What the recession has done to the corporate deal
At a seminar on the state of airlines at the Business Travel Market in London last week, a buyer from the Dutch bank ING said he was now re-negotiating his airline deals once a month. At the same session, Tony Berry, HRG's industry and fare distribution director, said that fixed price deal had been "eradicated" in favour of variable price agreements.
So just what has the recession done to these corporate deals, both with airlines and hotels. Once the bedrock of the business travel industry, are they any longer worth signing?
The industry answer seems to be yes - although they have to be for more flexible than even in the recent past.
The background to the situation is that business travel has slumped as a result of the recession and suppliers like airlines and hotels, which enjoyed until last year a strong seller's market, have seen their position reversed.
Buyers have, unsurprisingly sought to use their new position of strength to impose cuts in fares and rates on, respectively airlines and hotels. If the latter are just faced with pressure to cut rates, it is more serious for the airlines as they are caught in a perfect storm of falling demand and rising - or at least unstable- fuel prices.
Mr Berry said at the seminar that air fares were changing on an almost daily basis. He added: "There has been tremendous activity in fare contracts. The airlines are hungry to compete and they are competing and that is good for the industry."
Nigel Turner, Carlson Wagonlit Travel's industry affairs director, said a lot of his agency's customers were going for "best price of the day which rather runs in the face of their contracted rates and obviously puts pressure on suppliers."
It has led he said to some customers going out to formal tender again. "It shows how much the market has changed," he said. But he warned that his could be both expensive and a gamble. The cost is that they have to go through a formal procedure while the risk is that at the end of the day, they might not get an appreciably better deal to justify the process. There is also the fact that the suppliers, in what is a notoriously cyclical industry, might not be best pleased.
But Mr Turner pointed out that in these volatile times, the negotiated rate was the worst one a corporate would have to pay. If there was a better rate going on the day, the company would get it.
While he said there was a trend to variable rates, hotels, concerned to keep their rates up, were countering with offers to include internet access, breakfast and other extras in any package. It was not, he said, all about rates.
Margaret Bowler, HRG's director global hotel relations, said she had also found that "quite a few" companies were prepared to re-negotiate as rates went down. "Companies are saying ‘We want the best rate'. The expectation we have from the corporate is that they want us to book them the best price," she said.
But she made the same point that the negotiated rate was the worst a client was going to get.
Some hotels in cities where conditions allowed were adopting flexible rates which corporates did not seem to see as a problem, Ms Bowler said. But again, the trade off here was that the hotels included extras as part of the price.
"It was interesting as hotels last year wanted to add value as opposed to reducing rates. Now the corporates are getting both reduced rates and added value. The tables really have turned," she said.
Ms Bowler said corporates had also taken the opportunity of consolidating their hotel programmes. A year ago a company needing 1000 rooms a year in London might have had to use five properties because none would take more than 200.
Now a company might just need two properties with hotels, more anxious for business than they have been for a few years, happy to take 500. "This is making it easier for a company to buy," she said.
But this is not happening across the board with some five-star properties ready to take a hit on occupancy rather than make great cuts in their rates. This is what they did [post-9/11 when some were charging three-star prices. It took years to get their rates back up again. From their point of view, the luxury hotels are acting more wisely this time.
Ms Bowler said it was "too early to tell" what is going to happen for the rest of 2009.Hotels are looking for rates to go up but the corporates have not forgotten last autumn when a deal looked good when signed in September but poor in November when rates had slumped.
But there is also a longer term issue here as corporates try to extract the best prices from their suppliers. When times change, those suppliers could come back and bite.
Mr Turner believes that both sides of the fence are aware of this. "I think people are behaving reasonably and that they understand the market. The whole objective is to ride put the recession.
"Generally people are being very fair and understanding to each other."