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Setting up a hotel program.

Article Excerpt
The economic slowdown continued to suppress business travel buyer demand for hotel rooms in 2002, strengthening buyers' bargaining positions in negotiating with hotels. Hotels no longer could rely on the room night volumes they traditionally had obtained from their best corporate clients, so instead they increasingly focused on marketshare. For hotels, the appeal of marketshare gains was twofold. Not only did they benefit from a greater share of whatever business existed in the market, but they also store share from the competition. One caveat remained for buyers, however: They still had to demonstrate they could drive compliance and deliver the marketshare promised. As a result, buyers had to show that their corporate travel policies directed travelers to book only preferred hotels whenever possible. Many did that in the past year or so by narrowing the number of properties used in each city.

Buyers with a realistic grasp of their employees' travel patterns, and who had in place a data collection mechanism as well as the vocal support of senior management, were in the best position to benefit as they reasonably could assure hotels that they would provide marketshare gains.

In some cases, buyers were able to convince hoteliers to participate in online reverse auctions, procurement processes for bidding down the price of hotel rooms.

The occupancy rate for u.s. hotels in 2002 stood at 59.2 percent, down slightly from 2001 when occupancies were 59.8 percent, according to Smith Travel Research. The drop in revenue per available room showed even more significant slippage. RevPAR fell 2.5 percent, compared with the prior year, indicating that the industry cut back too far on room rates in the hope of stimulating demand. By contrast, occupancy in 2000, the industry's most recent banner year, was 83.6 percent. Smith Travel data showed the situation was most pronounced in the 25 u.s. destinations with the highest levels of business travel. RevPAR in these cities, which include Atlanta, Boston, Chicago, New York and Washington, D.C., was down 5 percent, compared with the prior year, with occupancy off 2 percent.

In the present economy, travel budgets, in many cases, have been slashed significantly, even from one quarter to the next, so buyers need to keep abreast as best they can of these developments as they affect hotel spend. Actual hotel spend data, which usually come from reports generated by the corporate card provider, also continue to be essential. Data that only reports on hotel reservations are less helpful since a high percentage of reservations are canceled, especially at the last minute. Additionally, when a company's top executives book hotels as specified in the travel policy, buyers have a much easier time convincing midlevel managers that they should follow suit.

The following summarizes essential steps that buyers should take when creating preferred hotel programs:

I. CHOOSE YOUR PARTNERS

Depending on the number of corporate travelers, the exact locations your travelers visit and the frequency of those visits, buyers may want to deal with a mix of large and small hotels and independent hotels and hotel chains. Depending on the length of your travelers' business trips, you may want to include extended stay hotels as well. These properties are more residential in feel than traditional business hotels and are designed for such travelers as consultants, trainees and trainers who need a place to stay for more than five nights.

A. Hotel chains

1. Reaching one or more agreements with hotel chains might allow you to leverage your travel volume to the greatest possible advantage. Fifty room nights over the course of a year may not mean much to an individual hotel, but 50 room nights to each of 30 hotels likely will attract some attention from the chain. That is especially true if many of those nights are in second-tier or third-tier cities, where the amount of business travel is less than in the gateway cities.

2. On a case-by-case basis, you might find it more efficient and cost-effective to negotiate with one national account sales manager, establishing a single point of contact with the hotel company.

3. Generally, it makes sense to start talking with a chain about negotiated discounts if your travelers can provide consistent business for a number of the chains properties, depending on the size of the particular chain. This travel frequency also needs to be predictable, meaning you can assure the hotel company with reasonable certainty that the room nights will materialize....

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