Availability Key In '01 - 2001-01-15

<B>Availability Key In '01</B>
<I>Hotel Negotiators: Data Better, Demand Up</I>

By Bruce Serlen

Troubling signs of an economic downturn notwithstanding, hotel sales executives last week reported that the recently concluded negotiations for 2001 rates were marked by continued strong demand for coverage in key cities--to the point where availability often took precedence over rates. Accordingly, interest in room allotments was up considerably, with clients frequently forced to include more properties in a destination than they might have otherwise. Similarly, sources reported more negotiation at the local property level--as opposed to the national or even global level--as travel buyers sought assurances that the rooms they needed would be available to their travelers.

Not that rates weren't hotly negotiated in their own right. In fact, many buyers still came to the table with set-percentage discounts off the consortia rate or standard corporate rate.

Thanks to improved use of data collection technology, hotel executives also said travel managers were much more knowledgeable than before as to their travelers' arrival patterns, total spend, etc., and were prepared to use this data to their negotiating advantage.

"Both we and the customer refined our technology during the past year, so the quality of the data was stronger," said David Ogilvie, vice president of global corporate travel for Starwood Hotels & Resorts Worldwide.

Concerns about the economy may have created a false expectation. "Given all the talk about recession, many customers seemed surprised at how much of a seller's market it still is," said Kevin Kelly, vice president of business travel for Wyndham International. "In fact, some customers were asked to accept healthy rate increases, making up for increases in the preceding years which were lower than the market would bear."

Much depended on the specific city involved. "For the major U.S. markets, availability was such a huge issue in 2000 that travel buyers came into the negotiating process for 2001 much more aware and determined to get the room nights they needed," said Peter Strebel, vice president of marketing for Omni Hotels. "Clearly, availability midweek was a key issue again in such cities as New York, Boston, Chicago and San Francisco," he said. "But even in cities not usually thought of as peak business destinations, hotels could sell out consistently, if the location was truly desirable for these travelers." As an example, Strebel cited North Denver's concentration of high-tech companies.

Granted, new supply came online in some of these markets during 2000, but not enough to make an appreciable difference in the supply-demand equation. "Buyers were still surprised at suppliers' ability to drive rate," Kelly said.

Other hotel executives saw two trends operating, each of which affected price and availability. "On the macro level, supply and demand were a bit out of kilter, with supply growth greater than the growth in demand," said Allan Lockhart Kane, vice president of worldwide sales for Choice Hotels International.

But from the micro standpoint, there still were niche markets, such as New York, where demand increased appreciably, but supply didn't. "Up until now, the economy can be up, the economy can be down, and it hasn't mattered in a market like New York," Kane said.

At multibrand chains, the tight market frequently caused clients to increase the number of properties in their programs. "Location was usually the driver here," Ogilvie said. "In some cases, it meant using more properties within a certain brand; in others, it meant using more of the brands."

Because of their access to more sophisticated data, travel managers had a much more accurate sense of their real needs this negotiating season than previously. "It may have been the result of mandating a corporate credit card or using a mandated travel policy or travel agency, with access to the reports they provide, but clients came to the negotiating table with better information," said Steve Houser, vice president of sales and marketing at Swiss&ocirc;tel Hotels & Resorts. "This was good for us, as it gave us a better picture of clients' ability to control and deliver room nights."

Credit card data has become especially crucial. "Buyers have become much more proficient at analyzing this data, particularly in destinations that they use frequently," said Sedat Nemli, general manager of U.S. sales for Kempinski Hotels & Resorts. "As a result, they can anticipate their travelers' travel patterns--and actual spend--in that destination much more efficiently, so the volume projections are more likely to be accurate." Travel managers whose travelers arrive on Sunday, for example, were in a much better negotiating position than those whose travelers arrive two days later.

Availability aside, price remained an issue in many negotiations. "Maybe because the economy is beginning to tighten up, companies are looking at their pocketbooks more closely. Buyers seemed to be more focused on their budgets," said Christine McNerney, Choice director of travel industry sales.

"Possibly because they were more knowledgeable about their needs, they often knew the rate they were looking for," she said. Also contributing to this mindset might have been the trend in recent years toward centralized procurement at many companies, where travel is purchased in the same way other commodities are acquired.

As part of this same buyer mindset, Kane and McNerney reported thatmore customers focused on negotiating for value-added amenities, which they could use, in part, to offset rate increases.

"Complimentary breakfast, airport shuttles and free local telephone calls were among the most frequently requested of these," Kane said.

Deals negotiated at the local property level grew in importance. "More small companies, in particular, realized they needed to consolidate their spending, so they can leverage, say, 50 to 250 room nights at an individual hotel," Houser said. "In this way, they could guarantee that they were paying a reasonable rate and have access to rooms during the high demand periods."

Given the overall negotiating environment buyers for 2001, hotel executives weren't surprised at the rise in interest in room allotments/room blocks. Terming the increase in the number of such requests as "significant," Houser said Swiss&ocirc;tel only negotiated these allotments to accounts that deliver room nights all year long, "rather than just peak season."

Typically, such room blocks are releasable on 48 hours' notice. "We recognize that clients have availability needs and that we have revenue needs, so we're happy to negotiate these arrangements where it makes sense," Strebel said.

The block could be as small as one or two rooms a night. "Or it could consist of five rooms," Ogilvie said. "There was also flexibility. A block, for example, might include both standard and club floor rooms."

Kelly, however, disagreed. He described room blocks as a formal lease commitment on the rooms and, therefore, the rooms are not releasable. "There may have been some initial interest on the buyers' part, but it means filling those rooms night in and night out," he said. Buyers also need staff to monitor the process, which "can be more complicated than it sounds."

The economy has been strong for so many years, it was hard for buyers and sellers to know if the tide really was turning. "The good times have gone on for so long, it may only be from hindsight that we know that the turning point actually had come," Strebel said.