Hotel Negotiating Takes Two

By BTN / April 23, 2000

Hotel Negotiating Takes Two

As part of BTN's focus on hotel negotiations at Corporate Travel World in New York last month--and the need for better controls by both buyer and seller--editors held an exclusive conversation with Rick Wakida, travel analyst and technology manager at AirTouch Communications, who is also chairman of the NBTA hotel committee; and Ed Skapinok, director of corporate sales at Bass Hotels & Resorts, which includes the Inter-Continental, Crowne Plaza, Holiday Inn, Holiday Inn Express and Staybridge Suites brands. Excerpts from their conversation follow:

BTN: Bass has taken a leading role in providing travel buyers with full folio data. What's the status of that initiative?

Ed Skapinok: Crowne Plaza started this program with IBM at its property near IBM's headquarters in Westchester, N.Y. Like a lot of companies, IBM is interested in managing the total amount it's spending at its preferred hotels. IBM travel managers can't always get those numbers from the data they're receiving, so they approached us to see if we couldn't generate full folio data electronically. What we're providing is actually a paperless expense report as far as corporate travelers go.

By my last count, there were eight to 10 Crowne Plazas participating in the program. We're still getting our feet wet. The idea is that it could become the standard of the brand. But we've also got to find more customers that are interested in having access to the data. Surprisingly, when we inquire, customers express interest, but may not really be ready to do anything with the data yet.

Rick Wakida: Travel managers may want to use full folio data, but with just one hotel chain, it's a bit limited. Once a couple of other hotel chains get on board, however, and you have some comparative data it becomes more useful.

Skapinok: Right now, it's positioned as a convenience for the traveler. You check out of a hotel and by the time you're back in the office, your expense account is completed and your check is in the mail. That's attractive to travelers. Instead of positioning it as a convenience, however, we're looking at how much business we can attract by providing it. So the ends might well justify the means. I don't know the cost structure behind it, but it's being positioned as a builder of market share and we've seen a bit of that already.

BTN: Rick, the NBTA hotel committee has done major work on bringing consistency to the RFP process. Are changes coming to the standard form?

Wakida: This year, the committee struggled with two really different issues. One was how to hold the line on changes, so that people using the standard form and the electronic process would continue to do so. That way, we'll continue to attract more and more users to it. Changing the form from year to year would only get people confused and might prevent them from wanting to try it in the first place.

Weighing against that is the need to make the form more global, to make it evolve as the industry evolves. After all, there's a lot of globalization going on right now. And with more companies globalizing their program, the form is going out to more international hotels. So on the one hand, we're trying to maintain the status quo with regard to changes. But on the other hand, we want to keep the process as up to date as we possibly can.

BTN: How widely is the standard form being used?

Wakida: From what we've heard in the field, the number of travel managers using the paper or electronic form has been rising. In fact, the numbers using the electronic process, in particular, is increasing to the point where the number is significant. It seems both large and small companies are using it. Again, we haven't made a lot of changes. It's been fairly consistent and remained user friendly. Some first-time users said they wanted to go right out and use the electronic form, but then they got the jitters. Once they worked with the data though, they saw they could actually manipulate things. It was more or less providing them with the comfort level they needed to proceed.

BTN: And on the hotel side? Is it only the large chains that have the capability?

Wakida: Some smaller chains and individual properties also can respond electronically. So certainly on the supplier side, the ability to provide data electronically is there.

BTN: When it comes to negotiating, what does a company have to do to qualify for national account status?

Skapinok: When companies are able to move market share because of the volume they bring, it makes sense to give them national account status. Two or three variables are important here. There are companies that don't meet our minimum standards for national account status, whether their hotel spend is $10 million or $20 million or whatever because they can't influence the booking decision the traveler is making. Consequently, what good is it to have national account status and become a discount program, if you can't mandate usage and deliver market share? Eventually, many of these companies may be great customers. But until they get proper measurements in place and the power to control booking decisions, they're not going to be great.

BTN: Measurement is crucial then?

Skapinok: Very. I've been approached by companies that say, "we're a large company, we use a lot of hotels, we want to be a national account." But they don't have a company credit card. So the data have been real sketchy. As a result, it's hard to manage such an account unless we can manage what people are booking. When travelers are just calling to book whenever they want--and as a result the company has no data--there's not a lot we can do to show there's any benefit from forging this relationship.

BTN: Yet aren't there companies that mandate compliance?

Skapinok: It's true there are some companies that are really starting to put some teeth into their program. Yet, I hardly know of any company that actually refuses to reimburse travelers for not staying at one of the preferred venues. Short of this, more companies are using different techniques to drive compliance.

BTN: How is compliance handled at AirTouch?

Wakida: Recently, the policy was reiterated in a letter from the company president about corporate suppliers. We also started with a corporate vendor card. The policy and directory of preferred properties are both available online, in a spreadsheet format and on paper. In addition, we hold traveler education seminars to ensure the message is getting across. The policy and directory also have been made available to the travel agency and we've held training sessions for the agency's staff to make sure we're communicating everything clearly to this group.

Let me describe the kind of results we're seeing. It's actually been a two-step process here. The first step has been to make sure travelers use our preferred agency because once they call the agency, the agents are trained to promote the preferred properties. The second step would be to assess the actual usage of the preferred properties. And the best way to accomplish this is not to look at the percentage of preferred properties used as a total of all properties because no matter how large your hotel program is, there will always be those cities and suburbs where you don't have a preferred hotel in the program.

Consequently, I think a more effective measurement would be to measure the percentage of usage of preferred hotels in those cities and suburbs where you have preferred hotels. In other words, how good is your compliance in your top cities?

Skapinok: Inevitably, there are going to be some cities where another chain has a hotel that's better located for your travelers. But trying to make people travel out of their way to stay at one of our hotels just isn't going to work. You can forget about that as far as I'm concerned. That's not a market where I'd say you can deliver volume to my hotel. But then there will be other areas where the locations work, where as a result you might have the buying power to get significant negotiated rates.

Wakida: It really comes down to the quality of your data about volumes.

Skapinok: It does. We're contacting individual properties. That's why it's important to get as much information up front as we can about the expected volume and the location within the city.

Where exactly is the business taking place that your travelers are there to conduct? You get a buyer who says his travelers spend 3,500 nights a year in Los Angeles, for example. But is that Ventura? Is that Long Beach? Los Angeles, after all, is a large market comprised of numerous submarkets. You try to pin that buyer down and get him to specify exact locations up front. The better the quality of information, the better able you're going to be to estimate volume.

BTN: As the national sales manager, do you make a recommendation on whether your chain offers a company a negotiated rate?

Skapinok: If I think we have an opportunity to drive a lot of business, I'll make that recommendation to the property. If there's an issue on the buyer side, I'm likely to get involved in the negotiation. But usually I help the hotel set its pricing strategies.

In a given market, I'm trying to match up particular properties at different price points with particular customer needs. After all, in the end it all comes down to what the customer needs. I'm not going to suggest, for example, that a buyer interested in a five-star property place his or her travelers at a Holiday Inn Express. But I would make that suggestion about the five-star property and an Inter-Continental, providing it makes sense in terms of location. From my perspective, if there's a value there, there would be no reason not to encourage travelers in that direction.

Likewise, if they're using a three- or four-star property and we have a Crowne Plaza in that market, I'm going to recommend they make the move to the Crowne Plaza, all things being equal. As a national sales manager, I'm aware of the whole range of brands in our portfolio and the price points they cover. It comes back to what we were saying about controls and being able to measure and predict your volume. Once I have a clear picture of where a customer's travelers are currently staying--and in what numbers--I can go in with a proper proposal.

BTN: What about rate integrity and single image inventory? Does the traveler consistently get the rate you believe the traveler should get in that market?

Wakida: Part of the process should be that once the negotiation phase is completed, proposed rates, services and amenities should either be formally accepted or declined. You'll want to make sure the acceptance letter confirms the rate. The hotels, meanwhile, have loaded all the proposed rates for the new year into the global distribution systems.

At the point the travel manager is sending the list of accepted hotels to the agencies, the hotels are meant to be unloading the rates that have been declined. But this hasn't been happening as it's intended to. Travel managers report that either the accepted rate hasn't been loaded in, the declined rate hasn't been removed or the consortia rate or corporate rate is there. They then have to conduct a rate audit, not once but twice, and the right rates often still aren't in the system.

Skapinok: It's often a matter of timing--when the rates are preloaded and when adjustments are made. Certainly, the earlier changes are made before the start of the calendar year, the better. Rate loading is an issue for everybody. I'm not sure why, but this year seems to have been worse than ever for the entire industry. I've heard the theory that it's due to everyone being focused on Y2K matters. I can't speak to that one way or the other. But I hope that explains it so that we won't go through this again next year.

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