U.S. Buyers Manage Globally Via Local Peers Overseas

Travel buyers who manage global hotel programs have relied more in 2002 on their counterparts in the locally based international markets than in previous years to select hotels, manage programs and, in certain cases, provide input on rate negotiations. Furthermore, buyers last month said they expected the trend toward decentralization to continue in 2003 and for the foreseeable future.

Underlying the development is a combination of three factors. Most immediate is today's economic reality. With cutbacks in travel budgets, rate negotiations at the local level often can produce additional savings. Locally based members of the travel team are best equipped to make sure their companies get the best rates in their respective regions.

Secondly, with compliance more of an issue than ever, U.S.-based buyers need to be sure travelers in the local markets understand travel policy and ensure that only the most appropriate hotels are included in the program. Since they are fluent in the local language and have a grasp of the culture, local travel team members can best provide this hands-on direction.

Third is the simple realization that, contrary to the wave of centralization that consolidated power in the hands of U.S.-based travel managers in the mid-to-late '90s, global programs tend to be large and unwieldy, many involving hundreds of hotels. Consequently, with U.S.-based managers still retaining ultimate responsibility, delegating decisions to local team members can make managing the overall program more practical.

At Credit Suisse First Boston, vice president of global travel Erin Barth expects the company to work with about 700 hotels in 2003. Each spring, the company convenes a hotel forum at its New York main office attended by representatives of global hotel chains. "The forum allows the company's travel team to get the word out on our lodging requirements for the coming year, our customized request for proposal process and our decentralized global travel structure," she said. "This way, the hotels know who to contact locally."

A regional head of travel for Europe, the Middle East and Africa is based in London, while the Asia/Pacific counterpart is in Singapore. Another large office is in Zurich, where parent Credit Suisse Group is located. As the firm's global business changes, so do travel patterns and room night requirements. "This year, for example, the Asia/Pacific region added twice as many hotel locations, which means much more activity for local team members," Barth said.

Typically, a travel buyer's objective is to create a consolidated program, wherein outbound U.S. travelers book the same hotels at the same rate as part of a single deal negotiated by team members in the local markets and, conversely, inbound international travelers get the same hotels and rates when they travel to the United States. In the case of Aon Service Corp., consolidation occurred first in the United Kingdom and the U.S. program followed suited. Yet, the travel program has been U.S. managed. "As a result, there's been a true partnership between the U.S. and U.K. teams," said Harriet Washburn, vice president of travel, who is based in Chicago. Because of the strength of this relationship, Aon last year was able to rely on the U.K. team to identify five London hotels and negotiate favorable rates that included guaranteed availability. Travelers then were required to stay at those hotels or not be reimbursed (BTN, April 8). Aon negotiated similar guarantees at its top U.S. cities, but London was the only international destination where such an arrangement made sense.

Similar to many domestic destinations, meanwhile, international hotel markets can have special characteristics, which can require buyers to be flexible. At Ford Motor Co., corporate travel associate Sean Curley doesn't usually negotiate hotel room blocks. "But in a market like Cologne, it can be difficult to obtain a sufficient number of suitable rooms, so we make an exception," he said. Curley relies on his European-based travel team to negotiate accordingly.

As Ford's regional travel manager for Mexico and South America, Antonio-Henrique Sala faces a more comprehensive challenge. "Hotel negotiations and other aspects of travel management in a region like this aren't as sophisticated as in North America or Europe, though that has begun to change. So, at the same time we're working with suppliers to standardize RFPs and negotiations within different markets in the region, we want to be consistent with Ford's global policy," said Sala, who is based in São Paulo.

At certain companies, corporate history makes decentralization the logical choice. At Pharmacia Corp., the present company resulted from the 2000 merger of the Swedish company and an American company, Upjohn. "Because of the historical connection to Sweden, it made sense to let the Stockholm office oversee much of the global hotel program," said Stephen Mitleider, manager of global travel sourcing who is based in Skokie, Ill. Not surprisingly, Stockholm was Pharmacia's top international destination in 2001, booking 3,500 hotel rooms, followed by Paris, Milan, London and São Paulo.

Yet, Pharmacia's travel program is due for further change. This summer, Pfizer Inc., another pharmaceutical company with extensive international travel, announced plans to acquire Pharmacia.

Similar to the U.S.-U.K. partnership described by Aon's Washburn, the most effective relationships between a company's U.S. and international buyers are marked by close contact and communication. "The local relationships are critical today, especially for forming trust," said Lisa Bliss, manager of hotel programs for Boeing Corp. in Tukwila, Wash., at last month's National Business Travel Association convention in Salt Lake City. One of the persistent issues facing companies with global programs is that non-preferred hotels will call unannounced on the local offices with the intention of siphoning room nights away from the approved vendors. "These vendors frequently will call on our office in Hong Kong, for example. It's reassuring that the staff there knows to alert me, so I can intercede," Bliss said.

Cognizant that negotiations for global programs increasingly are being conducted from points around the world, the NBTA hotel committee this year took steps to ensure that its electronic RFP format was as easy to understand for global hotel companies as domestic ones. "For the 2003 bid season, we really didn't make any substantive changes in the modular approach that the committee had introduced a year ago," said committee co-chair Tracey Wilt, senior buyer for hotel programs for Xerox Corp. in Webster, N.Y. "What we did do was make some clarifications in language, which we thought would make the questions asked more comprehensible outside the United States."

The committee's objective was to create a level playing field. "With this in mind, we've also translated the instruction sheet into French, Spanish and German to benefit non-English speakers. Everyone must still respond in English, however," said committee member Peggy Lee, global travel and marketing manager at SGI in Mountain View, Calif. "We didn't want hotels in Europe or Asia or Latin America to be at a disadvantage and, therefore, less likely to respond to RFPs or to respond incorrectly."

While many companies use the NBTA electronic RFP format, others, such as Credit Suisse First Boston, choose to customize their own form. "Given that we work with so many international hotels, we made adjustments in two areas of the RFP this year designed to make it easier for these properties to comply," Barth said.

One area involved telephone service. "Not all international markets are as sophisticated as others when it comes to telephone and high-speed Internet access. But these services are critical to our travelers," she said. "Therefore, we increased the number of questions in this area."

A second area concerned breakfast. In certain countries in Asia and in Europe, for example, the availability of breakfast—and the type of breakfast, whether a continental, buffet or full breakfast—is a high priority, so more information was requested here too. The company gives preference to hotels that include breakfast in the negotiated rate, Barth noted.

For their part, internationally based hotel companies are eager to work whichever way the corporate account prefers. Their objective is to get as high a percentage of the account's marketshare in as many cities as possible. This means analyzing each account to identify how it structures travel management globally, how decentralized its purchasing decisions are and who the final decision makers are.

Internationally based companies, however, have found themselves at a steep competitive disadvantage because they're up against such mega U.S.-based multi-brand companies as Marriott International, Hilton Hotels Corp. and Starwood Hotels & Resorts. These companies not only have much greater access to buyer-intelligence, but they consist of well-known brands and already are working with the corporate accounts on their U.S. programs. In addition, they have considerable in-house experience under their belts responding to electronic RFPs.

"Getting a foot in the door can be a real challenge for the internationally based players, if only because large corporate accounts typically have various operating units and subsidiaries around the world and it can be hard to pin down exactly how they purchase hotel rooms," said Joe Carino, president of the Carino Collection, a New York-based hotel representation firm, a number of whose clients are internationally based companies. "It can be like detective work."

Certainly, expertise in RFPs has become crucial today, according to Reto Wittwer, president and CEO of Kempinski Hotels, a Geneva-based company with 30 properties mostly in Europe. "Given the size of their programs, corporate buyers certainly don't have time to deal with proposals any way but electronically," Wittwer said. "Though, given the technology, the form has to be submitted letter-perfect to be accommodated by the system."

For other companies, the primary issue is building visibility in the U.S. market. "Buyers may know—and regard highly—individual properties, but not have knowledge of the company's overall scope," said Gabriele Burgio, president of Madrid-based NH Hotels, which through major acquisitions it made in the past two years has amassed 236 hotels, primarily in Europe and Latin America.

Similarly, buyers may know of a hotel company—and include it in the bid list—though not always in a complete sense. "Because Concorde Hotels is French and has a lot of supply in Paris, buyers often think of us exclusively in terms of that one market, when we're really diversified," said Anna Karas, regional director for North America, who is based in New York. "In fact, we have 90 hotels in 22 countries."

By contrast, other companies' inventory is more tightly focused. They see such concentration as a plus. "With four of the five hotels in our portfolio in London, we know that market extremely well and can work with buyers to their advantage," said Geraldine McKenna, executive vice president of The Savoy Group. McKenna noted that, depending on the demands of the account, a depth of well-situated inventory in one city can be more advantageous to a buyer than a splattering of rooms in locations that might not be so desirable in a number of cities or countries.

Location aside, in certain parts of the world more than others, buyers need to be alert to the hotels' accommodations and service levels, according to Jodi Dell Leblanc, director of sales and marketing of deluxe Taj Hotels and Resorts, which has 50 properties, most of which are in India. "U.S. business travelers bring their own level of expectations to bear and buyers need to be sure the preferred properties match up," said Leblanc, who is based in New York.

In terms of buyers having the upper hand going into the 2003 rate negotiations, internationally based hotel companies have suffered drops in occupancies and room revenues comparable to their U.S.-based competitors. "In many cases, we've seen U.S. travelers not cancel an international trip, even when the company was cutting back on travel overall," said Ron Roy, vice president of business travel and distribution for the Americas for Spain-based Sol Meliá Hotels & Resorts. "They've gone forward with these trips precisely because of the amount of time that's gone into planning them. By contrast, short trips, say between two nearby U.S. cities, might seem more expendable." Sol Meliá has more than 330 hotels in 30 countries.

"Certainly, we're sympathetic to our clients whose travel budgets have been cut and have come to us for relief," said Jennie Chua, president and COO of Singapore-based Raffles International Hotels & Resorts. "In the same way we have gone to our vendors and asked them to remember our long-term relationship in assisting us, we are determined to work with our clients." The Raffles portfolio of 38 hotels is strong in Asia, though the company's recent acquisition of Swissôtels increased its presence in Europe and the United States.

Looking to the future, Sol Meliá's Roy said that U.S.-based buyers' global programs were only likely to grow in the coming years. "Even if the down economy persists, the trend toward globalization isn't going away. Consequently, for global hotel programs, there's no going back," he said. "After all, of the U.S. gross national product, experts say roughly 30 percent depends on imports and exports. Twenty-five years ago, that figure was more like 3 percent. These numbers speak for themselves."