site hidden behind a fire wall on the hotel's Webpage provides travelers with information specific to their corporate account, while allowing them to book reservations with their preferred rate.

Some travel buyers find such links counterproductive, because they want their travelers to book reservations through a travel agent for better data tracking. Currently, most travelers must book through a travel agent connected to a global distribution system or central reservation office to receive their negotiated corporate rate.

"It's not our preferred way of booking because we want to work with our travel agencies," said a travel manager at a company that is based in New Jersey. "When we use these links we lose the ability to research information from our reservations."

That company currently uses such links with two of its preferred hotel companies, but officials still try to persuade its travelers to book via a travel agency.

Hilton Hotels Corp. said it has eight corporate clients who will beta test dedicated corporate site links that allow preferred rate bookings through Hilton's Website. Four Seasons and Radisson also plan to create such sites for their customers. Radisson is working with a few preferred customers, such as Siemens Corp. and 3M, to create and beta test private access sites.

Last room availability also remains a concern for travel buyers. While many hotels are backing away from last room availability or reserving it for their elite customers, some companies are requiring it from their suppliers before entering a contract (<I>BTN,</I> Aug. 3). "They don't even need to bother to give us a rate unless we have last room availability," said a travel manager for a New Jersey-based company. "The cost of doing an RFP, negotiating rates and sending them to our travelers is so expensive that it's not worthwhile to do business with a hotel unless we have that guarantee."

Some hotel companies have noticed that business travel buyers are asking for last room availability on an individual property basis, making it easier to negotiate. This guarantee can help some properties with low occupancy in highly competitive markets gain more business.