Hotel Chain Adds Discounting Tier

Atlanta - Six Continents Hotels last week announced it added a second tier negotiated pricing discount to its corporate rate program for 2003 that is designed to give key global accounts and other significant buyers another incentive to book its properties.

Two types of accounts are eligible to participate in the Six Continents tier pricing initiative, which the company has labeled Corporate Gold. "Key global accounts get a discount at any of our hotels where they don't have a negotiated rate already in place," said Mike Fegley, vice president of global sales for the Americas. "The discount won't be as deep as the negotiated rate at hotels where they have volume, but it will be better than either the regular corporate rate or the consortia rate."

He added that typical global account buyers might have negotiated rates at 100 or 200 hotels in the system. These are likely to be in destinations where the buyers have the most volume. On the other hand, they are not likely to have a negotiated rate at the rest of Six Continents' approximately 3,400 other hotels. Corporate Gold will give them an incentive to use these other hotels as well.

In addition, accounts that generate a substantial number of room nights, but not enough to qualify for key account status, will be able to participate in Corporate Gold. For these accounts, the discount will be a percentage off the regular corporate rate wherever their travelers go. Fegley estimated that 400 accounts would be involved in 2003. Six Continents president of the Americas Stevan Porter said the company had made the discount mandatory at all of its hotels worldwide, which include the Crowne Plaza, Holiday Inn, Holiday Inn Express, InterContinental and Staybridge Suites by Holiday Inn brands.

Consistent with the Six Continents announcement, buyers last week said hotels overall this bid season were being much more flexible in their approach to rates. It extreme cases, some buyers find the approach smacks of desperation. "It's almost a situation where the hotels are asking me what I'm willing to pay before they put their offer on the table," said Kevin Maguire, travel manager at Tokyo Electron America in Austin, Texas. "Sometimes, you just get the sense of rates being in free fall."

Maguire said the situation was reminiscent of the summer of 2001 when the full impact of the recession started to be felt and hotels quickly moved to renegotiate rates as a way of securing business already on the books. "The rates being quoted may not represent as much of a decrease as the rates quoted then. But the rates being discussed today often still represent a decrease and definitely don't entail any increases," he said. While he hasn't been approached by Six Continents, a tier-pricing program theoretically would be of interest to Maguire. "It basically would give our travelers a discount everywhere they went, including hotels beyond those where we have a negotiated rate," he said.

Buyers noted that the number of sales calls they are receiving is significantly higher than usual. "We're being approached by hotel companies we haven't worked with before that want our business," said Karen VanBuskirk, senior principal and travel manager at AMS in Fairfax, Va. "This has meant a lot of new sales calls and a lot of new properties interested in AMS business. In a way, it's a whole new ballgame." Such entreaties notwithstanding, VanBuskirk's strategy is to leverage her long-term relationships with the expectation of getting the best deals. "We're trying to work closely with hotels that we've partnered with in the past. Given the long-term relationship, that's where we're going to drive our marketshare and, consequently, get the best rate," she said.

By contrast, Maguire said he would switch preferred hotel vendors if the difference in rates was significant, "assuming the quality is similar." Tokyo Electron America's travelers understand the company's cost-savings objectives and, as a result, wouldn't have a problem changing hotels, he said.

As was the case for 2002, marketshare again is turning out to be a key determinant this year in negotiating rates. "Hotels want marketshare and a lot of the flexibility we're seeing on rate is about gaining share," said Terry Sullo, manager of travel and meeting services at Akamai Technologies in Cambridge, Mass. "To some degree, it's always been about marketshare, but hotels are paying more attention to it now than previously when corporate rates were much stronger. We'll see the hotel companies we work with tracking marketshare and calling us with the numbers they find. You never used to see that." Sullo noted that the trend particularly has been pronounced in such depressed hotel markets as Boston, where she brings a lot of room nights.

Fegley acknowledged the new emphasis on marketshare as opposed to absolute room night numbers. "There are just fewer travel dollars out there," he said. "So let's say a major account is going to reduce its spending 20 percent. You want to make sure they don't spend 20 percent less with you. You want to either maintain where you were or even grow. That means our share comes from someone else. It's the name of the game right now and quite different, for example, from 2000." Such programs as Corporate Gold are a way of achieving this marketshare objective.

Six Continents is hardly alone in this approach. David Ogilvie, Fegley's counterpart at Starwood Hotels & Resorts Worldwide, said Starwood looked at both marketshare and absolute production numbers. "In my opinion though, marketshare is more important. If you get good marketshare numbers, it tells you a customer is really working with you. If you're in difficult times, for example, and your marketshare in a city goes from 20 percent to 25 percent, you know that customer has really put great effort into moving business to your company."

But it's the same in good times as well, according to Ogilvie, who is Starwood's vice president of global corporate travel: "In good times, if you're doing $10 million of business with a customer, but your marketshare has gone down, that's not a real partnership. You're probably just getting the business because in high demand areas they have no choice but to stay with you for whatever reason."