Fairmont Sees Buyers' Needs

By BTN / September 17, 2000

Fairmont Sees Buyers' Needs

Chris J. Cahill, president and COO of Fairmont Hotels & Resorts, recently spoke with BTN hotel editor Bruce Serlen about the importance of the travel buyer to his company and the negotiating season ahead.

BTN: Fairmont is prominent in such U.S. gateway cities as New York, San Jose, San Francisco, Boston and Chicago. How does this affect your ability to negotiate with buyers?

Chris J. Cahill: To be a global player, you need to be in these key destinations. One of the strengths of the Fairmont portfolio is that it gives us valuable presence in these and other high-demand markets. When you take into account both transient and group, business travel accounts for about 75 percent of our business, so working successfully with travel buyers is crucial to us. As we move forward, there are still other U.S. destinations out there that would be a natural fit, Washington, Miami and Atlanta among them. The list is actually pretty succinct. Looking to Europe, it's a little trickier: Even if you end up with one property in a great gateway city with a lot of North American draw, managing the operations and growing it does present challenges.

BTN: How critical is having a recognizable brand name today to travelers and travel managers?

Cahill: At all levels of the hotel industry, branding is important. At the luxury end, specifically, it becomes very important in terms of being able to extend and grow your business base. From the research we've done, the customer sees Fairmont in terms of a certain elegance and class. And they expect a certain level of service that goes with that. As a result of this strong brand identity, I don't see us getting into any sort of multibrand management strategy the way other hotel companies have done.

BTN: Given your interest in building a national brand, how do you structure the national sales effort versus corporate sales at the local property level?

Cahill: Actually, this is coming together right now because the RFP process is upon us. We're consolidating the sales effort in this regard. Obviously, there's some overlap on the local level. Every hotel has its own salesforce and a corporate sales manager, and they're linked in regard to various service and pricing issues. Last room availability, for example, is an area where you see a difference of opinion on the local and national levels. Each tends to define LRA as it sees fit, rather than as the customer sees it. What we really need is a customer-driven definition, though unfortunately it's often not as simple as just what the customer is looking for and willing to pay for.

BTN: What is your approach to LRA?

Cahill: As it happens, because of the style and time in which many of our hotels were built, we have different kinds of rooms, as opposed to a lot of modern brass and glass hotels that are basically the same room on different floors or different sides of the building. Consequently, we have branded different types of room product within a hotel and have some flexibility in being able to say, "This is the corporate rate on this room, but we also have some price point premiums if this room is sold out." In fact, we can contract at the front end of the negotiations so buyers get a different product, if that's what they're looking for. The result might be a series of negotiated rates. There may be two or three different rates based on the product buyers want. Senior executives might be right for a deluxe room, while the bulk of a company's travelers would be given the standard room. As a result, this complicates the LRA issue because you have to be clear which room category you're offering LRA on.

BTN: Do you offer any form of guaranteed availability?

Cahill: One of the things we're looking at for our most preferred accounts is ensuring we always have a certain number of rooms available for those accounts, no matter what the availability of the hotel. In other words, we would protect the block. As for extending that out to a corporate contract, it really boils down to what city we're talking about, how much demand there is, what the price point is and how many rooms are required. There are a number of factors in the negotiation. My general approach is, if we have the customer, let's see how we can accommodate the account and be profitable at the same time. Let's work at it, rather than have a hard-and-fast guideline that says we won't do this or that. Because some of these arrangements become very unique to a specific city, such as San Jose, where demand midweek has grown tremendously, or at The Plaza in New York. In the final analysis, you have to look at the relationship between the customer and our company as a whole, that customer and the city, in terms of that hotel, and whether or not we can do it so it accommodates both of us.

BTN: But isn't there a limit to what you can provide to even your most preferred accounts?

Cahill: You're right. You're only going to have a certain number of rooms in a market like San Jose, so you don't want too many preferred accounts because you're not going to be able to satisfy them. As it happens, in San Jose we've begun construction on a tower to the Fairmont there that will add 264 rooms to the existing room count. It's scheduled for completion a year from now. But Silicon Valley is such a strong market, the additional rooms can easily be absorbed. My sense is we won't add any more to what I call national accounts because we don't have a distribution that could absorb as much demand as some others. Then, too, there'll be other contracts a specific hotel already has in place. Any one hotel might have another 10 or 20 of these contracts.

BTN: Travel buyers complain about minimum stay requirements and no arrival/no departure restrictions being built into the GDS, supposedly when last room availability is in effect. What's your reaction to that?

Cahill: It's a sell through. Basically, you call on Sunday, you get four nights; call on Tuesday, you can't get two. It's because of the nature of the peaks and valleys in most cities and yield management--hotel rooms being a perishable asset. Understandably, travel buyers find this frustrating because it's their credibility that's at stake. A traveler comes back and says, "I thought we had a deal at that hotel. You told me to stay there. But I had to go stay someplace else."

BTN: It sounds like you have a lot of empathy for travel buyers.

Cahill: I do. Hotels like to say, "Why don't you just tell us how many rooms you can use on a Tuesday night most weeks of the year and we'll know what you're dealing with." But buyers can only predict their demand levels to the extent that business drives it. I mean, it's not something that's easy to predict. For their part, they're under pressure to make their volume commitments, so we're all kind of chasing our tails. The more communication between the two sides, the better. And the greater the clarity of that communication, the better. And that will start with a common definition of what clients need from their perspective. Then, you can try to tailor it individually.

BTN: You mentioned yield management earlier. How much of this is a matter of how the hotels are managing their inventory?

Cahill: At the end of the day, this is the hospitality business, so you don't want to say no. That happens a lot. But hotels are getting savvy at managing that inventory, knowing what type of demand to anticipate. Usually what happens it that some external force pops up that's out of their control. There's a convention in town, for example, that they didn't know about and all of a sudden a whole bunch of people want to come in. Or the group block picks up more than they thought and they get crunched. Generally, however, they're pretty good at anticipating how much they have to hold back for those buyers who are their very good customers.

BTN: Regarding technology other than yield management, what aspects do you find travel managers most interested in?

Cahill: The ability to receive full folio data electronically remains a hot button. But that requires us having data warehousing capabilities in place. Once you have data management, full folio data follows as a matter of course. This is exactly the kind of information we'd like to be able to provide to that loyal base of customers. A lot of what we're doing in this area, in fact, is geared to the loyalty factor. By this I mean those customers who either have demonstrated loyalty or who we believe could demonstrate loyalty, if we were providing more personalized, individual attention. Indeed, as far as frequency programs go, our research supports the notion that travelers in the luxury category are more interested in getting service and recognition than they are necessarily in getting points. In some mid-level brands, by contrast, there's a lot less differentiation in service and product. So points-based programs go a long way to help drive loyalty in those categories. But in the luxury segment, we believe guests are more interested in our ability to anticipate their needs, particularly their likes and dislikes. Effective data management will make that possible.

BTN: What would be an example of this kind of use of data warehousing?

Cahill: One application would make the checkin process seamless. We'll have credit card information as well as know other things about guests, so will we really need to have them stop at the front desk, or can we take them from the car right to the room? Remember, in the luxury category you don't want to forget the personal touch. The same point of view applies, by the way, to direct links to customers through their corporate intranets, allowing travelers to book at the negotiated rate. Once the technology is in place, we'll be able to take advantage of the linkage in whatever way the customer is comfortable. But the reality is that, while some of these things work for some customers, they're not as important for others.

BTN: Once buyers have access to electronic full folio data, there supposedly will be more interest in negotiating on the basis of total spend as opposed to simply room night spend.

Cahill: I'd like nothing better. Traditionally, despite all the technology, it's been very difficult to get the total revenue contribution a customer is making. It's always focused more or less on room rate or room revenue. Yet, given the type of product and brand that we have, the full value of the customer's spend can be far more important. We spend a lot of time focused on total revenue per occupied guest room--as opposed to RevPAR or just average rate or average occupancy--because the total revenue number is just too important to us.

BTN: As for technology for the business traveler, brands in all industry segments are rushing to provide high-speed Internet access in guest rooms. Do you think this is where the real interest will be?

Cahill: First of all, you have to be very careful because today's trend may be gone tomorrow. It's kind of like how do you get ahead of the curve. Right now, we have a couple of things in place we're experimenting with, including free high-speed access at our new airport hotel in Vancouver and Internet access terminals at The Plaza in New York. But to some extent the bigger issue concerns wireless: At what point does wireless become more important than anything else? In other words, at what stage does the technology make it so easy for business travelers to carry around whatever they need, do they really require anything inside the hotel room from an appliance standpoint? The technology is moving pretty fast.

The way it's shaking out, luxury properties are offering high-speed access as part of the amenities package. It's a constant debate we have in the luxury category. For everything you provide, someone says, "Well, just drop the charges." It just goes back and forth. Lower down, travelers will be charged a standard daily fee for high-speed access. Travelers don't like to be incrementalized to death. Yet, why should guests pay for a service they're not using?

BTN: Considering that Fairmont also has the former Princess resorts in its portfolio, what are your thoughts about the blurring of business and leisure travel?

Cahill: We all talk about these distinctions, but customers don't think of themselves that way, especially at the upscale end of the market. In fact, if you're a luxury traveler, if you go on vacation or you go on business, you're more apt to stay at the same quality of hotel or resort. When you move down the value chain, by contrast, there will be people who stay at a better hotel when they're on business because the company is paying for it. Consequently, there's a greater opportunity for luxury brands to drive loyalty because customers are staying whether they're on business or pleasure.

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