UBS Warburg Sees New Threat To Hotel Rate Improvement

NEW YORK— In addition to the current pullback in business travel, market analysts at UBS Warburg here foresee yet another impediment to any eventual hotel-rate rebound— a growing affinity for reverse auctions among the nation’s corporate travel managers. Indeed, it is the belief of market-watchers at UBS Warburg that “reverse auctions will be used increasingly by corporate travel managers in the future, and represent a secular threat to hotel rates. Nearly all lodging companies will be impacted,” according to the firm’s Global Equity Research findings. Moreover, UBS analysts further contend: “The use of reverse auctions for group meeting and citywide convention negotiations is likely in the future.” Reverse auctions are defined as “an on-line procurement tool used by companies to negotiate individual business travel (i.e. corporate transient) rates and contracts with hotels. Essentially, the process is built around many sellers and one potential buyer (in this instance, of corporate transient lodging).” Consequently, the advice to the marketplace by the company’s analysts is that, “investors should stay on the sidelines during the next few weeks as [the firm]gauges whether business travel will decline sequentially from second-quarter trends.”