Cos. Move To Leverage Meetings, Transient Volume

<H1> Cos. Move To Leverage Meetings, Transient Volume</H1> By Lauren Bielski

With hotels firmly in the position of being able to drive hard bargains, corporate buyers are more interested than ever in leveraging their meetings and transient business volume to get deeper hotel discounts.

So far, however, not many companies have succeeded. There are those who have succeeded in leveraging meetings and transient air spending, but few have done so in their hotel programs. Most have not yet gotten a grip on their meetings expenditures.

That's why most hotels aren't even set up for such consolidated buying approaches. Unless companies have well-documented meetings expenditures and can deliver the level of group business they promise, hotels have a vested interest in keeping the two businesses separate, said Teri McClard, national account manager with Carlson Wagonlit in Minneapolis.

Hotels will always have two different rate structures for transient and meetings, according to Hewlett-Packard corporate travel MIS manager Jeff Kurn. "There is a different cost structure associated with group reservations; booking a room block is more work for a hotel than just taking a simple reservation in the CRS," he said.

Hewlett-Packard is in the process of documenting the value of its meetings business so it can negotiate for more forgiving attrition and cancellation clauses as well as other discounts rather than outright rate reductions. While the transient program can be a powerful tool for getting meetings negotiated, Kern said there is no guarantee thatg hotels will accept the business and that very often the meeting rate is higher.

Hotels need to see a company track record of controlling its business travel and meetings volumes to be convinced that combining them will achieve win-win results. Many corporations are now making moves in that direction. Several of the 100 largest U.S. buyers of corporate travel are set to integrate meetings and transient travel negotiating in the year ahead (<I>BTN</I>, July 15). Several other companies, such as AlliedSignal, Chrysler and State Farm, already have figured out how to track their meetings spending and wield the volume to carve out better deals.

AlliedSignal global hotel program manager Maxine Wiggs recorded a savings of $800,000 during the first full year of leveraging group and transient business for hotels, an effort she began two years ago.

"It makes sense for us to use the same properties for both programs, because our top travel cities-Phoenix, Newark, Detroit, Los Angeles and Chicago-are locations where meetings tend to be held as well." Wiggs said the criteria for properties to be in the hotel program always included that they be close to a business unit, in a hub city and near an airport in addition to having adequate meeting facilities.

To make her negotiating case, Wiggs culled data on 24,000 frequent travelers out of more than 80,000 employees the Morristown, N.J.-based company has in its aerospace, automotive and engineering design divisions. Wiggs began with the aerospace division and had meetings and transient hotel reservations booked through the agency to develop an accurate spending profile.

Wiggs surveyed administrative personnel to identify meeting arrangers and their activity. Later she toured many of the field offices for the aerospace sector and presented the new meetings program. "We were very gung-ho when the program started. We received a lot of input from employees in the aerospace division and benchmarked our budgets against all the available industry data we could find to determine how expenditures stacked up to the norm."

The company worked with Carlson Wagonlit in the first phases of consolidation. "Initially, we negotiated for pricing menus, so that the least experienced planners in the organization wouldn't get taken advantage of," she explained. The standard contract for the "total quality meeting" included a list of standards for A/V and food and beverage, including basic menus to do a comparison of pricing. For groups larger than 50, Wiggs would push hard for additional discounts.

The program, which gained momentum with Carlson's support and attracted the interest of management in other business sectors, stalled when the company went on board with American Express. "We lost some ground at that point; fewer planners registered their meetings through the agency."

With Amex's GTMS division now providing meetings agency services, Wiggs is still working to maximize AlliedSignal's combined clout. Today she does it in concert with Arlene Macchia, who traditionally arranged corporate executive board meetings and events for senior-level management. Macchia has been given the responsibility of travel management for conferences and larger meetings. Wiggs handles meetings for smaller groups of 50 or fewer participants, which are planned more like transient travel.

Merrill Sehulster, who as manager of travel services negotiates AlliedSignal's agency, air and card contracts, said that despite a loss of momentum that occurred because of the recent agency switch, the firm still is leveraging transient and meetings hotel dollars. Even with the transition, he said, the leveraging effort yielded an additional $1 million in cost avoidance after the second year. "We've had a lot of success partnering with suppliers in the travel program," he said. "By using a small base of properties for both types of business we've been able to secure a strong negotiating advantage."

Charles Braswell, manager of corporate services at Chrysler Corp. in Highland Park, Mich., also has succeeded in leveraging meetings and transient. He has worked this way since taking over the program four years ago and has agreements in place with Marriott, Hilton, Radisson and Holiday Inn hotels. Although use of the meetings program isn't mandated by the company, it has captured most of the meetings of 500 or fewer people.

Success by State Farm in leveraging meetings hotel expenditures has led it to doing the same for air and car meetings spending, a migration path that is the inverse of typical consolidation efforts.

"I've been leveraging my meeting volume with transient for about eight years and have saved about $3 million in travel and meetings expenses in this region," said Lou Black, travel unit supervisor in the Pacific region for State Farm Insurance, based in Seattle. He focused on consolidating meetings first in the region-which includes Oregon, Washington, Idaho, Montana, Alaska and Hawaii-because "more dollars were being left on the table" when meetings were handled by individual departments.

But even companies with some of the most sophisticated hotel programs can have trouble getting their hands on their meetings data. When that is the case, the most effective step is to identify destinations and properties where volume can be coordinated.

Bob Brunner, manager of corporate travel at Philips Electronics Corp., which has its North American headquarters office in New York, said that since only 3 percent of the vast organization's meetings are consolidated so far, he can take the leveraging strategy only as far as New York City, where the cachet of both types of business yields perks such as free airport pickup, cocktail hour or a hotel-sponsored corporate meal.

Brunner prefers dealing with properties that will commit to an across-the-board discount against the corporate rate for meetings as a base. On an individual basis, he'll go to specific properties and obtain additional discounts. Outside of New York, Brunner negotiates on the basis of transient volume only. "Everything is different outside of New York," he explained. "It can be difficult to deal with franchises. I can think of one case, with a property in Rhode Island, where the management refuses to listen to the national sales office."

While it remains true that meetings are different and often require more detailed negotiations on an individual basis, companies that can package their volume in a way that is useful to hotels can reduce travel budgets, said Tom Wilkinson, president of Travel Management Group in Alexandria, Va.

But that approach won't work for everyone. "In my experience this has been difficult to do because you have to use the same hotels for both types of business and you have to schedule meetings during times when they have availability," he said.

Still, if a travel manager can demonstrate the funneling of steady business to a hotel, the approach can yield some savings. Jon Fredrickson, manager of corporate travel at Minneapolis-based Honeywell, is working with Carlson Wagonlit to get initial data on expenditures for the first phase of consolidating the company's meetings program. Although Fredrickson isn't certain that the hotels used for transient business will fit the bill for meetings, he'll seize the opportunity to leverage both pieces of business where he can.