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September 12, 2010

ANALYSIS:Hotels rethink approach to leisure business in response to corporate cost-cutting

Recent forum predicts future shift in policy due to cuts in coporate travel spending.

Leisure guests will become increasingly important for hotels in the post-recession years, according to a high-level think tank, which took place in London recently.

World Travel Market, the premier global event for the travel industry, invited a dozen hotel suppliers and operators from its Meridian Club, which has 24,000 of the travel and tourism industry’s most senior buyers, to the event. The guests – all of whom were at least regional director level – represented all aspects and geographical regions of the hotel sector.

Taking place in the Directors’ Lounge at the Emirates Stadium, home to Arsenal Football Club, the wide-ranging discussion featured the recurring theme of hotels looking more closely at leisure business in response to sea changes in the corporate travel environment. This marks a sea change in thinking among hotels that have been the biggest growth area of the meetings and events venue sector for the last few years.

Travel budgets for blue-chips and small businesses were slashed during the global slowdown, and the concern expressed by hoteliers at the think tank was that, even if the world economy picks up, budgets will remain tight. One luxury hotelier commented that many companies were now mandating that its travellers could not stay in five-star hotels. Meanwhile, a tour operator with a global reach said that his business was now using video conferencing as a matter of course, and that this had now become “learned behaviour”.

A mid-market operator said that some of its properties in France were no longer taking bookings from the meetings, incentive travel and events sector because of the strong demand from US-based leisure travellers, while another mid-market operator said that it was benefitting from business travellers downgrading.

Another key finding from discussions at the think tank was that responsibility for travel budget is increasingly the responsibility of the procurement department, which appears to be leading to tougher negotiations.

“Corporations now want wifi access as part of the deal, and they are looking for free transfers, free phone calls, and discounts on food and beverage, which clearly affects our margins,” one hotelier said. “It is possible that leisure travellers might now be more profitable than corporate guests.”

It was clear, however that the leisure sector holds no key to success, with delegates reporting the holidaymakers were also demanding better value for money. A UK-based short break specialist, for example, said that customers were still willing to pay a good price for a break, but wanted more for their money.

Other panelists pointed out that luxury hotels are now expected to offer all-inclusive rates to tour operators, as bigger spending leisure clients are starting to see the appeal of all-inclusive breaks.

Themes such as emerging markets, foreign exchange rates and distribution were also covered in the discussions.

“The idea behind the think tanks is to give senior executives the chance to talk openly with one another about their sector,” said Mark Jacobsen, marketing manager at the Meridian Club. “We will take on board what was said and use it to make sure Word Travel Market is able to service the needs of all players in the challenging and dynamic hotel sector.”

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