One-On-One: Swissôtel's Meinhold Eyes Expansion

By Cheryl Rosen / May 14, 2000

One-On-One: Swissôtel's Meinhold Eyes Expansion

By Cheryl Rosen

Swissôtel president and CEO Andreas Meinhold recently spoke with BTN hotel editor Bruce Serlen about the importance of the travel buyer in building a global business hotel company.

BTN: What kind of technological support can you provide travel buyers in terms of RFPs and rate loading?

Andreas Meinhold: We're a strong supporter of electronic RFPs and appreciate that timely rate loading is an enormous issue today. We have a person dedicated solely to this function. The critical time, of course, is the fall because everyone wants to get negotiated rates finalized and then loaded into the system by year-end. In terms of negotiating based on prior volumes, we maintain very accurate data electronically. All our measurements are based on actual revenues, rather than on centralized reservation statistics or commission numbers. Hotels report back to us monthly on each of our top accounts. The reporting shows revenue actually generated by that company. There's also a difference between the room night spend and the total spend, so we understand that travel buyers are interested in negotiating on the basis of the total spend, because that number is larger.

BTN: In light of this access to data, where does Swissôtel stand on providing travel managers with full folio expense data electronically?

Meinhold: We're fortunate to have implemented a technology platform at our properties that's identical worldwide. Many of our larger competitors can't claim this because they might have, for example, 10 different property management systems in place, where we have just one. Because of our data warehousing capabilities, we can tell where a certain key account's travelers stayed, how much they spent and what they spent it on. Accordingly, we want to accommodate travel buyers' interest in getting full folio data to them. We just need to find the best way of enabling them to access the information electronically.

BTN: Is negotiating last room availability a priority for your customers and, consequently, for you?

Meinhold: We're in a service business, one that's clearly built on relationships, so it is very difficult to have to say no to a room request under any circumstances. Unfortunately--or fortunately, depending on how you look at it--many of our hotels are frequently sold out, given the strong economy and the strength of our properties in the marketplace. This makes the issue of last room availability particularly pressing.

We will negotiate last room availability for clients when the volume warrants it. At the same time, our hotels have three different guest room categories at different rates. This allows us to come up with a tiered program of negotiated rates, which then gives us additional flexibility when it comes to last room availability.

Flexibility is really essential here as we manage the room block inventory at a hotel on any given night. Again based on volume considerations, we'll also negotiate blocks of rooms for certain nights of the week on a year-to-year basis. The number of rooms can be as small as two to three or as large as 15. For these room blocks, we can arrange very short cut-off periods, say 72 hours.

BTN: How do you approach travel buyers who represent multinational companies?

Meinhold: Given how quickly companies today are expanding internationally, we've developed a sales structure that we believe is responsive. We employ a team approach where we have a global team leader for a specific key account who is located closest physically to the worldwide headquarters of that account. Then we have a regional team leader and team members based either in our hotels or corporate sales offices. The system is meant to acknowledge that a multinational account doesn't necessarily negotiate travel from one point, but may negotiate from a number of points around the world. It's a very time-intensive approach. Coordination is crucial. The challenge for global team leaders, in particular, is to stay abreast of the changes continually underway at the companies they work with, because as these companies change and grow, their travel needs change as well--at times, radically.

BTN: How many global key accounts does Swissôtel have, and what about accounts that don't qualify?

Meinhold: We have approximately 120 true global key accounts. They produce roughly 80 percent of our room nights. We only designate an account this way if we feel the potential is there for a certain threshold of business. Travel can't just be to one city. A minimum of two cities is required in different regions of the world. At the same time, on the local level there may be a small company--a law firm, for example--that brings a lot of business to just one hotel. While not a key account, this customer is still important to us.

BTN: Many of your competitors are developing sub-brands as a way of capturing more of their customers' business. Do you see this as a viable approach?

Meinhold: At Swissôtel, we have decided that we are maintaining a single luxury brand strategy. We would not at this stage focus on a second brand at a lower level. A tertiary brand, for example. Swissôtel Residences is a different situation. Swissôtel Residences evolved because we discovered that there was a strong demand for long-term accommodations in certain markets--in Asia, for example--and that many of our hotels in those destinations have rental possibilities in separate but adjoining buildings. Would we have a Swissôtel Residence without a Swissôtel next to it? The answer is no, because the appeal is the combination of the private residence and hotel services.

BTN: The newest Swissôtel opens in London this month, giving you 23 in the chain worldwide. What are your expansion plans?

Meinhold: Like other hotel companies, we realize that to be world class, we need to have a presence in the gateway cities that are favored destinations for business travelers, both in the United States and internationally. At the same time, these gateway destinations tend to have very high barriers of entry, which makes development of a luxury property complicated. Swissôtel Berlin opens in 2001. Elsewhere in Europe, we would like to have a presence in Paris, Rome and Madrid. In the United States, we don't yet have properties on the West Coast. And we count Canada as an important market where we would welcome having a presence as well.

BTN: How supportive is your parent, SAirRelations, a division of SAirGroup, of these expansion efforts?

Meinhold: Very supportive. The relationship is strong on both the development and marketing fronts. Yet, new projects must make sense fiscally. In these high barrier to entry markets, projects may seem attractive, but just don't make sense in terms of the bottom line.

In conjunction with our airline partner, Swissair, we're able to offer travelers a service called SwissConnection. It provides ground transportation from arrival at the airport to any Swissôtel. Pre-registration takes place en route, and guests are escorted directly to their rooms. It's appreciated particularly by travelers who may be tired from a long flight.

BTN: Many European-based hotel companies have been in acquisition mode lately. Do you expect this to continue?

Meinhold: The majority of the mergers and acquisitions lately, as well as organic transactions, have been happening in Europe by Europeans. It's clear they are currently some of the larger powerhouses, by which I mean the 10 largest hotel companies, and that they are attempting to acquire additional brands in an effort at consolidation.

I'm not at all surprised that Europe is the scene of so much activity. If you look at the buying cycles in the market today, you know the European cycle was starting to pick up about 18 months ago, just as the U.S. cycle was concluding. Approximately 80 percent of all the hotel inventory in Europe is non-branded. If you look at Germany, for example, there are many brands operating there, but there is still a huge inventory of privately held hotels that sooner or later will have to join some marketing organizations or bring in their hotels under franchise or management agreements with existing brands in order to compete.

BTN: What's your opinion of the Eastern European region as a growth area for hotel companies?

Meinhold: These markets are growing, though possibly not as fast as everybody expected. Every major hotel company is looking there, as we are. By this, I mean the main markets, the business centers, including Hungary, the Czech Republic, Poland, Rumania, then Bulgaria and eventually the republics of the former Soviet Union. It will happen, but it will happen more slowly. Yet, this doesn't mean you can wait. You have to be planning today, so that when the right moment comes, your development plans are ready. After all, there will be only so many desirable sites for the luxury kind of project we would want to do.

BTN: Small boutique hotels are making an impact in many markets. Is this a viable growth area to pursue?

Meinhold: As long as the economy remains as favorable as it has been in the past 10 years to the majority of our U.S. and European customers, I believe that market will be growing. Because with that affluence comes a desire for extreme personalization, which expresses itself in a number of ways.

There are suddenly travelers who want to be different and can afford to be different. They are convinced they have the right to have many, many choices and these boutique hotels are just another extension of the various choices people have. So, it goes back to your lifestyle and values. If you have the necessary means, you can do that.

BTN: How would you describe Swissôtel's guest service orientation?

Meinhold: I think we are a group of individual hotels that provides, for lack-of-a-better-word, luxury services to the primary customer segment, which is the corporate individual business traveler. What makes it remarkable is that our service product is consistent--we're Swiss after all. It is consistently delivered at the optimal qualitative level that a customer could expect. And in all that, it's about providing choices. I'll say it again. Choices. Anymore, it's not that you have a particular service or amenity, it's how many times you have it, in what application you have it, whether it's your availability of working space, whether you want it in a semi-private office in a business center, whether you want it in your guest room, whether it is computer software or high-speed Internet access. It all depends.

BTN: Do you find these preferences break out along national lines?

Meinhold: Yes. Take, for example, where business travelers are most comfortable working while in the hotel. You may want to work in your room. I don't work in my room. I want to work in an office environment. About 30 percent of our U.S. customers are international and their expectations are essentially different from U.S.-based customers. While U.S.-based guests prefer to work more in their rooms, international guests like to just use their guest rooms for relaxing.

For another example, when we poll guest preferences, everyone tells us they want a fitness or wellness center on site. But when it's there, everybody doesn't want to go to the wellness center. They want to have the treadmill in their room. So here you go again with choices. You have to have both. It's an ongoing issue.

With today's affluence, expectations have increased extraordinarily. And as a luxury hotel company, we have to be able to deliver on that. You can no longer just say, this is my product, this is what we're known for. There's a broad array of services that come with that basic product, if we're to satisfy our guests' newly defined needs, wants and desires.

BTN: Analysts talk about high-end business travelers today suffering "time poverty." As a result, there's often a blurring of business and leisure travel. How do you see Swissôtel as being well-positioned to take advantage of this trend?

Meinhold: Today, this whole concept of an annual vacation has eroded, it doesn't exist anymore, at least not in the United States. The concept still exists somewhat in Europe, but it's becoming less common there too. Accordingly, we must change our product in order to provide customers with the feeling that they've gained optimal relaxation within the shortest amount of time.

As a result, hotel companies need to design and devise their product and processes to make sure guests are engaged from the moment their vacation starts, whether that means the airplane flight or arriving at the front door.

You end up with two different hotels. From Friday at noon until Monday morning, people are at business hotels like ours for leisure purposes. They have a different set of needs, wants and desires than they do from Monday until Friday. There are many business people whose spouses or companions arrive on the weekend, for example. Consequently, hotel managers and employees need to understand that "while I appreciate my room was made Monday to Friday morning by 9 a.m., I don't appreciate it on Saturday morning because my spouse arrived the night before and I expect the hotel to know and have taken the necessary measures to accommodate that." The ability to react, to have someone at the front desk or in the reservations office frame this thing like, "Meinhold's spouse is coming on Friday. Operations, please adapt your processes to that and design them accordingly." That's what makes all the difference.

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