Buyers, Analysts Gauge Change At Strategic Travel Symposium

Despite a forecast for a continued decline in hotel rates in 2010, hoteliers will become more aggressive in collecting fees and surcharges this year, some of which are proving difficult to bundle into negotiated rates, according to an address by New York University Tisch Center associate professor Bjorn Hanson at last month's Strategic Travel Symposium in New York, an event co-sponsored by Business Travel News and the National Business Travel Association.

Hanson projected an increase in total collected fees and surcharges by U.S. hotel companies this year compared with 2009. The total, now well over one billion dollars, has steadily increased over the past decade.

Fees pose a budgeting problem for meeting planners because they are difficult to anticipate and vary even among hotels under the same brand flag, Hanson said.

"You could stay at a Marriott, Starwood or Hilton hotel one night, and stay at a different Marriott, Starwood or Hilton hotel the next night, and the fees and surcharges will be different," he said. "These are hotel by hotel, and they also come and go."

In particular, hotels are adding charges to hold travelers' bags after they check out, extra room service charges and increased or stricter cancellation and early checkout fees. On the group business side, Hanson noted a growth in master folio charges, audiovisual charges and set-up and breakdown fees for meeting rooms.

Hotels also are upping charges for such business services as received faxes to more than $5 for the first page, he said. This stems from a trend of hotels outsourcing business center operations due to declining demand.

Buyers often can't negotiate these fees because of technology limitations at the hotel. "It's really hard for hotels to bundle some services in corporate rates because the property management systems don't allow them to do accounting that way," Hanson said.

Buyers are being more successful in negotiating such business amenities as Internet access, parking and breakfast, he said.

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The U.S. economy has better than even odds of a swift recovery, which will lead to a slower but steady level of recovery for business and group travel, Economic Outlook Group chief global economist Bernard Baumohl said at the symposium's opening session.

"I think the worst is over for business travel, which came to a screeching halt in 2008 and 2009," Baumohl said. "There is a recovery underway, but there's going to be a longer lag time between when the economy comes back and how soon we'll see a recovery in business travel."

Economists are divided among three scenarios for the economy, according to Baumohl: a "double-dip" back into a recession, a drawn-out, anemic recovery and a quicker recovery. Baumohl gave the best odds, 55 percent, to the latter scenario, pointing to such metrics as recovery in manufacturing orders, capital spending and pent-up demand indicated by a boost in consumer debt.

The United States, along with Canada and Australia, will be among the quickest to recover of the developed countries, while Europe and Japan will experience a slower comeback, he said. China, India, Brazil and Peru also will have a robust recovery.

Business travel's recovery would be at a slower pace because of continued cost-cutting measures at corporations and increased reliance on such technology as remote conferencing, according to Baumohl.

Baumohl gave a slower recovery, the so-called "new normal" that would require five to 10 years to reach pre-recession levels, about one-in-three odds of occurring.

A dip back into a recession has only about a 15 percent chance of occurring, though the results would be catastrophic, he said. "It would be a shutdown in business spending and leisure travel, hotel prices would plummet, there'd be a rise in personal and business bankruptcies, joblessness would depress spending and the dollar would decline," Baumohl said.

Baumohl also cautioned about several disruptive factors that could change the odds. These include a significant uptick in domestic commercial real estate defaults and tight credit, the bursting of China's credit bubble, Greece's debt crisis spreading across Europe and inflated oil prices due to Iran's developing nuclear capabilities.

"There are clearly economic risks and geopolitical events could throw everything off-kilter," Baumohl said. "This is a year we'll have to be exceptionally vigilant and quite nimble as business managers."

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Airfares will grow, discounts will be under pressure and airlines will see steady growth in corporate revenue this year, though pricing and volumes will lag pre-recession levels in the near term, UBS aviation analyst Kevin Crissey told symposium attendees.

Corporate volume on U.S. legacy carriers in February was up around 15 percent year over year, according to UBS calculations, while corporate fares grew by only 5 percent. Though Crissey stressed that corporate air travel has not recovered, he said those volumes last month grew at an even faster rate than in January.

"We're seeing that things have certainly improved," Crissey said. "Volumes started to be up year over year in January and meaningfully up in February. After that comes fares. Fares are lagging, which is typical, but you need the volumes in order for the revenue and pricing departments to figure out that they should hold some seats back because there's actually someone to fill those seats."

Despite the year-over-year improvement in corporate fares and volume, Crissey said airline revenues derived from corporate travelers remain down 17 percent from two years ago.

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Attracting senior managers' attention to a strategic meetings management program can be challenging, but it helps when an executive receives invitations to speak at two company meetings on the same day in different states. That years-ago incident helped to fuel executives' approval of the development of an extensive meetings program at Estée Lauder Cos., executive director of travel and meeting services Cynthia Shumate told attendees.

The double invitation to a Lauder family executive helped galvanize a process that would include the creation of a calendar to ensure that planners at the company's more than two dozen brands could see where and when meetings were scheduled, Shumate told attendees at a panel on building a better strategic meetings management program. Since that incident, the company has launched several initiatives designed to capture meetings data and reduce corporate exposure.

Estée Lauder's initiatives largely sprang from the November 2004 introduction of an American Express meeting card, allowing the company to capture data surrounding meetings volume and spending throughout its then-decentralized brand structure. "That's the one number I sold the whole program on," Shumate said.

Since then, Estée Lauder has drafted standard legal language for cancellation and attrition to limit the impact of onerous damages from contracts signed by nonprofessional planners and worked to negotiate multi-meeting deals.

Fellow panelist Sheri Bonsall, vice president of corporate travel and meetings and fleet services at New Jersey insurance firm Chubb, already has developed a strategic meetings management program punctuated by a preferred meetings hotel deal with a standard contract at 10 home-state properties. The program's structure allowed it to weather a corporate decision to cancel all May 2009 meetings due to swine flu concerns.

"We recovered almost everything in attrition fees and renegotiated space," Bonsall said, adding that the cancellations also spurred Chubb to incorporate a virtual aspect to its live meetings. "We took a consultative approach and offered it at the beginning, during and after the meeting. If you don't have responsibility for it, I would suggest partnering with people who do to build a strategy. We put in policies and procedures and got the message out. We've seen no reduction in meetings, and there's a great benefit there."