November 20, 2008 - Carlson Wagonlit Travel director of hotel solutions Neysa Silver spoke with
Management.travel last week about the latest on the 2009 hotel rate negotiation season. A portion of the conversation is excerpted here.
As the negotiation season winds down, are you seeing what
CWT had forecast come to fruition?
We forecasted kind of a general increase of 2 percent to 3 percent, and we are always checking pace with what our forecast is. We just took a pretty sizable sample: 5,000 hotels and 25 different clients that we support. The average increase that we were seeing pre-negotiations was 4.7 percent. There is going to have to be room to negotiate to achieve our forecast, but we feel pretty good that initial rates coming in at 4.7 percent are going to yield an increase less than that. In general, when you look across the board--small, medium, large, no mandate etc.--2 percent to 3 percent is still, we feel, where they are going to be. Beyond that, we surveyed 145 customers and asked where they are [in terms of rate changes]. Fifty percent of them are sitting in the 1 percent to 3 percent increase] range. We had another 28 percent come in flat and 13 percent that came in [with a] 4 percent to 6 percent [increase]. We are seeing what we expect to see: something that is maybe flat for some bigger customers. We had 7.5 percent of them saying they are seeing an overall rate reduction. Are the suppliers opening up and negotiating? Yes. We are doing multiple rounds, and each round is having an effect. You have to have a reason backing you up when asking for a better rate, but [suppliers] are trying to be cautious about making sure that they can get people into their hotels and offering competitive rates based on what we are asking. They are being flexible, they are listening and they are showing that they can reach competitive pricing.
What are you seeing in the top markets?
New York has been an interesting market because certainly it has been specifically hit, and it is going to have some mass exodus, if you will, in terms of room nights. When we took a look at just New York as one market in specific last year, the year-over-year [rate increase] was around 17 percent. This year, it is trending just at 5 percent. The other interesting thing about New York is the decline-to-bid ratios. The hotels last year were saying, "No thank you, we are full. I am not going to bid on your business." That ratio has been reduced by 50 percent. In some of the other gateway [markets], the hotels are coming in at fair or reasonable [bids]. They are being pushed to do better, but we are seeing very moderate increases in general across the United States. For a very generic statement, they're really quite moderate.
Are your clients targeting different brands as new ones are introduced into the market or as old ones are rejuvenated?
Yes, they are looking to include, if not trend down to a limited-service type of property. That doesn't happen with all customers. Certain customers demand a certain type of hotel. Maybe it is due to the time that they arrive. Maybe they need a full-service [property] that can serve them a meal. It really does depend, but in general, making sure that they have moderate price choices and looking to that type of limited service has been a trend. They care about new market entry because that creates competition, which can be favorable for them. That also creates something that is new and fresh in the market that may have been kind of old and stagnant. Are they paying attention? Yes. Do they care about it? Yes, as long as it resonates with the market and the need that they have.
What are some other big changes this season?
This season feels very different--not from a timeline perspective, but last year was a very tough negotiating season. The suppliers were in a good seat. They were being really aggressive on their rate increases. This year is tough, as well, because we are trying to look at what happened to our customers' rates over the last two years and making sure that we are getting something that feels extraordinarily different from last year. Other than that, I can't say that a lot of it feels different. In general, we are getting better rates because [hoteliers] want to win the business, but I wouldn't say that it is brand specific.
What other trends are you seeing?
One of the other trends is data analysis. Previously, clients might have said [to their travelers], "OK, we are done with our program. Here is where you can stay." Now they are actually tracking the progress. Are we using that [property]? Can we make changes? What are some other opportunities, whether it is for traveler satisfaction, savings, security or what have you?
