Buyer's Market Calls For Hotel Payback

<B>Buyer's Market Calls For Hotel Payback</B>

Some corporate travel managers may view the current slowdown in both the economy and in business travel as an opportunity to extract sizeable discounts and other services and amenities from hotels in their top travel destinations. In particular, hotels perceived to have been engaged in gouging over the past several years immediately come to mind for "payback."

It is important for corporate travel managers to have long memories in order to avoid those properties that sought short-term gain at the expense of long-term relationships. Pricing at what the market will bear will improve the bottom line of the hotels' current month, quarter or year. However, consistent occupancy with stable, long-term corporate business reduces risk and avoids wide swings in occupancy and earnings, and is the type of property with which most corporate travel managers should prefer to work.

The shift from a seller's market to a buyer's market does indeed call for payback to certain hotels. The hotels that travel buyers need to pay back are their preferred hotels that did not exploit the seller's market that has prevailed over the past several years. These are the hotels that worked with them to limit rate increases and accommodate their travelers, despite chronically limited inventory due to extremely high demand. Even if their room night volumes are half of what they were previously, corporate travel managers must direct as much of what business remains to those hotels that have supported them and did not close out their rates and "yield out" their travelers. Travel buyers should redouble their efforts and work with their hotel sales managers to drive their travelers to these preferred hotels and not be seduced by the lure of deeply discounted rates from hotels that only last fall, during RFP season, steeply raised rates to unprecedented levels.

This payback philosophy is a critical component of the relationship between corporate travel managers and hotel sales managers. In turn, the relationship is one of the most potentially valuable intangible assets of either corporate travel managers or hotel sales managers, since it is the depth and strength of these relationships that determine, in part, the success of the corporate travel managers, their preferred hotel programs and the hotel sales managers. In absence of a good working relationship with hotel sales managers, corporate travel managers are at the mercy of the laws of supply and demand where scarce rooms are priced at what the market will bear. However, good working relationships with hotel sales managers, either at the property or national sales levels, can assist corporate travel managers in limiting annual rate increases, providing upgrades for VIPs and securing rooms for travelers during citywide conventions.

Therefore, now is the time to pay back those long-time, loyal preferred hotels and ignore the overtures of other hotels offering to cut extraordinary deals now that business travel has slowed. Corporate travel managers who practice this philosophy and work to develop and strengthen their hotel supplier relationships will reap the rewards of a much stronger hotel program when the pendulum inevitably swings back to a seller's market.

<I>Rick Wakida, the U.S. travel manager for Vodafone Americas Asia Region, based in San Francisco, is the immediate past chairman of the NBTA hotel committee.