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Despite Lower Rates, Major Global Hotel Brands Have No Plans to Compromise Service or Scale Back Amenities

Consortium of Hotel Industry Leaders Meet on BusinessTravelConneXion.com for Chat; Flexibility, Compliance and Relationship Building Vital to Success in Economic Environment

- Hotels and Buyers Unite to Negotiate Win-Win Scenarios-


NEW YORK - May 7, 2009 - Representatives from Hilton Hotels, InterContinental Hotels Group, Omni Hotels, and WORLDHOTELS recently convened for an hour-long, Live Chat Event on BusinessTravelConnexion.com to discuss insights on the best methods to navigate the current industry landscape and opportunities to derive maximized value from a managed hotel program. Powered by American Express Business Travel, BusinessTravelConnexion.com is an online community that harnesses the collective intelligence of the business travel industry. Live Chat Events are one of the features for bringing the community together to share best practices.

“Our recent Business Travel Monitor data showed the average international and domestic hotel rates booked have softened in the first quarter, indicating the pendulum is swinging back towards a buyers’ market,” said Herve Sedky, moderator of the Live Chat and vice president and general manager, Global Advisory Services, Corporate Meeting Solutions and Global Business Partnerships, American Express Business Travel. “If both suppliers and buyers can adopt the same return on investment and value-based mindset, they can adjust managed hotel programs to maximize the value of their relationship.”

According to participants, despite receding hotel rates in the face of continued economic pressure, service and amenities remain a priority with none having plans to scale back to save costs. When participants were asked whether or not the hotel brands would unbundle services to reduce the advertised room rate, now common practice for airlines, they all agreed it would not be an effective cost management strategy for hotels.

“Unbundling fees would hurt hotels,” stated Alice McQuade, director of Travel Agency and Government Sales at InterContinental Hotels Group during the chat. “Buyers believe they are buying an experience with services included. Giving a lower rate and then start charging for other services or amenities would make it difficult for travel managers to benchmark pricing.”

Tom Griffiths, vice president Americas of WORLDHOTELS continued, “We don’t want to be a commodity buy. We want to be a value buy to travel managers and business travelers.”

Other Chat highlights include:

  • The process of hotel negotiating and re-bidding is becoming much more of a business-as-usual process, ongoing throughout the year making the hotel season near obsolete.
  • Compliance remains a key variable for both hotel suppliers and buyers and is a powerful tool during negotiations. Further, hotels have invested in more sophisticated technology to analyze data and traveler behavior in order to aid travel managers in increased compliance and greater cost management.
  • Building loyalty through increased communication and interaction builds sales.

According to the panelists, new negotiating and bidding techniques are becoming commonplace, potentially shifting away from negotiating “seasons” toward a more fluid, ongoing dialogue based on changing market conditions.

“The days of issuing a single, one-year RFP in September, loading it in November so that it is available in January are gone. Companies and hotels are looking at ways to maintain the greatest degree of flexibility in pricing,” stated Mr. Griffiths.

Dynamic pricing that allows discounting based on a floating rate was discussed as an alternative to ongoing negotiation but received mixed reviews among participants as some didn’t consider it economically relevant in a recovered market.

“Dynamic pricing has never been more relevant. It fluctuates with the market and provides a cost-neutral solution, saving time in the RFP process and negotiation,” stated Kelly Phillips, vice president of Leisure and Business Travel Sales, Hilton Hotels.

Conversely, Brad Frazier, corporate director of Global Business Travel Sales at Omni Hotels stated, “When we mention dynamic pricing to customers we get pushback because it’s difficult for a travel manager or procurement professional to show value in times of prosperity.”

While a buyer’s market is prevalent in the negotiating process, chat participants revealed that rather than decreasing rates across the board, hotels are determining whether or not to reduce rates on a case-by-case basis, and often come to the table with their own asks to generate a “win-win” scenario.

Mr. Frazier commented, “Absolutely, we will have a discussion about reopening a bid, but it has to be determined hotel by hotel, market by market. In the end it has to be a win-win for both parties. Assuming a mid-year renegotiation is a reduction, we are looking for buyers to offer something in return such as increases in our market share, a reduction of preferred properties in the market, or institute a clause in the RFP to allow for a rate increase in the second year. It has to be a situation where both the hotel and buyer feel good.”

Sophisticated reporting and data analysis, along with travel patterns and behavior, can drive compliance and empower travel managers to make better decisions.

“We’ve taken greater stance on driving compliance,” stated Ms. Phillips. “We have sophisticated reporting that analyzes travel patterns and behaviors and are using data to drive cost savings through compliance. In a good economy or bad, driving greater compliance through travel management companies means we all win.”

Strengthening old relationships and forging new ones was a critical element in maintaining the future strength of the global hotel brand and building loyalty.

“We are strengthening accounts we have by working smarter with them. We have added to our sales force and we’ve reduced the number of accounts so they can sell and market on transient and group basis, or training basis, working more closely with people who are already customers,” said Ms. McQuade. “With this added sales force, we’re more responsive to our clients and hotels.”

Ms. Phillips added, “Loyalty is paramount. We look at things from both a traveler and employer perspective. We analyze enrollment and engagement levels by corporation. Depending upon the results, we then deploy resources against on acquisition or penetration campaign. The ultimate goal is to help drive employer accepted behaviors that both support their hotel program compliance and drive loyalty and share.”

The Live Audio Event was the third in a series of live events providing unique access to senior business leaders and industry experts across the business travel industry. The full chat is available on www.businesstravelconneXion.com.

About American Express Business Travel

American Express Business Travel (www.americanexpress.com/businesstravel), a division of American Express Company, is committed to helping its clients maximize the greatest return on their travel investment through program optimization support, world-class customer service, and greater spending control. With clients ranging from small businesses to multinational corporations, American Express Business Travel provides a combination of industry-leading technology, travel management consulting, strategic sourcing and supplier negotiation support, alongside global customer service available online and offline. The Company also provides a dynamic online community (www.BusinessTravelConneXion.com) harnessing the collective intelligence of those in the business travel industry offering a variety of perspectives, best practices, current research, and industry information.

American Express operates one of the world’s largest travel agency networks with locations in over 140 countries worldwide. The Company processed $25.4 billion in global travel sales in 2008.

American Express Company (www.americanexpress.com) is a leading global payments, network and travel company founded in 1850.





Contact:

American Express Business Travel
Tracy Paurowski
212-640-8409
tracy.j.paurowski@aexp.com
or
Sloane & Company
Emily Porro
212-446-1874
eporro@sloanepr.com


Also See: Business Travelers Feel Safe and Value Security Assurances / April 2005

Hotel Rates for Both Mid-range and Upper-range Properties will Increase by 1 to 3% in 2005 / American Express / October 2004

Survey of 1,400 Business Travelers; 91% Expect To Maintain or Increase Travel Next Year; 9% See Drop / Oct 2002

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