NEW YORK— With the industry enjoying strong occupancies and ADR in many markets the past few years, corporate travel buyers have become increasingly frustrated with their inability to negotiate volume discounts. Hotels that were willing to give concessions on rate in return for volume commitments in less prosperous times have become selective. Yet hotels still value their relationship with their corporate accounts, especially in key markets that depend on business travel bookings midweek. At a recent briefing here, American Express Business Travel senior practice leader for hotels Priscilla Campbell described how corporate buyers and hotels can best work to meet their common objectives. “Depending on the strength of the client’s program, we’ve seen increases in rates in the key cities of anywhere from 5%-13% over 2006,” Campbell said. “These are fairly substantial increases. It was a very difficult negotiating season, one of the toughest in recent history. Especially in markets like New York, Chicago, San Francisco, and Boston, availability is still a real challenge for travel managers and as a result hoteliers are getting a premium cost for their rooms.” Given that travel managers may have had to absorb significant increases in 2005 rates over 2004 and 2006 rates over 2005, rate hikes for 2007 have had an even greater impact. According to the American Express Business Travel Monitor, the average domestic booked hotel room, which cost $182 in the fourth quarter of 2005, sold for $200 per night a year later. One response on the part of travel managers has been trading down, no longer including as many upscale, full-service hotels on their list of approved properties in favor of lower-priced options. A number of factors come into play when they’re trying to determine their strategy and focus their program. “If customers historically have allowed their travelers to stay at upper-tier hotels, suddenly to trade down to an economy or budget tier doesn’t make a lot of sense because that is a huge cultural change,” Campbell noted. “Some clients just culturally aren’t able to enforce that kind of change and change travelers’ behavior accordingly.” A down-trading strategy may not be the best solution. What is their corporation’s travel policy? Will the policy support change management? How are they going to communicate this to their travelers, specifically so travelers have more of a big picture idea of why the change is necessary and important for the corporation. These are some of the questions they need to be asking.” Other travel managers will opt to work with hotels in more marginal locations. “In New York, for example, some clients’ strategy may be to steer clear of Manhattan hotels and move travelers to more of a fringe area in order to find more attractive rates,” she said. But travelers may then end up incurring additional transportation costs. What will the impact be on travelers and on the overall business? “These are options travel managers weigh. In New York as it happens, many hotels can be looking for a guarantee of at least 1,000 room nights a year before they’ll consider a negotiated rate, so travel managers may have no choice but to consider alternatives like going to the outlying areas.” For their part, hotels need to be sure the proposed room nights will be there in return for any consideration on rate. “One of the things we’ve stressed strongly this year is that once you establish a relationship with a chain or in some cases specific properties, it’s critical that you to be able to shift your business to those properties and support the agreement because that’s what’s going to lay the groundwork for upcoming years,” said Campbell, Littleton, MA. “It’s hard to predict without a crystal ball what’s going to happen with rates in 2008, but everything right now looks like it’s trending towards another difficult negotiating season. So it’s incredibly important for travel managers to put some muscle behind their
American Express Business Travel senior practice leader for hotels Priscilla Campbell