Corps. Buy Room Blocks To Ensure Availability

Devising tactics to combat the escalating hotel occupancy crunch in key business cities, some corporations have opted to buy year-long blocks of rooms. Many hotels also have added a twist to the pure room block deal, granting the option to release the rooms to other last-minute guests, then charging only for room nights used.

Room block deals--recently forged by such chains as Crowne Plaza, Doubletree, Hyatt, Westin and Wyndham--may even prove a better tactic than last-room availability or stretching volume over more hotels.

While a last-room availability deal will guarantee a preferred rate, the hotel could be sold out a year in advance, noted Keith Douglas, director of sales and marketing for the Chicago Doubletree Guest Suites. And while shrinking supply has prompted many corporations to spread their program over more hotels, "in the future, when there are more rooms available, these companies won't have history," said Pamela Dorneden, BTI Americas' director of hotel marketing and development.

Companies also may dodge state and city hotel taxes by leasing a room for more than a month--without trading in hotel service for a corporate apartment.

"Companies are definitely taking advantage of the tax savings," said Rolfe Shellenberger, senior consultant for Runzheimer International. "They can move people in and out of the same room to meet the contract."

"Blocks were popular in the mid '80s and then fell off," noted John Lavin, now Doubletree's vice president-national sales following his departure from his position as Hyatt assistant vice president of individual travel. "Now demand for blocks is up again, and, in most cases, it's worth it."

Last year, Wyndham Hotels & Resorts launched a room block test with the Miller Brewing Company in Milwaukee and three other corporations at hotels in Atlanta, Chicago and Phoenix. Each bought a year-long block of 10-20 rooms in one hotel. Although each paid for 365 days, occupied or empty, "the rate turned out to be cheaper per night than a locally negotiated rate," said executive vice president Mack Koonce. Since the company pays for the year upfront, the hotel grants a deeper discount on top of negotiated rates, added John Hackett, Wyndham's national director of sales.

The Miller Brewing Company, which has forged a room block deal this year as well, filled its rooms almost every weekday of the year, Hackett said. On weekends, the company often filled the rooms with VIPs and clients--especially during citywide events such as Summerfest.

"Hotels needs to fill weekends, so travel managers are saying, 'make it more attractive for our customers, and we'll help you with weekends,' " Hackett said. In turn, the room blocks aid the hotel's yield management.

At Westin, almost every client asked for room blocks last year, though the chain only granted a few, noted national account director­corporate sales Christina Zeniou. "Clients are more creative now," he said. "The bid process took three to four times as much negotiation last year, because everything was negotiable."

In New York, calls for year-long suites at the Crowne Plaza have picked up, said Michael Silberstein, director of operations-North America, Crowne Plaza Hotels & Resorts.

"Whenever there's a shortage of rooms, companies realize that if they had one or two corporate suites in a hotel it could serve them well, even if it's not 100 percent occupied. It will always come out cheaper at the end of the day," Silberstein said, adding that blocks also grant travelers more flexibility. "Since they have the room, a traveler might arrive Sunday for a Monday meeting or stay the night after a Friday meeting."

So far, most companies haven't blocked rooms in more than one hotel. "Some companies make sure the rooms are occupied all the time, while others leave them open," Lavin noted.

Still, blocking rooms probably won't build to a "broad-based sweeping trend," said Smith Travel Research vice president Chuck Ross. "It's going to be the exception and not the norm, but it will be a practice that may be employed in areas where a company has its headquarters and routinely brings in travelers."

Partial blocks, however, are catching on. "We may start seeing more Monday-through-Thursday blocks," Hyatt's Lavin said. "But you get a better deal if you take weekends."

Several high-volume Hyatt clients have forged deals for blocks that the hotel may sell if not booked 48 or 24 hours out, Lavin said. Clients then pay only for room nights used.

In Chicago, the Doubletree Guest Suites set aside a block of rooms for corporate accounts for the first time last year, said director of sales and marketing Keith Douglas. Five accounts blocked space year round, including weekends. The top account blocked 15 rooms, while the others averaged three rooms each. The hotel then set aside 25 rooms--8 percent of the hotel's total inventory--for all other accounts. By year-end, the hotel had quadrupled its transient business, said Douglas.

"At the end of the year they're charged only for nights used," Douglas said. "When approaching a soldout period, we'll call the accounts to check if they still need the rooms for that period."

BTI Americas, meanwhile, clears space at over 900 hotels, guaranteeing inventory for key clients. "Many key hotels have pulled back on the number of clients they take," said BTI Americas' Dorneden.

BTI blocks an average of five rooms for each client, and "each hotel has a different release date, usually one or two days out," she said. "In key markets--Chicago, D.C., New York--companies may need room blocks beyond this [guaranteed inventory]."

Canada's Delta Hotels & Resorts has opted against room blocks so far, instead granting last-room availability to key accounts, said vice president of marketing Scott Allison. "Some companies in Canada have tried to buy room blocks, but I don't think the Canadian hotel industry has responded at all," he said. "We have been approached by a couple of corporate accounts, but generally when companies want room blocks they want them substantially discounted. So if that's all the company is looking for, we're not going to be super amenable to it. If the company has to pay for empty rooms, they're not going to be happy, and we'd rather find a different solution.