Hotels getting bolder with increase in demand

April 20, 2004 |

The market is rebounding and hotels are going to be looking to make up lost ground and are getting much more bolder in terms of the rates they expect for 2005.

The market is rebounding and hotels are going to be looking to make up lost ground, said Bjorn Hanson, PricewaterhouseCoopers global leader of the hospitality practice, last month during a Corporate Travel World session in New York. “They’re getting much more bold in terms of the rates they expect for 2005,” he said. “They’re going to end 2004 with two points of occupancy gain and start to feel they can be much more aggressive and actually try to recover some of the rate that was lost,” he said.

The lodging industry has lived through three years of rate decline, he reminded the audience: “Our forecast for midsize corporate negotiations is that rate increases negotiated this fall for 2005 will be greater than 2 percent. Those negotiations the following year for 2006 rates will be greater than 4 percent.”

Buyers on the panel said, in most cases, they had been successful in keeping rates flat with the prior year, at least so far. “We have a lot more hotels that want to do business with us,” said panelist Gary Polito, manager of corporate travel for Bose Corp. “Some hotels started the last request for proposals season seeking quite aggressive increases, but once we reviewed the data, rates ended up mostly flat. Having reliable data has become even more critical than ever.”

If Hanson’s predictions are correct, more buyers than ever before are going to try to minimize rate hikes by combining their group and transient spend. “By leveraging all of your spend this way, you can make the most persuasive argument that you’re driving marketshare to select suppliers,” said panelist Erin Barth, vice president of global procurement services at JPMorgan Chase.

Terry Oomens, director of sales and marketing for New York-area Hilton Hotels, agreed with Barth on the importance of being able to drive marketshare in the current environment. “Marketshare remains key for us. Many programs during the downturn consolidated the number of hotels they use in market. From our perspective, this was a good thing since it means we have the potential to capture more share, whether in an individual property or cluster of hotels.”

Another good thing to come out of the downturn, according to panelist Alison Guilbeaux, director of hotel consulting business development for WorldTravel BTI, is that many companies used it as an opportunity to tighten travel policy. “We saw more pre-trip authorization and travelers being asked to establish the significance of the proposed trip beforehand,” she said. “When you have to submit the itinerary for approval by senior management, you tend to put more thought not only into whether the trip is really worth taking, but compliance.”