Rooms Hotels

Marriott to corporations: We have the power now

Jul 12, 2012 9:29 am

Skift Take

If the economy truly gets out of its doldrums, the power struggle between hotel chains and corporations will shift back to the hotels.

— Dennis Schaal

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Source: Skift
Author: Dennis Schaal

With its group business up and healthy increases in corporate rates slated for 2013, Marriott International is signaling to corporate partners that tough negotiations may be in store this fall.

The hotel chain, the first major one out of the gates in reporting second quarter earnings, cites robust group bookings in North America, a revenue per available room increase of  6.7% worldwide, and forecasted “high single-digit percentage increases” in negotiated rates with corporations next year.

In a conference call with analysts today, newly installed CEO Arne Sorenson said demand has come back “reasonably strong” since the 2007 plunge, and that power has shifted “somewhat” to suppliers.

Marriott hopes the “somewhat” will be substantial.

“We do think it will be a good season for negotiations,” Sorenson said.

What this means for road warriors — whether they are part of a managed travel program or not — is that they can expect to see increasing room rates for the remainder of this year and into 2013.

The hotel chain’s group room revenue in North America increased almost 8% in the second quarter, compared with the year-ago period, and “group booking pace” is forecast to be up 10% for the rest of 2012, Marriott states.

And, corporate business, buoyed by the tech and consulting industries, help pushed occupancy rates higher, Marriott says.

For the second quarter, Marriott saw its net income jump 13% to $143 million on a slight revenue uptick to $2.8 billion.

Possible challenges

In other corporate travel-related news, Sorenson says Marriott is speaking with the U.S. government about its push to lower per-diems for government travel.

“They might well be pricing their employees where they might not be able to stay in full-service hotels, particularly in central cities,” Sorenson said.

But the strong recovery in corporate demand may buffer Marriott from any per-diem reductions.

Sorenson said many hotels are “yielding away” from government business because increased demand elsewhere.

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