Buyers Hit Up Hotels For Value-Added Amenities

Value-added amenities are playing a more significant role in hotel negotiations this year than in years past, with travel buyers and hotel national sales managers last week agreeing that value-adds increasingly compete with room rate as the number-one topic on the table.

Underlying the shift in priorities this year, negotiated rates for 2003 are expected to be flat with, or actually decrease from, 2002 rates. With further leverage on rate unlikely, buyers have focused on value-adds—which include complimentary shuttle service and waiving high-speed Internet access fees and local telephone call charges—as an area for further possible savings.

"There's much more talk about these things upfront than there used to be," said Kevin Maguire, travel manager at Tokyo Electron America in Austin, Texas. "Back in 1999 and 2000, they just weren't on the bargaining table. In fact, hotels held firm on the charges because they saw them as a way of generating extra revenue. Now they're much more front and center, a real sweetener." Waiving high-speed Internet access fees probably is the most sought-after value-add for Maguire's travelers. "We're a technology company," he said, "so people want the high-speed to get their e-mail more easily."

At AMS, a Fairfax, Va.-based information technology consulting firm, the emphasis on hotel value-adds is a way of saving money in another aspect of the travel program. "Complimentary shuttle service between the hotel and our major offices is the value-add we're bringing up first when it's clear there's no more leverage on rate," said Karen VanBuskirk, senior principal and travel manager. "Flexible shuttle service is important because it helps us in our effort to reduce the number of rental cars our travelers book, thereby reducing overall costs."

Hotel operators view the shift as a positive development. "From what we've seen early on this season, there's been much more discussion about the value-adds," said Ty Helms, vice president of sales for Hyatt Hotels Corp. "In fact, in many cases, it appears buyers want to talk about the value-adds first and then focus in on—and settle—the price."

Buyers know they have more leverage in this market than they had in the past. "Customers are asking, 'What more can you do for us?' " said Christopher Cope, Best Western International managing director of worldwide sales for North America. "In the past, you'd see a lot of our properties offering nothing more than their standard corporate rate, while today they understand they need to be much more aggressive in their pricing. This includes promoting the value-added amenities because they're things travel managers are looking to leverage."

According to Cope, buyers who use midprice hotels are the ones most likely to be concerned with reining in the "uncontrollable costs" of managing a hotel program. "Especially when budgets are closely scrutinized, buyers want to know they have a handle on the incremental costs for things like phone calls and breakfast," he said.

Hyatt and other hotel companies actually prefer negotiating on this basis. "You know all of the issues are on the table this way and can factor them in when you're quoting a firm rate," Helms said. The buyer requests he has heard most often have been waiving Internet, phone and early departure fees.

At Best Western, many of the most sought-after value-adds were included in the Best Request quality assurance program that the membership association implemented last year. Included were such items as free local telephone calls and waiving charges to use a credit card to make a call, as well as complimentary breakfast and providing in-room coffee makers and irons. "All else being equal, providing these things as brand standards should give us the edge over competitors in the midprice segment that still charge for them," Cope said.

For buyers using the National Business Travel Association's electronic request for proposal form this year, the core pricing module includes a list of value-adds and asks hotels which ones they provide for free. "Travel managers can use this list as a starting point when it comes to negotiations," said Peggy Lee, global travel and marketing manager at SGI in Mountain View, Calif., who is NBTA hotel committee vice chairman.

While they don't discount the growing importance of value-adds today, buyers also confirm that in the final analysis rate is still a primary driver in negotiations. "Value-adds can be important to travelers, but can they make or break a deal?" asked Colleen Guhin, global travel manager for On Semiconductor in Phoenix, Ariz. "Frankly, I'd rather have the hotels take the cost of all these extras and drop my negotiated rate further." Typically, not every traveler takes advantage of a particular value-add. "With a lower rate, every traveler who stays at the hotel can benefit," Guhin said. "After all, free breakfast or shuttle service aren't necessarily things travelers all use consistently."

Once value-adds are negotiated, buyers also cannot assume travelers easily can find out to which ones they are entitled. "Typically, the room type description for many hotels in the global distribution system is limited," said Lisa Bliss, manager of hotel programs for Boeing in Tukwila, Wash. "Consequently, the value-added amenities often aren't included. We've negotiated complimentary breakfast at some of our hotels, for example, even though it's not their standard, but they've revised that room type description in the GDS to include that fact."

In most cases, hotels have not included consistently the information in the room type description. "Buyers are not always communicating it effectively to their agencies and the agencies aren't always knowledgeable enough to ask the right questions," she said. Bliss raised a related issue that affects larger hotel programs in particular, programs that might involve hundreds of properties in different destinations. "Except for travelers who book the same few hotels over and over, it can be a challenge for them to remember which value-add they're entitled to at which hotel," she said. "Likewise, it can be a challenge for buyers to communicate the information effectively."

Faced with the opportunity to negotiate more value-adds, buyers need to have a clear sense of their travelers' priorities. "Most of our customers are pretty organized and know what they're looking for," Cope said. "In fact, they come in knowing the items they need to ask for."