Corp. Combine Drafts Hotel RFP

<B>Corp. Combine Drafts Hotel RFP</B>

By Bruce Serlen

The six companies with medium-size travel spend that comprise the newly established Corporate Travel Consortium expect to file their first hotel RFP within the next two months.

As with these companies' desire to leverage their buying power for airline tickets and rental cars, the consortium members' hotel request for proposals was born out of the frustration experienced in the past few years of trying to gain the hotel access they need and to negotiate favorable rates in today's thriving U.S. lodging market.

The six companies, representing a variety of industries, are: Adidas International of Portland, Ore., Bose Corp., of Framingham, Mass., International Dairy Queen of Minneapolis, Raymond James Financial of St. Petersburg, Fla., and Sematech and Tokyo Electron America, both based in Austin.

According to the consortium's architects, the RFP presently is being drafted and is expected to be ready in January for final signoff, with submission to hotel companies no later than February. Together, the six members account for an estimated 100,000 hotel room nights a year.

Individually, none of the six members control enough volume to move market share significantly to a particular hotel company in a given destination. Increasingly, this is what hotel companies are looking for before they enter into serious negotiations with a company.

"For many of the chains, we don't even qualify for national account status because our numbers aren't big enough," said Kevin Maguire, travel manager for Tokyo Electron America. "Consequently, in such high demand cities as Austin, where two of us are based, we haven't been able to get the access we need."

The same frustration applies to negotiating last room availability, which helps ensure that a room will be available at hotels in locations where a company's travelers most need to be, even if it means paying a premium in rates.

"Hotel companies tend to reserve LRA for their biggest and best accounts, so we often find ourselves excluded there too," Maguire said.

Yet, admittedly, negotiating an RFP on behalf of a consortium is complicated. "It means coming up with an arrangement that works equally well for all the member companies, not to mention the hotel companies involved," said Bill Davidson, manager of corporate travel and meeting services for Sematech. The timing of this initial RFP raises issues as well.

"A win-win situation is what we're aiming for and we won't succeed unless we deliver it," said Gary Polito, manager of corporate travel for Bose.

Historically, buyers' consortia such as this haven't prevailed long-term precisely because of these conflicting agendas. As a starting point around which to structure the RFP, the consortium decided to target the need for rooms in about 15 U.S. cities. The list is still subject to minor revision, but included at present are: Atlanta, Austin, Boston, Chicago, Dallas, Detroit, Minneapolis, New York, Orlando, Phoenix, Portland, Ore., San Francisco, San Jose, Tampa and Washington.

"Most are primary, gateway cities, where demand for rooms has been at record-breaking levels, though there are some second-tier cities included as well--or at least some cities where new supply coming online has made them not quite so much of a seller's market," Polito said.

Consortium members were sure to include their own home cities on the list. "This was the logical place to start since we bring so many room nights to these locations," Davidson said. "We then picked the additional cities based on where we had the greatest amount of volume."

The consortium expects to submit its RFP to the large, mostly multibrand players in the industry: Bass Hotels & Resorts, Hilton Hotels Corp., Hyatt Hotels Corp., Marriott International and Starwood Hotels & Resorts Worldwide.

The consortium intends to start with the 15 cities and expand from there as the need dictates. "If you think of these as the feeder cities in an airline negotiation, they are a good place to start," Polito said.

Polito acknowledged that hotel room availability midweek is extremely tight in many of these cities, which would make the hotel companies less inclined to provide additional access and/or actively negotiate rates. However, the consortium believed that its ability to drive market share to other cities would make the hotel companies more apt to come to the table.

"Two or three of our companies bring room nights to cities like Baltimore and Albuquerque, for example," Polito said. "These cities tend to have less demand than the gateway cities, so if these room night numbers are great enough, it might improve our leverage. In other words, in return for driving market share to these cities, the hotel companies may be prepared to provide additional access in the key cities."

Complicating matters for the consortium is the fact that each of the six members has had its own hotel program requirements, corporate culture and traditions. "For this reason alone, it's good that many of the hotel companies have multiple brands at different price points," Polito said. "Because the consortium represents companies whose travelers are used to staying in hotels at different price points, the selection of brands should make it possible to satisfy everyone's needs."

Each of the travel managers in the consortium is used to evaluating hotel proposals--and negotiating rates--single-handedly. Now, it will be done by committee. "Building a consensus will be a challenge, but it is far from an impossible task," Davidson said. "As a group, our mindsets are basically in sync and we have similar views of what an effective travel policy should be." In addition, member companies already are dealing with many of the same suppliers.

At the core of such an effective policy is the ability to mandate travelers' compliance. "Generally speaking, the mandate culture is about the same at all the companies," Polito said. "Being able to drive the volume to the selected properties is certainly crucial in an effort like this."

As for timing, hotel RFPs typically are submitted earlier in the year, so rates can be negotiated in November and December and those rates then can take effect with the start of the calendar year. "Because this RFP won't be submitted until February, it will be a few months longer before we can have negotiated rates in place," Maguire said. "As a result, each of the companies involved has proceeded with its own hotel program as it would in any year. But the intention on all of our parts is that if things go as well as we expect, the consortium's agreements will supercede individually negotiated deals."

Interest in the consortium on the part of other companies has been high. "More than 60 companies have expressed an interest in joining us," Maguire said. "But at this point, it's premature. Right now, we just have to deal with this undertaking step by step.