Corp. Hotel Dealing Delayed

A significant number of travel buyers did not finish their hotel negotiations in time to have rates loaded by Jan. 1, and some still are completing agreements with chains and individual properties. Unlike in recent years, when some buyers sought late-breaking hotel discounts, delays now stem from buyer resistance to hotel demands for higher room rates and guaranteed availability. As in the past, the longer that buyers attempt to hold out for lower rates, the more they have to deal with travelers using whichever rates the hotels loaded into the global distribution systems.

"The primary reason it's taken extra time this year is the high number of rate increases," according to Tina Itschner, corporate travel and purchasing manager for HNTB Corp. in Kansas City, Mo. "We're seeing increases anywhere from 7 percent to 15 percent across the board. That's causing us to reevaluate if we want to use that property or even if it's worth having a negotiated rate in that market. That decision requires reviewing our past performance as well as present projections, all of which is time-consuming."

With the lodging industry rebound in full swing, hotels are more confident they can get the rate hikes they seek. "Negotiations are taking longer in some cities, though not all, because rates are going up and there's been more back and forth than usual," said Patricia Carlin, manager of global travel and corporate card for Sybase in Dublin, Calif. Carlin's headquarters-city hotel was not a problem because of the room night volume she brings there. Negotiations were more protracted in other cities where she has neither the volume nor a long-term relationship.

For travel buyers Curt Matos and Donna McGovern, warning signs that the process this year would be protracted were apparent early. "We were surprised when the automatic tracking system we use to monitor requests for proposals showed properties were not responding in the fall," said Matos, who is director of travel services for Charles Schwab & Co. in San Francisco. "That basically means they're not interested in our business. We hadn't seen that for a number of years."

Matos said it was symptomatic of the market turnaround "Hotels are doing better," he said. "They have more demand than they can handle in some cases, so they can be more selective in the business they accept, especially if it's an account that doesn't generate a lot of room nights."

During the downturn, hotels made a point of returning RFPs completely filled out because they wanted to increase their chances of being included in the buyer's program. That has changed. "Even hotels that are part of national chains this year returned RFPs with blocks of information missing," said McGovern, who is hotel program manager for Interpublic Group of Companies in New York. "This was information we needed to know, especially if it concerned amenities and features the hotel might provide complimentary. Consequently, it took more time than expected to follow up before we could even deal with rates."

The amount of a premium to be paid for including last room availability provisions has been a sticking point. "The differential that hotels were asking for LRA versus non-LRA rates was wider this year than it had been," Matos said. "In some cases, the premium they initially were asking for LRA was just too great. It's really a market-by-market decision, however, so you have to know the cities where it's going to be a factor."

Yet, in an environment where demand on peak nights in many markets has begun to outstrip availability, buyers can view having LRA as crucial. "We're going to end up having it in 99 percent of our hotels," HNTB's Itschner said. "We only don't have it in properties where they wouldn't give it to us."

Itschner and Matos expect to wrap up their last agreements in the next two weeks, while Carlin expects to be done by the end of the month. All are wary of letting negotiations spill into March. "The majority of our 2004 rates have remained in the GDS," Itschner said. "We worked diligently to make sure they were in the system."

The situation is complicated, however, when the negotiation involves a new hotel, rates for which were not in the system in 2004. "Fortunately, that's a very small number," Itschner said.

By early February, Matos only had four locations outstanding. "Where necessary, we've relied on our agents to telephone the hotel directly for a rate," according to Matos. "In other cases, we've bridged the absence of a rate with a consortia rate, if needed."

By contrast, Carlin has allowed hotels in certain cases to preload proposed 2005 rates with a clearly stated proviso. "Corrected rates have to be loaded into the system promptly in place of the preloaded rates once final decisions are made," Carlin said.

Likely to be delayed as well are such buyers as Peggy Lee, who do not source hotel programs during the typical season. Lee, global travel and meeting manager for Network Appliance in Sunnyvale, Calif., began sending out RFPs this month in anticipation of new rates taking effect in May. With hotels still engaged in negotiations with holdovers from 2004, however, she expects delays as well.

"Usually there's much less pressure when work off the traditional January-December timeframe because hotels can devote more attention to your program," Lee said. On the positive side, she said she had benchmarked with buyers whose negotiations dragged on and knew what arguments to expect.

For their part, hotel sales executives said some degree of protracted negotiations was inevitable this year, given how rapidly market conditions had turned in their favor, particularly midweek in the key cities.

"Buyers who had grown accustomed the past few years to little rate growth faced a much different situation this year and that took some getting used to," said Marietta Baldwin, senior vice president at Starwood Hotels & Resorts Worldwide.

According to Baldwin, there was much more discussion this year on a range of options to increase a buyer's potential negotiating leverage, consolidating group and transient spend chief among them.

While negotiations may have dragged on longer and in a greater number of cases this year, delays are part of life, even in uneventful years, said Jill Cady, director of global sales strategy and systems for InterContinental Hotels Group. "Customers have the best intent to wrap things up by early December, but invariably budgets will be revised or the program changes in some way that makes the original timetable go longer," Cady said.