||Corporations, Travelers Favor Lower-Priced Hotel Properties
Corporate policy and individual choice are driving a pronounced shift in business travel hotel bookings toward mid-scale brands.
Driven by economics, many companies have changed corporate travel policy to mandate stays in the lower-priced brands of major hotel firms. At the same time, individual travelers who have an option to choose their hotel are more frequently selecting lower-priced properties which are often newer and include more amenities in the room rate.
The shift to lower-priced properties has not had a negative impact on agency bottom lines, according to business travel agencies interviewed by Travel Market Report. Some agencies reported that overall revenue from hotel bookings is up, even with a much higher percentage of stays in lower-priced properties.
At Travel Cafe in Billings, MT, for the first three quarters of the year bookings at full-service hotel brands decreased from 20% of total corporate hotel bookings to between 7% and 13%, compared with the same period in 2009, according to Billie J. Ruff, agency president. Moderately-priced hotel bookings increased to about 21% of the agency's total hotel sales.
Companies are finding more value in sending their travelers to lower-priced hotels, where they get similar service to what they'd receive at a full-service Marriott or Hilton, according to Mike Detrick, associate vice president and director of business development for Great Southern Travel. The agency operates 12 offices in Missouri, Kansas and Arkansas.
"They’re finding they are able to spread out their dollars further by staying at more moderate-cost hotels," Detrick said.
In addition to lower rates, noted Ruff, "those moderately priced business hotels offer amenities that are really attractive to corporate travelers," including complimentary Internet access, parking and breakfast. "That's really what the business traveler needs," Detrick said. "They’re not in the hotel that often. They don't need a full-service restaurant, a huge gym or spa."
Behind The Shift
Some agencies said the shift to lower-priced hotels is policy-driven.
"In more corporate travel policies I'm seeing that people are only approved to stay at the chain brands of the Hilton or Marriott, but not the full-service Hilton or Marriott," Detrick said. "The company is the one mandating it. It's being pushed down from the CFO."
"Some of the executive levels may still have some leeway as far as full-service hotels go, but for the regular travelers it's a pretty widespread trend right now that is corporate-driven," said Carol Kanaverskis, head of the hotel division at Teplis Travel Service. Teplis is an Atlanta-based agency with offices in seven U.S. cities and one in Ireland.
Other agencies find that individual travelers are fueling the shift.
"What I'm finding is that all my corporate clients are comfortable with their travelers being responsible," commented Ruff at Travel Café. "They set in place a budget for the year and they monitor expenditures but they're not mandating anything."
"For more of our accounts [hotel choice] is an individual choice, not mandated by company policy," said Leslie Parenteau, office manager at Travel Leaders/Donovan Travel in East Greenwich, R.I.
She said the agency's business travelers are quite loyal to mid-scale brands and will choose, for example, a Hilton Garden Inn over a Hilton full-service property. "I have seen the trend more in terms of loyalty to a brand, where a traveler has a preference for a brand and they tell us they really want to stay there," she said.
The trend is not driven purely by economics.
"In my opinion, clients prefer Courtyard by Marriott versus Marriott, or Hilton Garden Inn versus Hilton, just because they are newer hotels," commented Maikel Rodriguez, president of Brickell Travel Management in Miami.
Bigger rooms and more amenities are also a big part of the attraction, he said. "Lots of times these hotels are as pricey as their full-service sister brands as corporations usually go for the executive level floor where they know that by paying a bit more their employees will have access to breakfast, snacks, happy hour cocktails and other perks."
Location is also a factor. "Most importantly," Rodriguez added, "these moderate chains are usually located very close to corporate plazas."
Great Southern Travel's Detrick referred to the trend as a Catch-22 for agencies; the lower-priced hotels make clients happy, but the agency earns less commission on the bookings. In his view, however, it all evens out in the end.
"Our goal is to satisfy the needs of our corporate travelers and their companies. We know that if we keep the client happy they're going to keep coming back," Detrick said. "So there might be a downside, but the upside is maybe this allows them to make another trip and continue to travel and it all comes down on the back-end just fine."
Ruff said the business travel shift to booking lower-priced hotels is actually benefiting Travel Cafe's bottom line.
"Corporate business is up substantially this year over last year. I believe that the per-night rates and the commissions we receive as a result of that is being offset as the volume increases," Ruff said. "So it hasn't affected our bottom line and, in fact, I think it has improved. When we meet with clients and can say, 'Look, your per night rates have maintained or gone down,' it allows management to say more travel is okay."
One way or another, hotel bookings are not likely to have a significant impact on an agency. "I don't see that hotels really wind up affecting our bottom lines too much," said Gary Teplis, owner of Teplis Travel Service. Fees represent a much larger portion of revenue for his agency and most other corporate travel agencies, so a slight erosion of hotel commissions is not a major issue.
(Source: Travel Market Report, 10/18/10)
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