Buyers Grappling With Poor Data In '04 Hotel Negotiations

Travel buyers' ability to prove they have shifted marketshare to preferred hotels—while crucial in 2004 as they angle for the most favorable rates—remains problematic due to the inconsistent quality of the data they receive.

Across the spectrum of managed travel, data accuracy is hardly a new issue, but up to now the most intense focus has been on the airline side. The sense among buyers and hotels, however, is that, fueled by market conditions, 2004 will be the year the quality of hotel data becomes a major concern.

"We get a lot of questions about moving marketshare and about compliance, but the data that is used is not always accurate," said Christi Hedrick-Waters, preferred hotel program coordinator at Plano, Texas-based EDS, noting that hotels often draw on flawed market intelligence as a resource. "As a buyer, we use those reports as a guideline, but they're not the Bible. In fact, there are a lot of reports out there that hotels focus on, but the information they contain can be questionable."

The discrepancy can be significant. "Hotels will tell us they're looking at a report that says hotel X is getting X volume from us," said Jo Ann Gallardo, hotel and meeting coordinator for Dell Computer. "Yet, we'll really be surprised because when we pull our own reports, the numbers can be completely off. It can be like night and day."

According to Andrew Menkes, president and CEO of Partnership Travel Consulting, the issue facing the industry head on in 2004 is that there is no clearinghouse for hotels as there is for airlines. "There's simply no such thing as an ARC for hotels, nor is there a marketing information data tape or third-party aggregator, such as Prism," he said. "As a result, carriers can identify to some degree how much marketshare they are getting versus the other guys, which hotels cannot."

Without verifiable data based on 2003 production, hotels say their hands are tied in negotiations for 2004. "Access to reliable data is critical in order for a hotel to make a decision on rate," said John Gillespie, director of national accounts for Hyatt Hotels & Resorts. "Buyers may have either corporate card or agency data, but we have our own internal data as well."

Not surprisingly, in today's market when absolute room night volumes are down, these data are marketshare based. In other words, when buyers move marketshare to certain hotels in a market, they are stealing it from competing hotels. "It's data that a number of third parties supply to us," Gillespie said.

He acknowledged, however, that a lot of the available data are faulty and recommended caution. "Because there are so many resources providing various numbers right now, buyers need to view it accordingly. The bottom line is that all the parties involved—including the agency, hotel company and corporation—need to share the data, so each party can make an informed decision for 2004," Gillespie said.

Buyers tend to distinguish between agency data, which are booked data, and corporate card data, which are consumed data. Unfortunately, the gap that exists between the two also can be significant. "We'll look at credit card data just to get a sense of the numbers, but base our analysis for next year primarily on agency data," Dell's Gallardo said. "Otherwise, the frustration level can be too high because the numbers just won't jibe."

An added issue with agency data for many buyers is that not all eligible bookings are made through the approved agency. "Consequently, marketshare might only be measurable as little as 50 percent of the time," Menkes said.

Complicating the situation for such buyers as Hedrick-Waters and Gallardo, is that their programs are not mandated, making hotels less certain the projected room nights will materialize. According to Hedrick-Waters, however, the correlation between mandates and compliance is never a given. "Our program may not be mandated, but we've had high compliance in 2003, higher than at some companies where the program is mandated," she said.

Similarly for Gallardo, Dell does not make room night commitments to preferred hotels. When hotels question what guarantees they have, she poses a challenge to them. "We invite the hotel national reps to come into our offices to present to the agents as a way of driving compliance. They are even welcome to customize Web sites for our directory," she said, adding that very few sales managers take her up on the offer.

Added EDS' Hedrick-Waters: "What will really make volume projections meaningful in 2004 is a buyer's willingness to share the right information with hotels and, ultimately, move marketshare."

For Eric Boulter, senior industry manager for travel at PepsiCo, the process starts with the buyer getting a handle on the number of room nights that realistically can be delivered in that market. Questions of rate and amenities are secondary. "Our goal is to come up with the amenities and the right price, but only at the right room quantity that we feel we can deliver in that market to that property," he said. "That's where we focus as opposed to, say, getting the absolute best price."

While better data helps prove shifts in marketshare, such buyers as Terry Sullo, manager of travel and meeting services for Akamai Technologies, also are mindful that the current weak environment for business travel eventually will rebound. Accurate data still will be important, but hotels again will hold the upper hand. They will not have the excess inventory they do now, and demand generally once again may outstrip supply. "Everything is cyclical. After you've been through a couple of cycles, you realize how important it is to work with your hotel partners for the long term," she said.

As hotel companies seek to provide value-added extras to their best customers, improved reporting is one of the options they cite. "We're really trying to find new ways to work with corporations," David Ogilvie, vice president of global corporate travel for Starwood Hotels & Resorts Worldwide, told an industry gathering this spring. "Buyers aren't alone in seeking different business solutions. For example, we have a whole team of technology people who work closely with the business people to develop ways to deliver data more effectively."

Specifically regarding volume projections and marketshare, Ogilvie pointed out that requests for proposals containing these projections do not constitute a legal contract. "There's nothing in this document that truly binds either the corporation or the hotel to do certain things. It is an agreement," he said. "Hopefully, when you work with a corporation that is a good partner, they are being realistic in what they tell you they intend to produce in a given location." Ogilvie added that, regardless of whether formal mandates exist in their policies, most companies Starwood works with meet their volume projections.

Yet, hotel companies hardly are acting out of altruism. "We work closely with accounts to understand better their total business. We want to understand what share we've enjoyed in the past and where we can take it today," said Steve Armitage, senior vice president of sales for Hilton Hotels Corp.

There's no question that the subject of marketshare enters these discussions. "Yes, we're interested in the ability of our corporate accounts to manage travel policy and their placement of business," he said.

Mindful of the considerable technology resources large hotel companies have at their disposal, consultant Menkes believes the quality of data hotels provide to their clients will improve in the near term, assuming buyers keep the hotels' feet to the fire, "but nothing will happen overnight," he said.