Corporate Rate Negotiations Tilt Toward Buyers

Room rates negotiated between hotels and corporations are likely to be much more favorable toward corporations in 2009 than they have been in any year since 2003, according to a recently released report on the corporate negotiation climate for next year.More specifically, corporate rate increases will be much lower in 2009 than this year’s increase of approximately 5 percent, according to the report’s author, Bjorn Hanson, clinical associate professor of hospitality and tourism management at New York University’s Preston Robert Tisch Center for Hospitality, Tourism and Sports Management.The corporate and contract travel segment represents about 20 percent of occupied room nights, and almost 30 percent of U.S. lodging revenue. These rates are negotiated in September, October and November for the following year. Negotiations for 2008, conducted last fall, did not anticipate the actual demand, occupancy and revenue per available room trends for this year, with room occupancy likely to decline by 3.3 percentage points this year. The 5 percent increase in corporate room rates is greatly responsible for the projected growth in average daily room rates of 3.1 percent this year. But Hanson said corporate travel chiefs will be much more likely to play hardball this year. Many corporate travel managers plan to open their negotiations with overall expectations of a 2 percent rise, but a good number are negotiating for anywhere from reductions of 2 percent to increases of 1 to 2 percent, Hanson said.It is still too early to definitively predict the level of corporate and meetings business next year, but from his discussions with corporate travel managers and hotel executives, Hanson said corporations will likely stage more meetings in their offices rather than hotels, and will direct their employees to spend less time at conventions, thus booking fewer room nights. In addition to focusing on rates, corporate negotiation strategies being discussed include waiving charges for services like telephone access and faxes (which Hanson noted can be difficult to manage, since some hotel business centers are operated by outside service providers), fitness centers, breakfast and local transportation. The information age has provided both sides of the negotiating table with greater information to buttress their negotiating strategies. In addition to knowing the number of room nights a corporation has booked the previous year, increasingly, hotel companies can more accurately gauge which corporations and groups spend the most dollars in their properties’ restaurants and shopping venues.“They can better determine which groups are eating fast food in their rooms and which ones are eating in the hotel restaurants,” Hanson said.