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);
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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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