More Corporate Transient Business
|By: Neil Salerno – July 2006
Just a few short years ago, the Internet turned the corporate transient market topsy-turvy. It seems like just yesterday that we simply negotiated rates with corporate clients. We based those rates on their potential room night volume and travel pattern; and, hopefully we were able to count on their business unless or until another hotel came in to bid against us.
In those days, all rates were opaque, except for our published rack rates. Companies loved negotiated rates because they were able to get a good deal as compared to our rack rates; hotels loved it because we were able to negotiate good base business.
We sold rooms which started at rack rates and worked down to special promotional rates as needed; super-special rates for companies with volume. For the most part, companies with the highest volume and best travel pattern got the lowest rates; companies earned those special rates with volume business. In turn, companies encouraged their travelers to use the hotels they designated as a partner hotel. All was well in hotel-land.
The Internet changed all that
One of the strongest advantages we had in those days was that rates, other than our rack rates, were hidden and not easily discerned by the public. The process of shopping hotel rates, in those days, was pretty difficult. It required searching through hotel company directories and/or making many phone calls. Rack rates, the only visible rates, established the value of our negotiated rates by the comparison between the two.
As the popularity of the Internet exploded, hotels gained the ability to market to the entire world, but, at the same time, lost the flexibility to control their own rate structure. Suddenly, corporate consumers had the ability to check rates on the Internet to find the best rates available; no more hidden rates. This really complicated the corporate rate negotiation process.
Franchises Impacted the Industry’s Rate Quoting Process
To make matters worse, realizing that third-party aggregators were quickly taking-over control of travel on the Internet, several major franchises began to fight–back by declaring “lowest rate guarantees” on their web sites. It made sense; how else would they draw consumers away from third-party sites?
This one act made the Internet a bargain basement for consumers and forced hotels to sell rooms by lowest rate. Yes, it worked well; it continues to boost traffic to franchise web sites, but it also changed the way we sell rooms. All of a sudden, discounted rates were not only visible to the public, but also promoted internationally. Thank goodness promotion of lowest rate guarantees have subsided a bit in the past year or so.
Their decision to guarantee lowest rates on their web sites helped franchises to re-capture their share of the Internet channel, but it provides little benefit for their individual hotels except to force them to sell by lowest rate instead of the merits of their hotels. It also helped teach consumers to shop by rate on the Internet.
The early success of third-party portals threatened the very existence of the franchises. After-all, why would one pay a 5 or 6% franchise fee on all room business, whether it is generated by the franchise or not, if hotels can get the same volume from third-party portals and pay only for the room nights they generate. Now that the franchises have been able to cut their own deals with the third-parties, the war turned cold, but the competition between them is still tense; and hotels lay somewhere in the middle.
The biggest benefactors of the war for web dominance have been consumers; especially corporate travelers. In order to maintain their contracts with companies, many hotels were forced to offer even deeper discounts, but without the promises from corporate accounts to produce any volume of room business in return. Suddenly, corporate clients were comparing their negotiated rates with our lowest published rates instead of our higher rack rates.
Until the franchises learn how to compete with third-party portals with anything other than simply promoting their lowest rates first, this controversy will still exist. The “bedding wars” were a good step to promote the merits of their hotels and not just lowest rates; unfortunately, I can’t imagine many franchisees being pleased with the large investment required.
We need to provide more services
Corporate transient business has never based on rates alone. Hotels that profit by negotiated rate corporate business learned to think “outside the box”. They created formal corporate rate agreements, which included special value-added benefits and amenities. These benefits became “special” to that company and could not be found on anyone’s web site. In many cases, this was enough to lock-in that company’s business. Value-added features have never been more important than they are today.
Think outside the box; the old amenities of free local calls and continental breakfast just won’t cut-it anymore. To be effective, negotiated amenities cannot be available to the public; otherwise they are no longer special. Free high-speed Internet is now a necessity; so, how about free long distance calls for those who want to save minutes on their mobile phones; it’s possible today with Internet phones. Find those things that are important to that company and use them to lock-in their business; what better way to find them than to ask them.
How about creating a link to your site to be placed on your client’s office computers? How about a volume reward program designed specifically for the corporate traveler; these can be easily tracked on your web site. Be creative.
Make your web site a better corporate sales tool by offering potential clients their own special page on your web site. This page can be made public or, better yet, private to that company with pass code access. Provide a link on your site to their company web site directly from their page on your site. It can be a valuable link for you and encourage the company to provide a link from their site…to their page on your site. This is a simple task for your web master.
Create a business resource page on your web site listing all local major companies; this will increase traffic to your site and give your site more accessibility to the local business environment. An often forgotten tool is to include the names of major companies in your area with your Meta Tag key words and phrases on your web site. Wouldn’t you like your site to show, as a search result, if someone is searching for those companies?
Use the Internet to Research Potential Clients
I couldn’t even begin to count the number of hours I spent in the public library, in the years before the Internet, researching potential business. That’s all gone today. Many times one can determine the needs and wants of a company by reading about their structure and corporate goals online. Names of and information about their decision-makers can usually be found on their web sites.
Selling is easy; finding someone to sell is the hard part. Sales people, who master the art of prospecting and soliciting business on the Internet, win more often. Learn to use the Internet and your web site to find and lock-in corporate business. There are many additional ways to get the Internet and your web site to work for you; sit down with your team and discover them.
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