What Does The Future Hold For Travel Agents?
By Staff -- HOTELS Magazine, 7/1/2002
- What Does the Future Hold for Travel Agents
- The 'Chic B&B'
- A 'Commanding' Renovation
- Security And Service In El Salvador
- Wish-ful Thinking
- Big Talk From Wyndham
- Case of the Month: Creative Development
- New Hotel Collection Asks, Answers—What is Hip?
- Gostelow Report
- Hoteliers
- World Watch
What Does The Future Hold For Travel Agents?
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With what seems to be an almost daily influx of new and improved travel planning options available, and many hotel companies working harder than ever to steer traffic to their Web sites, the travel agents’ role in the process seems to be diminishing. However, while driving Web traffic is essential in today’s marketplace, especially for the large, well-known hotel companies, many hotel operators still view strong travel agent relationships as a top priority. Some hoteliers even are snuggling up to agents in an effort to foster brand loyalty and increase bookings.
One such company is London-based Le Méridien Hotels & Resorts. In a move to entice travel agents, the company launched the “Le Guest Book” incentive program. The program rewards its travel agent members with a 2% bonus on qualifying room revenue for reservations made at commissionable rates. The travel agency also receives a 2% bonus on top of its routine 10% commission.
With Le Guest Book, members receive direct cash payments, rather than points. Le Méridien partnered with Chicago-based Citicorp Services Inc. to create a “stored value card” that can be used at ATM machines to withdraw cash, or anywhere MasterCard or Maestro is accepted. The program launched in January at a time when it seemed much of the industry was moving in the opposite direction. The timing was not by accident.
“We like being the contrarian,” says Susan Clark, Le Méridien’s senior vice president of marketing and sales. “We like being the company that reaches out to the industry. It sets us apart and creates a stronger brand identity, particularly in the U.S., where you have the majority of travel agents, but where our brand is not very well known.” Clark says the program gives Le Méridien a competitive advantage. “It increases our awareness and image among the travel agent community,” she says. “We don’t have the size or resources to go directly to the customer. It is more efficient to earn the support of thousands of travel agents than to try to educate millions of customers.”
Le Guest Book will run indefinitely, Clark says, with the goal of 65,000 members by the end of the year. There are currently more than 6,000 members, with US$5 million in claims.
Agent Allies
Le Méridien is not alone in its effort to woo travel agents. For independent hotels and small, lesser-known brands, courting travel agents is not just an option, but a necessity.
The Caribbean was one of the regions hit hardest by the events of 9/11, and as hoteliers try to fill rooms, travel agents become their strongest allies.
“We’re a small resort and don’t have a lot of money to devote to marketing,” says Peter Locke, general manager of Chenay Bay Beach Resort, St. Croix, U.S. Virgin Islands. “So if I have 400 or 500 travels agents working with me that’s like having a national sales force.”
The resort recently relaunched its 20% commission program. “My objective is to maximize room revenue,” Locke says. “We need travel experts, especially in an area like St. Croix, who know where we are, and what we’re about. And we appreciate their support and loyalty.” Locke says business has increased 20% since they went to 20% commissions, and May occupancy, which is routinely low in the area, is in the 70s.
Redefining Relationships
Rather than treating every travel agency the same way, large hotel companies are devising individualized strategies that speak to particular market segments. And in the process utilizing their multiple distribution channels to more effectively target customers.
“Not all customers buy travel the same way and the marketplace has evolved so that there are more choices than ever,” says Jim Young, vice president of global distribution for Atlanta-based Six Continents Hotels. “Today a travel agent is but one method by which we can sell rooms.”
Six Continents’ strategy is to steer loyal customers to book directly online. The company recently announced its “lowest price guarantee” Web promotion to further that aim. However, Young says, 15% of Six Continents’ revenue is garnered from agencies, and the company believes that percentage represents customers who are not brand loyal. It is these guests Six Continents will continue to target using agents. “It’s our job to let those agents know what’s going on with our brands so that they are better equipped to sell our product,” Young says.
But is Six Continents prepared to cut commissions and still achieve that 15% revenue? According to Young, the marketplace will dictate Six Continents’ next move. “Commissions are really set by the marketplace. Six Continents is always going to be competitive to the marketplace,” he says.
While London-based Hilton International has no immediate plans to cut commissions, the company will make changes to the “blanket 10% commission,” particularly in regard to its business with the large travel companies, says Tim Davis, Hilton’s senior vice president of global distribution and e-commerce.
As for Le Méridien’s approach, Davis says such tactics make sense for a company of its size. “The smaller the chain, the more dependent it is on agencies to reach a global market. But for Hilton the traditional basis of pure travel commission is not going to stay around,” he says. “We are in serious talks to introduce changes to that model outside the next 12 months because what doesn’t stack up is paying the bland agent, regardless of type of agency.” Hilton is looking to reinvest commission money to further grow its business with the major travel management companies, wherein Hilton would provide support in such areas as technology and training. “We want to redistribute that 10% in a more equitable arrangement,” he says.
For Minneapolis, Minnesota-based Radisson Hotels & Resorts, balancing online initiatives and travel agent programs is a continuing challenge, according to Brian Stage, executive vice president of marketing and sales. While Stage says he would not be surprised if a hotel company in the near future eliminates commissions, he cites Radisson’s successful “Look To Book” agent incentive program, as an example of industry support. At the same time, he says Radisson is “making huge investments” in its Web site to make it easier for customers to book online. Therein lies the conundrum.
“We have seen online bookings grow exponentially,” Stage says. “By the same token we’re not withdrawing any support of agencies. The challenge for hoteliers is that it makes it more complex to manage distribution channels.”
London-based Firmdale Hotels puts a fresh spin on the traditional English bed & breakfast with its newly opened Knightsbridge Hotel. This more affordable, “chic B&B” concept, as it’s called by owners Tim and Kit Kemp, is a slight departure for the Firmdale group, which is known for its luxury, full-service hotels. However, the focus is still on the discerning traveler.
“We decided that the current market required an affordable alternative—a hotel that could offer the same style and quality as our other properties but generally at a lower price,” Tim Kemp says. “There’s no restaurant, but in this case very chic bedrooms offering the same styles, quality and finish as our other Firmdale properties.”
This modern, 44-guestroom B&B features two drawing rooms, a private meeting/dining room, bar and 24-hour room service. According to Kemp, “initial results are running close to 100% [occupancy].” Room rates start at £135 and include a light breakfast.
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Veteran hotel operator Russell Dazzio calls himself a “hotel commando.” It is a fitting title for someone whose latest business venture involves transforming former military bases into 3- and 4-star hotels.
Dazzio is chairman and co-founder of Los Angeles-based R&R International Hotel Group, a hotel development and management company. The “commando” nickname, he says, refers to his hands-on approach to the hotel business.
“I’m one of the last of a breed, [meaning] a senior executive who is still connected to the properties, not stuck away in some office,” Dazzio says. “I have a great passion for my work and have always approached my work the way a special forces commando would—moving fast, taking risks and coming up with creative solutions.”
With that mindset, Dazzio has ventured into what he believes to be a “break-away concept” in the hospitality business: the military installation.
His first such project is the Lions Gate Hotel & Cottages, a hotel and executive conference center that resides within a 3,000-acre (1,214-ha) former military base in Sacramento, California. The hotel is part of the new McClellan Business Park, so named for the McClellan Air Force Base, which operated on the site from 1937 to April 2001. Through R&R’s partnership with Industrial Real Estate Group (IRG), the company in charge of the entire business park project, Dazzio’s team is responsible for all hospitality-related venue construction, design and property management.
Dazzio says Lions Gate, which opened in March, already is beating Sacramento’s occupancy rate, which is around 60%. Total investment costs for phase one, including all construction and renovations, is approximately US$15 million. An additional US$4 million will be invested for completion of phase two. Projected revenue is US$6.5 million. Dazzio expects to break even by the end of 2003.
Additionally, the R&R and IRG team recently received the exclusive rights to develop Hamilton Army Airfield in Marin County, California, into a 4-star hotel and spa. The group also has signed a development agreement to convert Alameda Point, a naval base in Alameda, California. Further, Dazzio is looking at sites along the U.S. Eastern seaboard for future expansion. His goal is to have 12 conversions within three to four years. “You want to grow but not before your resources,” he says. “There’s plenty of opportunity, but we want to make sure we do it right.”
So what does it take to transform mess halls into banquet halls? A combination of creativity and a willing attitude, Dazzio says. The R&R crew transformed the site’s former military hotel into an upscale, 120-room inn with completely renovated interiors. Phase two will involve converting existing buildings into 36 luxury cottages and 16 extended-stay townhouses. Registration and restaurants now are located within the former officers’ clubhouse, which was refurbished to be the hub of the entire area.
Another unique renovation was the transformation of the former base commander’s residence into the “General’s House,” a state-of-the-art executive boardroom and luxury suite. The main dining hall also was upgraded to an executive cafeteria, catering to business park employees. The building that once functioned as the officers’ club was gutted entirely and turned into the “Garden Pavilion,” an expansive gathering place with two large banquet halls. And, one of the most significant remodels still pending is the transformation of a 125,000-sq. ft. (11,612-sq.m) hangar into an exhibition hall called the “High Bay Pavilion.”
While pleased with the positive response the hotel has received so far, Dazzio says the biggest challenge has been transforming a private sector space into a public sector operation. “The codes are completely different,” he says. “It’s not your run of the mill remodeling job. We’ve learned a lot about what our ‘real’ construction costs would be.”
Security And Service In El Salvador
In midst of the guerrilla war in El Salvador, I had a once-in-a-lifetime experience as the general manager of the ex-El Salvador Sheraton between 1983 and 1987. A risk and crisis management plan was implemented to reactivate a hotel near bankruptcy. One important question we faced: Does the hotel have to show guests it is increasing security?
“Security and Service” was the marketing slogan implemented at El Salvador in 1983. Our “security and safety plan” was built on six concepts: prevention, training, awareness, control, communication and secrecy. The first rule was to avoid any physical aspects that would transmit and/or cause fear to the hotel guest. Security staff would not wear a military or police uniform when inside the hotel.
The uniformed military (Salvadorean soldiers) heavily armed with rifles guarded the main entrance and hotel lobby. They were replaced the first week with a 35-member, 24-hour security staff who wore discrete hotel uniforms. Only the supervisors were allowed to carry short weapons.
Due to the tense situation in the capital city San Salvador, where daily combat and guerrilla attacks were the norm, events held at the hotel were guarded heavily by the Salvadorean military. In fact, in 1982, two North American journalists were assassinated in the coffee shop of the hotel.
After the June 15, 1985 “Massacre of Zona Rosa,” when four U.S. marines were assassinated in a matter of minutes together with 15 civilians in a residential area one mile away from the hotel, halogen exterior lighting was installed on the roof of the hotel. In addition, a fence was installed around the parking lot and green area.
Throughout my tenure at the hotel, weekly training seminars and workshops were held with all the security staff, members of the safety committee, department heads and myself. Once a month, security experts from the Salvadorean military and other institutions held special workshops on topics such as “bomb searching” with trained dogs. Bomb threats were on a daily order.
A direct “hotline” with the security department of the ministry of defense and some foreign embassies in El Salvador was established between the hotel and the embassy. From the hotel side, after the chief security officer was assassinated in 1984, only the general manager had direct contact with these strictly confidential contacts.
A strict control policy of depositing firearms at political events was implemented as well. All guests had to hand in their firearms at a checkpoint installed near the ballroom entrance. Guests received a numbered ticket to claim their personal weapons after the event.
If the guerrilla war was not bad enough, at noon on October 10, 1986, an earthquake struck the area, and the main building of the hotel suffered severe damage. Luckily no one was killed nor injured. A physical inspection and assessment of the damages—led by a structural engineer (a hotel guest) and myself—revealed the building was no longer safe. At 1 p.m., in fear of aftershocks, I decided to close the main building.
As a result of the earthquake, 57 staff members lost their homes. On October 11, I sent a fax to Sheraton’s President John Kapioltas, requesting relief aid. Kapioltas sent a solidarity message to all Sheraton hotels, which resulted in more than US$20,000 in donations of relief funds for the staff members and their families.
The main building underwent a complete renovation program and re-opened mid-1988 under local management and a new name, Hotel El Salvador. Sheraton withdrew from the franchise contract in 1987, and I resigned in June of the same year.
Contributed by Eberhardt H. Rues, RUES Hotel Management & Consulting, Citrus Spring, Florida
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Business was too good at The Hotel’s 40-seat Wish restaurant. The four-year-old, Mobil 4-star restaurant already was drawing more than half its dinner business from the local market. Even an hour-plus wait for a seat in the outdoor garden did not daunt Wish’s growing customer base. Looking to capture pent-up demand and energize a proven revenue stream, Jessica Goldman Srebnick, COO and director of hotels for the developer, Goldman Properties, her father Tony Goldman and interior designer Todd Oldham launched a redesign that adds 55 seats to the restaurant and brings the saleable garden atmosphere inside.
Oldham expanded the restaurant into under-utilized lobby space, transforming the interior from a sleek, citrusy boutique feel to a lush, romantic garden. “By sectioning off the dining area from the front desk using three levels of plantings, we were able to create an intimate environment without harsh dividers,” Oldham says. The mix of chairs and banquettes, arranged around a central “fountain” created with plants rather than water, maximize flexibility for seating single guests, couples or groups up to 50.
Green-toned tweeds and striped velvets intensify the garden feel of the setting, as do the olive green and beach glass blue striped walls, which echo the umbrellas of the outside garden. Oldham-designed votive holders in amber and deep rose make this garden glow. No structural changes were required to more than double Wish’s covers and make it a showcase for Executive Chef E. Michael Reidt, included in Food & Wine’s America's 10 Best New Chefs of 2001. Although the look is purposefully different, Oldham created continuity with the reuse of the hand-cut glass mosaic mirrors created for the original design.
“Even successful concepts have to be reinvented if you want to stay fresh,” Srebnick says. The new look, with surprises such as a palm tree growing out of a bar table and electric ice cubes in martinis, is an appropriate setting for a chef who pairs goat cheese with seared watermelon. Average check, including beverage, remains at a pre-renovation US$50-$55. “We were looking to drive revenue with more covers, not higher prices,” Goldman says.
Dallas-based Wyndham International has raised the bar in the industry battle to bring back business customers with its unprecedented offer of free local and long distance telephone calls, Internet access, faxing and copying for current and new ByRequest members. New members must stay at any Wyndham hotel by September 30, 2002. While Chairman and CEO Fred Kleisner (above) would not reveal the costs associated with the program, he states that it will pay for itself based on anticipated new business generated.
Case of the month: Creative Development
Problem: The Kentucky Fair and Exposition Center did not have a conference hotel that could attract commercial business, and a typical full-service conference hotel would not pencil out. Some new approach to specs and financing would have to be found to reduce investment and make a hotel feasible.
Solution: Consultant Charles Johnson, ISHC, worked with local hotel developer, Musselman Hotels, to create a unique hybrid: a limited-service property to which full-service amenities and a 12,500-sq ft. (1,161-sq.m) conference center were to be added.
To creatively finance the project, they qualified it under the Kentucky Tourism Development Act, whereby a tourist attraction can recoup 25% of development costs via rebate of sales taxes over 10 years. To qualify, the project must generate more than 25% of its demand from out of state, a threshold the consultant documented in market studies. The rebate will service the conference center portion of debt.
The new Hilton Garden Inn and Conference Center will serve the needs of Fair and Expo Center groups as well as the nearby University of Louisville. It would not exist without the creative merger of limited-service, full-service and conference center formats to meet both market and economic development needs.
Presented by The International Society of Hospitality Consultants.
New Hotel Collection Asks, Answers—What Is Hip?
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San Francisco-based Kimpton Group has introduced the Hip Hotel Collection, a new online directory showcasing a growing portfolio of style-driven hotels around the globe.
While the Web site launched as an internal Kimpton project, including just four of the company’s properties, today it boasts 23 additional, non-Kimpton hotels as members. Interest in the collection, and subsequent growth, has come about almost entirely by word-of-mouth, with operators even contacting Kimpton directly to see if their hotels could be included. Featured hotels include Pacific Palisades, Vancouver; The Caves, Negril, Jamaica; Morrison Hotel, Dublin; The Time, New York; and Adelphi, Melbourne.
Proclaiming “no cookie cutters allowed,” the directory markets a group of highly individualized “offbeat, fun and stylish boutique hotels” for the image-conscious traveler. The collection even has a hip new logo to match.
According to Stephen Pinetti, senior vice president of sales and marketing for Kimpton and designated “hip master,” the company aimed to create a logo that captured the whimsical spirit of the hotels as well as their sense of style. The icons used represent “what is hip,” he says. For these hotels, “it is both what’s talked about and what’s looked at,” in regards to the hotels’ visual appeal as well as to the unique services and amenities each provides.
In addition to showcasing the properties much of the Web site, which currently receives about 3,500 hits per month, also is devoted to the discussion of “what is hip.” Hoteliers who want to share their opinions can do so at www.hiphotels.net
Millennium & Copthorne is looking for properties in Egypt and Lebanon. Expansion throughout the eastern Mediterranean is led by the group’s Abu Dhabi-based senior vice president of the Middle East and North Africa, Franz Zeller.
Fairmont Hotels & Resorts is seeing its hotel in Dubai providing a stepping stone to further expansion outside North America. The Dubai hotel’s owner, HH Dr. Sheikh Sultan bin Khalifa Al Nahyan, grandson of the Ruler of Abu Dhabi, would like other Fairmont joint ventures. Fairmont Chairman and CEO William R. Fatt, who has been among several hoteliers looking for what seems like a considerable time at an existing high-profile Mayfair hotel, now is working on a possible London new-build.
The Eden Project in Cornwall, UK, is a gigantic eco-project featuring widely varied climates in eight biomes—the area the size of 35 football fields. The project, designed by architect Nicholas Grimshaw, responsible for Zurich Airport and the Eurostar terminal at London Waterloo rail station, has been such a successful tourist draw that Eden Project CEO Tim Smit plans an extension, including a 200-room, low-energy hotel with walls made of rubble.
London-based Peter Tyrie is looking to expand both his Eton Town House Collection as well as a number of freestanding restaurants. Where interests him? Barcelona, Florence, Madrid and Rome are top of his list. Perhaps Tyrie should at least talk to the Florence-based Frescobaldi family, a wine dynasty stretching back to the Middle Ages, who also are looking for hotel operators and owners. The Frescobaldis have two successful wine bars, run by Diana Frescobaldi, and she would like to talk about extending this number, possibly into existing or projected hotels.
Peter Buhrer, a Zurich-based entrepreneur, is looking for a management company for a 500-room eco-friendly island resort in Velos, Greece. Financing, he says, is secured and the developer is using what was once a monastery as core to provide three related areas—hilltop, harbor-side and spa. Some of the required energy will come from windmills.
Bangkok’s Pavilion Resorts, led by GM Somrat Lertwiram, stepped into the international market with the opening of the 108-room Pavilion Queen’s Bay, Krabi, at the end of 2001. Khun Somrat now looks forward to expansion, at least on Samui and probably on Phuket.
Interestingly, Thailand is not at the top of the current “wants” list of Richard C. Helfer, CEO of Raffles International Hotels & Resorts, Singapore. As of June 3, Helfer is keen on Hong Kong and Shanghai for his Raffles and Swissôtel brands. In Europe he wants Madrid, Paris and Rome. And in the United States he wants more presence on the West and East coasts, which presumably would include Miami, San Francisco and Washington.
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The Regent Kuala Lumpur appoints Randy himabuku general manager (GM)
Malcolm McKenzie-Vass
Allen J. Kramme - Rockresorts International LLC, Denver, names Michael C. Shindler vice president of development
- Sol Meliá Hotels & Resorts, Miami, names Andre P. Gerondeau executive vice president, Central and North America
- Malcolm McKenzie-Vass is the new GM of Santiburi Dusit Resort, Koh Samui, Thailand
- John Arnett joins Kor Hotel Group, Los Angeles, as chief operating officer
- Omni Hotels promotes five GMs to area managing directors: Peter Austin, Omni Shoreham Hotel, Washington, D.C.; Steve Ferran, Omni Royal Orleans, New Orleans; Offer Nissenbaum, Omni Berkshire Place, New York; Troy Schroeder, Omni Hotel at CNN Center, Atlanta; and Mark Yardis, Omni Richmond Hotel, Virginia
- Allen J. Kramme joins Sheraton Wild Horse Pass Resort & Spa, Phoenix, as GM
- Six Continents Hotels, Atlanta, appoints Issac J. Collazo, vice president, operations strategy and planning; Jeff Senior, vice president, Inter-Continental Hotels, Americas; and Craig R. Mueller, vice president, development, Northeastern and Midwestern U.S.
- Conrad Hotels, Brussels, appoints Darren Law GM, Conrad Cairo, and Ahmed Salama GM, Conrad Sharm El Sheikh, Egypt.
North America
Depending on who you believe, hotel performance for the rest of 2002 is going to be either great or disappointing. At the June NYU investment conference, PricewaterhouseCoopers’ Bjorn Hanson revised his 2002 forecast downward as a result of uneven economic growth. Smith Travel Research data maven Randy Smith, however, predicted recovery in demand and rate during the year’s second half.
Comparing forecasts, PwC says RevPAR growth for 2002 will spike downward to -0.7%, while STR says it will finish the year +2.3%, recovering from -4.3% at the end of May. PwC says occupancy will finish the year 59.8%—under 60% for the first time since the data has been recorded, while STR expects to finish the year at 60.2%. As for daily rates, PwC predicts a 0.3 decline for 2002, while bullish STR says rates will end the year up 2%, after reaching -4.3% at the end of May.
For New York City, an NYU survey revealed signs of a performance rebound, but average rates in Manhattan are not expected to return to 2000 levels until 2005. The forecast shows occupancy will reach 1999 levels by 2005.
Perhaps the most interesting news made at the conference was made by Wyndham International, which announced free local and long distance calls, Internet access, faxes and copies for members of its ByRequest program.
Latin America
Eric Pfeffer, former CEO of Cendant’s hotel division and now president of Pfeffer Group, Sunny Isles Beach, Florida, has been hired as a consultant to help La Quinta Corp., Irving, Texas, with its initial global expansion plan for Mexico, Central and South America.
“Our franchising program has a strategy to build on success,” says Alan Tallis, executive vice president and chief development officer at La Quinta. “We have 55 franchises open domestically and another 70 to 75 under development. It’s time to move into the international arena. We’re ready.”
Without wanting to predict specific expansion numbers, Tallis says the goal is to locate and enter into agreements with qualified international hoteliers who will represent the brand well in their markets. He expects to create a mix of master licenses and direct franchise opportunities. He says his people are talking to several groups in Mexico and two groups in Brazil. He adds that preliminary discussions are underway with a group in China. La Quinta recently named AFM Hospitality, Toronto, as a master franchisor for Canada.
Tallis says he chose Pfeffer because “he is well known and well respected in the international arena.”
The biggest challenge for La Quinta south of the border, Tallis says, is finding the right groups with operations ability and the capital necessary to carry out expansion programs. One advantage La Quinta has, however, is its name, which translates nicely into “little mansion.”
Asia Pacific
Singapore-based Raffles International Ltd. and Tokyo-based Hotel Okura Company Ltd. have agreed to a strategic alliance covering a joint effort for hotel development and management, a joint sales and marketing program and an e-procurement program.
Four Seasons Hotels & Resorts continues to distance itself from the Regent brand as it recently announced effective June 1, 2002, The Regent Sydney became the Four Seasons Hotel Sydney. Four Seasons has managed the hotel since 1992, and the move further expands the company’s portfolio in Asia. In February, Four Seasons opened in Shanghai and has hotels under construction in Hong Kong and Tokyo’s Marunouchi district.
Europe
Jarvis Hotels is reportedly close to making a deal with Cendant Corp. to franchise the Days Inn and Howard Johnson brands in the UK. Chairman John Jarvis says the company is committed to becoming a management company and plans a sale/leaseback deal once market conditions improve. Jarvis also is in the process of selling five hotels that no longer fit the brand profile.
Best Western International is spreading its wings in Spain with plans to double its room count, adding 23 hotels and 2,000 rooms by 2006. Its focus will be on the Costa del Sol, Costa Verde and cities such as Seville and Zaragoza. At the same time, BWI has announced plans to add 10 hotels in Romania by the end of this year.
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