Buyers who hit a brick wall when negotiating with hotel chains and multibrand hotel companies often overlook a third source that can improve their final results: hotel management and ownership companies.
While negotiating directly with individual hotels is a standard travel procurement practice, working with management and ownership groups remains a much less common strategy, said Michelle Hunt, regional category manager of travel services for DHL Global Business Services. Hunt has built up relationships with various management companies, including Crescent Hotels & Resorts and White Lodging, both of which have portfolios of hotels including midprice to upper upscale brands across North America. When putting together her hotel program for this year, as negotiations with a few chains proved difficult, she found those relationships paid off.
"Not everything we submitted was taken back, so with some of those holdout hotels, we finished directly with the ownership groups," Hunt said. "On every single one where we engaged, we did improve the final offer at the chains."
That improvement came in the form of a better rate and/or additional amenities, including some offers from "creative, out-of-the-box thinkers," she said.
For example, rate-inclusive breakfast is one of the most crucial amenities for DHL, particularly for inbound travelers from outside of the United States who would not otherwise be reimbursed for the meal. Some hotels did not have a restaurant or regular breakfast service. In negotiations, they came up with such alternatives as Starbucks gift cards or items from the minibar, Hunt said.
"I like the way they stepped up," she said. "They didn't shut down the conversation, and it was eons apart from someone where that answer is just, 'No.' "
Working Directly
Resources available to corporate travel buyers also vary widely within management and ownership groups, which can range in size from just a handful of hotels to large portfolios. Interstate Hotels & Resorts, with just under 400 hotels throughout North America as well as some in Europe and Asia, falls firmly into the latter category and has a long history of working directly with buyers, said executive vice president of sales and marketing George Brennan.
"We bring a dimensionality that most management companies simply don't have," he said. "We leverage that ability to be able to talk to travel managers and represent a large number of hotels in many markets."
In several markets, including New York and Southern California, Interstate has multiple hotels covering a range of brands and tiers. In those markets, Interstate can act as a single point of contact for buyers, Brennan said.
As with the industry at large, Interstate follows the standard request-for-proposals season, with the busiest time in the fall, he said. Its sales team works alongside brand sales teams at branded hotels, identifying accounts they would like to retain or add.
"It gives them a secondary effort beyond their brands, with particular focus on converting accounts that might be in their competitive set," Brennan said.
Negotiating with hotel ownership and management groups can yield different results than doing so with chains because they "have different financial goals than the chain does," Hunt said. A chain national account manager looking at results across multiple properties might be more willing to turn away business at a single hotel if the possibility exists for better results across the chain.
"Sometimes chains feel entitled, like they're going to get your business anyhow because of loyalty programs," Hunt explained. "The ownership truly wants your business."
Carlson Wagonlit Travel hotel solutions group director Yon Abad said he has seen other buyers find success with the strategy, and it can yield benefits for both sides.
"If a buyer is able to establish a direct relationship with the owner, they will likely see good results as well as flexibility to implement creative availability and savings solutions," according to Abad. "It may also lead to additional cross-business between the company and specific properties."
The strategy, however, is tough to implement too widely across a program, as owners generally are interested in speaking only with their top few corporate customers, Abad added. Buyers usually do best targeting those groups with which they have the highest spend, he said.
Going to owners also can cause friction with those chain hotel salespeople who "don't like to be bypassed by buyers interested in having direct discussions with ownership," Abad said. Hunt noted that she never has seen a national account manager push back against what she was able to negotiate with management groups.
Working With Tech
One challenge Hunt faced was that the ownership and management groups she wanted to work with did not have access to tools used by Lanyon, a third-party provider that assists DHL with hotel RFPs. As such, that aspect of the RFP process had to be conducted separately via email, which she said was "extra work on my part, but worth the effort." Hunt said she is talking to Lanyon to see whether the groups can gain access to its tool.
Lanyon managing director for Europe, the Middle East and Africa Roland Tanner said the company already has functionality in its tools to allow buyers to work with management companies.
"They supplement the hotel chains, bring an extra layer of value, and they often are very active in supporting the hotels in their corporate negotiations," Tanner said. "You have to make sure you support the integrity of the data, and you have to have data privacy."
For instance, Lanyon has to ensure that the hotel itself does not have duplicate appearances in the tool as represented by its owners and its brand company, he said.
Looking forward, Hunt hopes to change the dynamic and broaden her contacts with hotel management companies in program negotiations. She and her team are examining the biggest ownership groups to determine the proper current contacts. "Each group has a different set-up, so we're trying to figure out how to find that single point of contact," she said. "We have 13 or 14 of the biggest ownership groups finalized, and [my team] is reaching out to explain what I want to do on a bigger, broader basis. We want them involved from the beginning."
Hunt also is working to leverage her relationships with management companies for group and meeting bookings "where it makes sense to move additional business," she said. "You can be comfortable to say internally within your organization that these folks are going to take care of you."
This report originally appeared in the May 2014 edition of Travel Procurement.