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 Hoteliers Meet with Airlines Concerning Issues
of Airline Crew Contracting;
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Taxes, Ground Transportation, Safety and Security,
Accounting, and Contracting
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HSMAI's Airline - Hotel Contracting Strategy
Conference, an Issues-Driven Forum

MCLEAN, VA (Mar. 2, 2004) – Far surpassing attendance expectations, 65 representatives from 21 airlines and 25 hotel companies participated in the debut Hospitality Sales & Marketing Association International (HSMAI) Airline and Hotel Contracting Strategy Conference held in Miami last week.  It was the largest gathering of airline representatives meeting in an open and candid forum with hotel personnel to discuss their most pressing issues and identify recommendations and solutions.

The day-and-a-half exclusive forum, designed to facilitate communication and understanding between these two segments, addressed the top five issues facing this $1 billion-plus market with a results-oriented discussion and roundtable brainstorming, followed by a recap of recommendations.

“This marked the very first face-to-face event for this unique and powerful market segment where they could intimately and candidly discuss and debate issues and ideas, and identify solutions,” states Robert A. Gilbert, CHME, CHA, president and CEO of HSMAI.

“What added to its uniqueness was the open environment and dialogue amongst competitors in both the airline and hotel industry, whereas traditionally airline-hotel contracting is addressed by individual brand or in a sales environment.  This was truly a solutions-driven, working forum,” adds Gilbert.

Airline attendance included: Alaska Air, America West, Air Canada, ATA, British Airways, Capitol Cargo International Airlines, Chautauqua Air, Comair, Delta, Hawaiian Air, Horizon Air, FedEx, Frontier, JetBlue, KLM Royal Dutch Airlines, Mesa Air Group, Northwest Air, Spirit Airlines, Skywest Air, United Air and US Airways.

On the hotel side, attending were: Best Western, Cendant Corporation, Comfort Suites, Crowne Plaza, Embassy Suites, Hilton, LaQuinta, Lodgian, Marriott, Ocean Properties, Prime Hospitality, Remington Hotels, Wyndham International and Starwood Hotels & Resort.

The following summarizes the five topics – Taxes, Ground Transportation, Safety and Security, Accounting, and Contracting (which were provided as handouts to all participants at the program’s close):

I. TAXES

Issue: Applicable sales tax and rules vary from city to city, state to state, county to county and country to country, creating confusion on how much hotels charge, potentially causing expensive add-on cost for airlines.  If not done accurately at time of stay, there is an expense involved in correcting the error and reimbursement of back taxes paid.

Recommendations for the airlines:

  •  Become more knowledgeable regarding tax exemption laws (i.e.: bed tax)
  •  Ask hotels more specific questions upfront
  •  Agree at time of contracting what tax ramifications are part of the agreement and what the plan is for updating each party
Recommendations for the hotel industry:

Billing

  • General manager and/or controller should review bills before they go out
  • Signer and submitter are both knowledgeable and accountable
  • Note on invoice should indicate tax-exempt items (Tax exemption should be calculated daily looking back over the exemption period)
  • Promptly return taxes
  • Take ownership for helping airlines recoup expenses prior to taxes
Corporate Responsibility
  • National sales rep should help oversee RFP process
  • Provide tax laws and information to properties and ensure that hotels implement correctly
Education
  • Due to high staff turnover, which often leads to inconsistent billing, hotel should provide and/or develop a training manual for new employees
  • Hold weekly or quarterly yield management/revenue management meetings
  • HSMAI or NBTA provide continuing education opportunities and periodical ‘tax review’ seminars
Documentation
  • Provide airlines (and hotel staff) with document outlining all city, state, county taxes. This document should be provided as pre-RFP verification to help the airline rep determine which counties and cities are most attractive, prevent hotel from incorrect billing, and provide a comprehensive reference for the airline rep. This should specifically list those taxes that the airline is exempt from.
  • Attach copy of tax laws to RFP
  • Hotel should maintain a file with the information and have a plan to update the information at least two times per year
Recommended Resource Links

As each state determines its own tax rate, begin with an individual state’s web page
(www.state.tx.us or www.state.fl.us, etc.).  From each state’s web site, look for State Comptroller, Dept. of Finance and Dept. of Revenue as sources for the tax rate in that state.

Other helpful links: 

  • www.taxsites.com (links to state and local tax web sites);
  • www.lawcrawler.com and www.findlaw.com (search engines for legal reference sites);
  • www.salestaxinstitute.com/sales_tax_rates.html (chart of standard state tax rates)
  • www.fbodaily.com.
II. GROUND TRANSPORTATION

Issue: All components of ground transportation are vital to the success of crew transport, from timely and courteous service to the use of clean and well-maintained vehicles.  Delays, particularly in return trip to airport, can be costly to the airline.

Recommendations for the airlines:

Communication

1. Provide current and accurate pickup times (as well as the contact phone numbers and/or websites) to the hotel
2. Clear communication channels with: i.Headquarters, operations and local ramp 
ii. Any mandated sub contracted vendors iii. Airport operations/authority - contract restrictions must be realistic
3. Airline should provide specific instructions to the hotel when contract begins (information kept at front desk)
4. Airlines and hotels must share information continually
5. Emphasize the importance/value of crew contracts to employees

Agreement & other documentation

a. Create metrics for quality service feedback mechanism (to measure and determine timeliness)
b. Agree upon penalties for non-performance
c. Agreement should include plan for schedules or terms that may change midway through an agreement

Basic requests from hotel industry

a. Recognize the importance to coordinate needs of airline with those of other guests (crews do not have the authority to set van departure times)
b. Realistic expectations should be set as they often are too high and haven’t been adjusted since 9/11
c. Emphasize that crew should be timely, and that vans should not wait for them when other guests need to go
d. The driver should be tipped by crew if service merits it

Safety

a. Include in contract that the vans should be locked
b. Create a contingency plan – transportation company under contract in case of emergency (with direct billing)

Recommendations for the hotel industry:

Drivers

1. Timeliness - drivers must recognize the importance and ramifications
2. Able to converse with crew members
3. Drive responsibly (no personal cell phone calls, safety basics, etc.)
4. Easily recognizable
5. Understand the importance of transportation in the relationship and that crews may need special exceptions to be made to accommodate their schedule
6. Empower, train and educate the drivers on how to respond to situations
7. Ensure that the vehicle size can accommodate crew and luggage
8. Understand that crew members should not be kicked off to take hotel guests
9. Water on van for people to drink, help with luggage, friendly
10. Train drivers on: i. Confidentiality of components of airline contract ii. Entertainment, area information and respective transportation options

Communication

1. Pay attention to schedule changes using technology to track flights and confirm pick-up times (ex. flighttracker.com, flightview.com)
2. Know contact names and numbers
3. Communicate to airline van availability and options during contracting process
4. Crew should be provided with shuttle departure times (these may be different from regularly scheduled departures for guests)
5. Maintain a log sheet with crew signature
6. Logbook for crew comments

Responsibility

a. Hotels should take ownership for all aspects of transportation rather than just the drive
b. If hotel commits to drive crew to local attractions they should honor this commitment based on availability
c. One person per shift should be responsible for all aspects of transportation.

III. SAFETY & SECURITY

Issue: The safety and security of airline crews at all times is vital.  Heightened security is necessary in all aspects of a crew’s hotel experience.

Recommendations for the airlines:

  • Crew should take responsibility and use common sense on basic safety precautions
  • Airline should initiate safety training for employees
  • If necessary, conduct a separate security inspection of hotel outside of normal site inspection
  • Create a checklist that satisfies both airlines and hotel security concerns
  • Provide crew with cards that can be carried with them that lists basic safety tips (print on room key or key packet)
  • Crew should obey hotel rules/security regulations (i.e. opening doors for smoke break)
Recommendations for the hotel industry:

Basic Standards of Service

1. Up-to-date safety equipment (automated key locks)

2. Screen phone calls from outside callers by asking for name in addition to room number
3. Connecting rooms should have additional security locks (and indicated as such)
4. Ensure that hotels report serious crimes against crew members to the police department and the airline
5. Timely response to security concerns identified by the crew
6. Ask crews upon check-in if they would like an escort to room

Other Suggestions

a. Provide crew with safety plans, procedures, policies and practices
b. Hotel staff should periodically check floors
c. Upon arrival, provide crew with welcome letter outlining basic safety tips
d. Have a coversheet for clipboards or electronic sign-in sheet
e. Identify for crew the head of security (whether it be a dept. director, general manager or front desk)
f.  Provide notice of scheduled security drills to airlines and/or crews (when possible) so proactive measures may be taken
g. Corporate offices should provide airlines with appropriate security updates

IV. ACCOUNTING

Issue: Proper and consistent accounting procedures are necessary to make everyone’s job easier.  The invoice format that the hotel uses is often inconsistent and does not meet the format requested by the airline.  Inaccuracy or non-compliance creates payment delay as well as additional time and cost on both sides to resolve.

Recommendations for the airlines:

Billing

1. Share billing requests/requirements with the hotel’s national sales rep
2. Provide clear documentation detailing billing procedure (corporate vs. direct bill travelers)
3. Standardize billing across the industry (develop industry standards for billing procedures among airlines)
4. Have one dedicated person for billing

Payments

a. Timely payments (Wright Express-Cendant’s solution, Guest Logic-Air Canada’s solution)
b. Pre-payment (hotel may offer discount)

Education

a. Hold pre-conference to orient new hotels
b. Provide new hotels with examples of other hotel’s invoices that provide correctly formatted invoices

Recommendations for the hotel industry:

Billing

a. Keep on file airline billing procedures and requirements
b. To expedite process, provide accurate breakout and backup for: i. Crew and manifest ii. Training iii. Ad hoc iv. Distressed passengers v. Maintenance
c. Offer weekly vs. monthly billing (depending on airline size and preference)
d. Develop electronic billing (multiples crews on property creates variety of types of billing and obvious confusion)
e. Have an ‘airline champion’ at the front desk (and/or accounting) who partners with a specific contact in the airline’s accounting department
f. Evaluate incentives for prompt or accelerated payment of invoices
g. Confirm process for and/or provide backup for incidental charges
h. Ensure billing complies with respective taxes and tax language in agreement
i.  National sales representatives to share samples of billing systems that may be standardized or formatted

Education/Communication

a. Educate the hotel staff before the crew begins their contract and explain such airline specific issues such as varying layover times and different length of stays. Keep reference binder at front desk with current information on bullets of agreement (per airline to honor confidentiality)
b. Educate national sales representatives i. Work on all account matters ii.      Informed of all invoices being sent to airlines and related problems iii. Know their product
c. Hotels should have a written SOP for handling crew developed from: i. National account director ii. Crew Contract
d. Due to high turnover, detailed written information should be provided to new general manager, director of sales and marketing and controller

V. CONTRACTS

Issue:  Both airlines and hotels have many issues and variables regarding the development and agreement that fits depending upon airlines needs, union requirements, hotel ownership and market conditions.

Contracts between hotels and airlines have many issues, such as:

  • Sourcing hotels and negotiating process - local property vs. leveraging a relationship with a national salesperson or a brand, management company, or ownership group
  • RFP process - why such a low response rate from hotels?
  • The authority of “who” can sign the agreement itself
  • Definition of a contract
  • Contract components: mutual indemnification; tax liability; lease vs. letter of agreement; other standards; appendices; term – hedge for long term rate commitment vs. hotel’s need to deal with changing supply and demand issues in market; scope of types of stays included (crew, training, inconvenienced passengers, day rates, etc); what happens if hotel changes ownership?
Recommendations for the airlines:

Perform site visit at hotel to see how crew assesses hotel

Communication
a.  Work more closely with brand (rather than local hotel) to prevent confusion
b.  Standardize contracts
c.  Confirm that the hotel company rep has signing authority
d.  Work with both the chain rep and management rep

Recommendations for the hotel industry:

Awareness
a. Recognize that multiple year contracts are subject to operational change (airline service stops)
b. Seek mutual win-win for both parties

Education

a. Educate owners, asset managers, hotel staff on contracts and displacement. Explain that crews and business travelers are not necessarily equal (airlines bring a large amount of revenue)
b. Involve corporate legal team
c. Provide post and pre-contract education
d. Define new RFP ‘lingo’ (i.e.: B2e & aero exchange)
e. HSMAI Forum to help educate the buyer/seller to instruct peers and upper management
f.  Educate airline buyers on displacement

Communication

a. If turnover occurs, and there is a new general manager or director of sales, call the airline
b. Visit the buyer (airline) at their site
c. Involve national account rep from the very beginning
d. Have attorneys review contract and determine who is authorized to sign
e. Standardize contracts - improve communication within brand and streamline contracts for airlines (encourage franchises to use)
f.  Provide timely contract execution
g. National should keep on file contract info and/or copy from local property (instead of airline)

In addition to the solutions-driven workshops, “state of the industry reports” were delivered by Jeff Potter, president of Frontier Airlines for the airline industry, and Mark Lomanno, president of Smith Travel Research, with an overview of the hotel industry. 

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HSMAI’s success in the strategic solutions business makes it uniquely suited to produce this event that facilitates dialogue between the hotel and airline industries.  Since 2001, HSMAI has held an annual Industry Outlook Strategy Conference, and in 2004, four unique strategy sessions are scheduled, including Hotel Internet Marketing (twice annually), Revenue Management, and Industry Outlook.

HSMAI is an organization of sales and marketing professionals representing all segments of the hospitality and travel industry.  With a strong focus on education, HSMAI has become the industry champion in identifying and communicating trends in the hospitality industry, while operating as a leading voice for both hospitality and sales and marketing management disciplines.  Founded in 1927, HSMAI is an individual membership organization comprised of nearly 7,000 members from 35 countries and 60 chapters worldwide.

 

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Contact:
HSMAI
8201 Greensboro Drive, Suite 300
McLean, VA 22102
phone (703) 610-9024
www.hsmai.org
Also See British Airways Sells New York City Hotel to an Affiliate of Hotel Properties Limited, Singapore for $31 million / June 2002
Meeting Contracts Between Event Organizers and Hotels Receiving More Scrutiny / March 2003


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