Buyers Diving To New Depths At The Negotiating Table

<B> Buyers Diving To New Depths At The Negotiating Table</B>

By Cheryl Rosen

In the first hotel negotiating season for the new century, travel buyers appear to be bringing a spirit of adventure to the hallowed--and harrowing--hotel RFP process. The nation's largest travel buyer, IBM, has found a whole new group of hotels with which to negotiate, and is talking not only to national hotel chains and individual properties, but also to hotel management companies that own hotels across the country. With arguably the most technological of travel programs, meanwhile, Charles Schwab's Bob Grant is moving to mandates, convinced that the savings a well-managed hotel portfolio will yield will match those he has wrestled from air suppliers.

And beyond the pond, one European travel manager is avoiding the end-of-the-year bidding frenzy by extending his hotel contracts through June 2000, while moving his car rental negotiations back to October. From now on, his hotel program will run from July 1 to June 30, and his car program will run Oct. 1 to Sept. 30--allowing him to focus on just one sector per quarter.

At IBM, hotel program global leader Stella Bugtas described the idea of negotiating with hotel management companies as a "pilot program" to test a concept she hopes will ease the annual onslaught of RFPs and hold down costs. In putting together its annual hotel program, IBM traditionally begins at the national chain level, where account managers pull together bids from local properties in the 200 cities where Big Blue's hotel spend is the highest.

"What I'm going to do differently this year is to also identify the top three hotel management companies, where one will have maybe 100 hotels in its portfolio, including Marriotts and Holiday Inns and Hiltons, for example. I have three weeks to do the negotiations for about 1,000 hotels, and we want to see if we can do better in terms of rates and also speed up the process."

"This is the first time I've heard about this idea, but I think it would be a great advantage to us as well as to corporate buyers," said Jim Miller, vice president of sales for John Q. Hammons Hotels Inc., which owns and operates 50 properties flying the flags of nine different franchises in 36 cities. "As a franchisee, the hotel companies ask us to submit a discount for their top accounts, but that doesn't guarantee us any volume. Dealing with customers directly, though, we'll be able to look at the overall picture of the corporation and provide a discount across the board as a return for volume across the board. "

But another management company executive was far less sure: "Negotiating with management companies would be outrageously confusing--who wants to remember that the Hilton in one town is operated by one company and the Hilton in another is operated by someone else? Most of our hotels are decentralized and have their own businesses to run, and we would never force a general manager into a deal he was not comfortable with, so dealing with us would not be any different from dealing through the franchise company. And national chains are set up to handle national accounts, where we really are not."

Meanwhile, the European travel manager is "avoiding the mad panic rush of the traditional negotiating season and trying to spread the load" by shifting his negotiations to the second quarter of 2000. He already has negotiated car rental contracts, which will take effect Q4 1999. "Both ways I'm avoiding Y2K, spreading the bid process around," he said.

He's not negotiating air contracts at all. "Peter Drucker notes that doing deals is exciting, sexy and fun, and that's why there are so many deals. My belief is that in Europe, we're better off buying spot in the market at the best possible rate than being tied to delivering a certain volume agreed upon in advance. We'll identify the lowest-cost supplier on each trip and use creative ticketing--back-to-backs, hidden cities-- whatever we can to hold the costs down."

Spreading out negotiations through the year is "a fabulous idea," said Mary Lou Pollack, national sales vice president for Prime Hospitality Corp., owner of AmeriSuites and Wellesley Inns and Suites. "We get decimated here in September, where we might get 10 RFPs from major customers in a single day, all due back in two weeks. Moving the negotiations would get him better service and better pricing, because we'd have a little more time to go back and forth with the individual properties and with him."

At Charles Schwab & Co Inc. in San Francisco, vice president of travel and food services management Bob Grant will focus in 2000 not only on the contract for his hotel program, but also on the fulfillment of that contract.

"My focus is to corral hotel bookings, and I'll have that under control by the end of this year. I'm going to run a new Hotel Opportunity Report that will show anyone who has booked a trip but not a hotel, and I'll send an e-mail to everyone asking where they plan to stay."

Travelers headed for educational forums will be allowed to stay in conference hotels, but Grant "will intervene in the T&E process to be sure that travelers who just want to stay in a non-preferred hotel are not reimbursed."

And does he really think such a mandate is possible in the most difficult segment to enforce? "Oh, I know it will happen," he said. With Schwab already moving more than 80 percent of its air to preferred carriers, 40 percent of its bookings to online and 91 percent of its tickets to electronic ones, "There's more money on the table in booking hotels than anywhere else in the travel program. And as a CTD, Schwab is losing hotel commissions as well as market share every time a traveler checks into a hotel he has not booked through us.