News

in     05-10-2015
 

Hoteliers say they’re coming to the corporate rate negotiation table in a position of strength, although their projected increases are below that of at least one national forecast.

 
REPORT FROM THE U.S.—Hoteliers are coming to the corporate rate negotiation table in a position of greater strength than in years past, although they still expect increases at the low end of industry projections. 
 
Most sources interviewed for this reported pegged corporate rate increases for 2016 in the 3% to 5% range. 
 
That’s below the 6.5% to 7.5% range forecasted—the largest in three decades—by Bjorn Hanson, clinical professor at the Tisch Center for Hospitality and Tourism at the NYU School of Professional Studies. It’s also shy of the 5.2% increase predicted for the U.S. hotel industry on average, according to STR, parent company of Hotel News Now.  
 
“In most areas, business travel is on the rise, and on peak business travel nights demand is more than supply, resulting in hotels being able to increase rates for 2016.  Our plan is to reward loyal clients with the lower percentage increase to keep them from looking for a new preferred hotel,” said Lori Kiel, VP of sales and revenue management at The Kessler Collection. 
 
She was among those expecting corporate rate increases between 3% and 5%, along with her peers at the Banyan Investment Group and Waramaug Hospitality. 
 
“The question of rate strength is dependent on market occupancy,” explained Jay Litt, executive VP of Waramaug’s asset management arm. “Where it’s strong, we have ability to have better yield and can push for higher (average daily rate). Where (occupancy is not strong), we can get smaller increases.”
 
David McGregor, Banyan’s senior VP of operations, cited a similar mix of market conditions.
 
“Our negotiating position varies by market, based on several variables including the local hotel supply and where the local property fits into that marketplace,” he said. 
 
Another variable is who is doing the negotiating. Some corporate accounts are managed locally by Banyan, while others are managed at the national level by hotel chains, such as Hilton Worldwide Holdings. Executives at the franchisor say industry fundamentals are tipping in their favor. 
 
“We are still feeling a significant demand from the marketplace that far outweighs the available supply,” said Kelly Phillips, Hilton’s senior VP of transient sales and distribution. She declined to share her expectations about movement in corporate rates.
 
Katherine Steed, VP of sales and marketing at The Hotel Group, pointed to such confidence at the brand level as a reason for her company’s more optimistic outlook of corporate rate increases between 5% and 6%. 
 
“Occupancy levels have already exceeded previous peak levels before the recession. Rate growth, however, has been sluggish and continues to hover below pre-2007 levels. It will be a priority for industry members to close that gap,” she said. “Hotels recognize this at the local level, as do the brands negotiating on the hotels’ behalf at the corporate level. Having that confidence in the market and the support of the brands do put us in a position of greater strength than last year.” 
 
Table trends
With requests for proposal out and negotiations in full swing, sources already are reporting some notable differences to the process than in years past. 
 
Steed said many clients are expanding the pool of hotels from which they accept bids. “We’ve seen an increase in pre-RFP surveys and multiple rebid requests from the same RFP,” she added. 
 
Hilton’s Phillips cited a somewhat contradictory trend: “There’s a heightened interest in minimizing and mitigating the rebid process to shorten and reduce labor associated with the RFP season.” 
 
She pointed to an increased appetite for dynamic pricing models as another trend. 
 
Executives at The Kessler Collection have noted a calendar shift in the negotiation season.
 
“I have also seen local negotiated accounts planning ahead and asking as early as August what their increase will be for the following year. They like to be prepared ahead of time and have the questions the decision maker would ask answered,” Kiel said. 
 
Client priorities
Affordable rates are and will continue to be a top priority for corporate clients, sources said. Also on the list for 2016 are: 
 
Value-adds/amenities
“Clients are pushing for more amenities and more services to accompany higher rates,” said Navin Shah, chairman of Royal Hotel Investments, who declined to share his corporate rate forecast. 
 
Phillips said Hilton has responded by including more perks within its HHonors loyalty program, such as free Wi-Fi. 
 
Complimentary breakfast is another must, according to The Hotel Group’s Steed.
 
Service
“Top priority to corporate clients is level of service,” Kiel said. “If you are available to speak with them and answer questions, they are more likely to stay loyal to you. There are many hotels that take a week or more to even call a client back. If your response time is day-of, you are more likely to win the business even at a higher rate. This helps the business traveler plan faster and free up more of their time.”
 
Flexible cancellation polices
With an increased number of flight changes and last-minute tweaks in itineraries, many corporate customers are pushing for policies that allow for cancellations by 6 p.m. the day of check-in, Kiel said. 
 
“Anything longer than 24 hours is likely to be questioned,” she added. 
 
Last-room availability 
“Most corporate clients want ‘last-room availability’—namely, the guarantee of a room at their special rate at all times, regardless of hotel occupancy,” said Banyan’s McGregor.
 
Upgrades and perks
Waramaug’s Litt pointed to club lounge access and the associated benefits as one example. 
 
Said Kiel: “Complimentary upgrades when available are requested often especially by clients who stay every week. This goes hand in hand with being acknowledged and recognized through a loyalty program.”