LABTA: Buyers Beware Of Vendor Consolidation
<B> LABTA: Buyers Beware Of Vendor Consolidation</B>
By Norman Sklarewitz
<I>Los Angeles</I> - Business travel buyers beware: You likely will lose your price negotiating power as industry consolidation continues to narrow the supplier base.
That was the troubling conclusion drawn at last month's joint meeting of the Los Angeles Business Travel Association and the Southern California chapter of Meeting Professionals International.
Thomas Karens, vice president of travel industry sales for Budget Rent A Car Corp., made no bones about his company's stance when he spoke before 340 attendees at the Los Angeles Airport Marriott. The ability to negotiate a better price depends solely on "the customer's dedication to use. If we're one of two suppliers, it'll be better than if we're one of three or four," he said, noting that car rental rates already have jumped between 5 and 7 percent in a trend he expects to continue.
Karens said the rental car companies are no longer owned by auto manufacturers who "used us as dumping ground. Our cars used to cost us virtually nothing, and after we used them, they were dumped on the used car market. Now we face the same sticker shock that everyone else does."
He also warned that no-show rates of between 20 to 30 percent are "unacceptable" to suppliers.
A similar consolidation trend is taking place in the hospitality industry, as hotel chains continue to add properties through acquisitions, franchising and development.
Frederick L. Miller, vice president of intermediary sales and marketing for Marriott Lodging, said he foresees the development of "common core services," in which buyers will deal with "one sales person accountable to the customer" for all levels of accommodations.
Marriott already has implemented a core services program in California. A team of 80 sales personnel represents the properties in all 11 Marriott brands.
"In the past, a corporate travel manager would be called on by sales reps working out of individual properties who sold only that single hotel," Miller said. "The effect was that various Marriott properties competed with each other."
Miller said Marriott reps now will sell guest rooms, meeting space and even catering. Client requirements then will be turned over to the booking center at the selected property, he said.
Supply-side changes also are impacting corporate travel departments on a structural level, as more of these departments begin to report to finance or purchasing instead of human resources, according to Eric Altschul, vice president of the consulting services group of American Express Corporate Services.
"Senior management is taking more interest in, and becoming more involved with, travel," he said.
Moreover, increased attention from higher corporate echelons could result in unforeseen results. For example, Altschul said, senior managers might ask the travel department to find ways to reduce travel.
"The involvement of senior management is changing the way we do business," he said. "Travel managers will be required to develop new solutions and not just arrange for travel."
On the Internet front, Altschul predicted the volume of online airline bookings in the next two years will increase to 40 percent from the current 20 to 30 percent.