ome large corporations are
participating in online reverse auctions to procure hotel rates, a
practice that puts hotels in a very competitive medium and shaves
weeks off the traditional RFP process.
And although hoteliers are lukewarm to the open-bid process,
they're adjusting out of necessity.
"It's something we have to deal with," said Mike Fegley, Six
Continents Hotels' vice president of global sales in the Americas.
"The reverse auctions commoditize our product, and we don't feel
our product is a commodity.
"But we don't want to be left out. If one of our large accounts
chooses to do business differently, we have to adjust or we'll be
left behind."
In a reverse auction, corporations invite hotels to participate
in an online event that lasts about two hours, said Alice McQuade,
Six Continents' director of corporate sales.
A few companies provide the technology, including Sausalito,
Calif.-based ProcurePoint Travel Solutions, which said 11 corporate
customers are putting hotel business up for bid this autumn.
"We've participated in about two dozen auctions this year," said
McQuade. "Corporations will use the auctions for selected cities,
usually based on the their volume in those cities."
Unlike a traditional auction in which the price is bid up,
hoteliers are bidding the price down in an effort to win business.
Some corporations are reporting compelling results.
Charles Schwab and Dell Computer Corp. said reverse auctions cut
10% and 13% off room rates, respectively. Last year, Compaq tried
reverse auctions for a few cities and was pleased with the results,
said Deborah Matarazzo, who was manager of the global hotel program
before Compaq merged with Hewlett-Packard.
This autumn, the new company is in the process of conducting
open bids covering 25 cities, said Audrey Hemphill,
Hewlett-Packard's current global hotel manager.
"Last year, Compaq saved more than expected using the open-bid
process, and I was impressed with the reduced cycle time of the
[RFP] process," said Matarazzo. "We reached full agreements with
hotels in two weeks as opposed to three months."
Chad Goodnough, director of business travel sales at Wyndham
International, said Wyndham's experiences with reverse auctions are
improving.
"We're learning this new way of doing business. Corporations and
technology providers [of online reverse auctions] are doing a
better job of understanding that we're selling a service, not
necessarily a commodity," Goodnough said.
"Corporations are making sure that we're bidding against hotels
in the same tier and same location. If that's not happening, then
we can't submit a competitive bid."
Hemphill said, "Hotels want to make sure that we're comparing
apples to apples. "We let them know up front who has been invited
to the open bid and make sure that a luxury hotel isn't competing
against an economy hotel.
"We also let hotels know that our final decision is not solely
based on price. We take location and value-added amenities into
account.
Hewlett-Packard won't be using the reverse-auction model in
every city.
"We're not doing open bids in our top markets because we require
more personal one-on-one meetings with hotels in those cities,"
Hemphill said.
Corporations that want more personal business relationships in
all their markets might find reverse auctions aren't for them.
"We're not really comfortable with it," said Kevin Maguire,
travel manager at Tokyo Electron America in Austin, Texas.
"You're putting hotels in a defensive posture and I'm not sure
that's the best way to build a relationship."