Hoteliers Shift Focus To Small Volume Customers

<B> Hoteliers Shift Focus To Small Volume Customers</B>

By Maria P. Vallejo

Large corporations were the eye catching deal makers these past few years, but hotel companies now are targeting small-volume firms with specialized programs in preparation for a new economic cycle.

The supply-side economic cycle has not fully run its course, but signs of a slowdown are making many hotel companies reevaluate their customer base in this and future negotiation seasons, hoteliers said. Most of the small-volume customer programs were established in previous years, but intense focus has been placed on improving their memberships.

"Not everything is going to be good forever. We have to take a longer-term approach," said Stan Boyd, Fairmont's senior vice president of sales and marketing. "Hotels have overreacted to anticipated demand and penalized the business travelers. They've done that by closing off national rates and forcing them to pay rack rates."

Supply growth is expected to surpass demand growth in many U.S. markets for the rest of this year and to account for decreasing occupancy, said Randell Smith, CEO of Smith Travel Research in Hendersonville, Tenn. Average U.S. occupancy is expected to fall 0.4 percentage points to 63.7 percent, compared with the previous June, according to Smith Travel Research's Lodging Outlook Survey for June 1998.

Average daily rates are expected to increase by only 4.6 percent in 1999 compared with 5 percent this year, according to New York-based Pricewaterhouse Coopers's June U.S. Lodging Industry Forecast. And average daily rates are expected to continue falling into the year 2000, with a predicted change of 4 percent. A combination of reduced occupancies and tumbling share prices could indicate an economic turnaround--a change that could give new leverage to small-volume businesses.

"There is a lot of animosity by business travelers who feel they are being gouged," Boyd said. "These companies are operating below the radar of a consortia. They don't represent a huge amount of business, but you realize there's more potential in their room-night production."

Fairmont Hotels, based in San Francisco, started rolling out a program in June with plans to lure 1,500 accounts. The program was started after completing a market research project that surveyed between 200 and 300 small businesses. The research revealed many of these travelers booked rooms with a published corporate rate and dealt with several sales contacts. A personal relationship was not easily established.

Fairmont program members will receive a discounted rate based on the property location and a single point of contact, a privilege often reserved for larger firms. Eligibility requirements vary depending on the hotel site and acceptance is based on more than volume. Fairmont will recognize new customers with celebration bookings, meals at the hotel's restaurants and the company's influence with local trade and corporate organizations.

Such programs benefit the traveler and hotel properties that need more business. While markets like New York and San Francisco continue to show strong occupancies and rates, hoteliers are noticing some properties that could benefit greatly from the additional small corporate business.

"The market is going to change. We want a customer for life," said Barbara Kogen, senior director of Omni Hotel's national sales and training. "There's always going to be the small guy, that law firm next door, that's going to be a big piece of business for a local hotel."

Companies using three or more Omni properties with at least 1,000 room nights combined can become members of its Executive Service Plan, a 15-year-old program that gives members preferred rates of 10 percent below published rates.

Four Seasons provides a single point of contact for its small-volume customers, a service usually reserved for large preferred accounts. Individual hotel properties must decide on company requirements and depth of discount accompanying the Private Reserve Account program. Company sales officials work directly with travel managers or whoever is in charge of arranging most of the firms' travel.

"No business is so small that it can't get the best value for their money," said David Crowl, Four Seasons' vice president of sales. "It's a lot easier servicing a client that's centralized and localized. I don't care how small you are, your business will change with each city."

Radisson Hotels Worldwide, Minneapolis, has a similar program for accounts of up to 4,000 room nights per year, offering a 10 percent discount off the published corporate rate.