Hotels Loading Rates Before Final Contract

Hilton Hotels Corp. and Marriott International have begun widespread preloading of negotiated 2005 rates, raising a red flag among travel buyers that, when final prices differ, the wrong rates will remain in global distribution systems. The practice exacerbates the problem for buyers who have been frustrated with preferred hotels for inaccurately loading negotiated rates in GDSs. This is particularly troubling for buyers in a negotiating season in which hotels are proposing rate increases of 3 percent to 5 percent.

Hotels preload rates to ensure that annually negotiated prices are available for booking rooms as of Jan. 1. With hotels asking for higher prices, any discrepancy in rate-loading errors likely will be in hotels' favor.

"We do a lot of preloading of proposed rates in order to make sure we're able to keep our commitment to have rates available and bookable for Jan. 1," said Maureen Mackey, Hilton managing director for business travel sales.

Mackey conceded "there's going to be a certain degree of renegotiation, but for the most part you'll find it's a 50-50 split where 50 percent of the proposed rates are what we actually end up with."

Aware of buyers' chronic rate-loading concerns, Marriott declined comment, except to say, "We preload a majority of our account rates based on customer needs." Marriott claimed it is developing technology to detect rate-loading inconsistencies electronically.

Robert Dirks, Hilton senior vice president for sales strategy and development, defended preloading because of the time pressure hotel companies are under to load rates quickly. "Rather than wait for all the rates to come in at the end of October or November and then have to load tens of thousands of rates, we've got the rates already in the system," Dirks said. "It's a way of staying ahead of the game."

Mackey admitted that once errors have been detected, correcting them takes time and delays getting accurate rates in the GDS. "It's not something that can be done immediately, but when we get the customer's selections, we have our GDS team go back in and pull those rates out," she said.

Some buyers are sympathetic to the time issue. "If buyers get their final decisions to the hotels early enough, it eliminates the need for preloading because the hoteliers have sufficient time to get the rates loaded," said Brian Nichols, chairman of the National Business Travel Association hotel committee. Nichols, who is hotel and ground transportation manager for Deloitte in Wilton, Conn., said, "As a buyer, if I tell a hotel company I'm going to get them acceptances on Dec. 15, the hotels know there's no way they can load those rates within two weeks. They'd then go into a preloading mode and load in advance. It's a two-way street. If the buyer is going to be very late and the hotel company knows that, the hotel company is being proactive in loading the rates in advance."

Because they have less leverage, the impact of inaccurate rate loading falls hardest on small and midsize programs. "Preloading rates is a double-edged sword, the choice between having the rate loaded incorrectly or not having a rate for a preferred hotel in the GDS at all," said Peggy Lee, global travel and meeting manager for Network Appliance in Sunnyvale, Calif. "The onus is on the buyer to audit the rates and bring inaccuracies to the attention of the hotel company, so they can be addressed."

When rates change late in the negotiation process, the obligation should be on the hotel to make sure they are corrected, Nichols said. "It's easier for them. Say they preload rates for 100 hotels in my program. If I continue to negotiate with 25 and end up with different rates, the hotel company only has to change 25 hotels' rates instead of loading 100 hotels' rates from scratch." The hotel company, however, has to identify what those 25 hotels' rates are. "It falls to the hotel company to quality-check the final rates that the buyer accepts versus what they have in their system and make sure they adjust them accordingly," Nichols said. "Technologically, it gets dicey because the hotel company has to have a central database against which they can do this."

Buyers of small and midsize programs are most at risk of the consequences of preloading errors because they can least afford to conduct rate audits. "When you're managing a smaller program, it's a question of how much manpower you have available to monitor the hotels," Lee said. "Which evil would you like to take on, auditing and having the hotel company have to make corrections or not having the program loaded on time? It's not a clean and happy thing all around."

Because they have the least leverage, small and midsize buyers also are least likely to have a national account manager assigned to them by a hotel company. "A major benefit of having a national account manager is having someone who can go to bat for you with rate loading problems," Lee said. "It's probably hardest for midsize buyers because their programs are large enough to have rates to monitor at hundreds of hotels, but they're too small to get national account status at a large chain. These buyers are the most frustrated of all."

In contrast to Hilton and Marriott, Starwood Hotels & Resorts Worldwide has not preloaded 2005 rates in advance of getting the final buyer sign-off. Starwood also cited the time-pressure argument but, unlike Hilton, used it to justify steering clear of loading rates in advance. "Preloading actually can create a lot of extra work when the time comes to unlink or delete certain specific rates," said Anne Asch, director of e-distribution marketing and operations.

Once an account submits its final rate acceptances, Starwood begins the loading process. "It works well for existing accounts that are accepting the same hotels," Asch said. "As long as the hotels have the same rates loaded in their individual systems and the various systems are linked correctly, loading them into the GDS happens quickly. Manual intervention is only needed for new accounts or when a new hotel is being added to an existing program."

InterContinental Hotels Group distinguishes between individual hotels loading proposed 2005 rates to replace existing clients' 2004 negotiated rates and pre-loading rates for a buyer's entire program. "Our definition of pre-loading would be if our global sales department loaded all the rates first presented to the customer," said Jill Cady, director of global sales strategy and systems.

Pre-loading included, buyers spend an inordinate amount of their time ensuring rates are loaded correctly and on time, according to Lee. "Ask buyers and they'll tell you. It's not negotiations, no less planning the strategic direction of their program, that takes up much of their time, which it should. Rather, it's spent chasing after and cleaning up messes like rate loading."