More hoteliers hit room-bartering bonanza
By Marty Whitford, H&MM Senior Editor
Bartering is nothing new. Individuals learn to barter at an early age, trading keepsakes such as baseball cards, marbles and stamps with friends and the swapping doesn’t stop at home. Adults extend barter into the business world, where companies and countries have traded for centuries.
Barter proponents say the hospitality industry is on the cusp of an explosion. The number of worldwide barter clients has jumped 15-fold the past two decades. The global barter business tallied $9.1 billion in 1996 transactions and is projected to grow 9 percent to 12 percent annually. Hotel and motel room night trading currently accounts for nearly 8 percent, or $730 million, of all annual trades, according to Tom McDowell, executive director of the Cleveland-based National Association of Trade Exchanges. Barter can be quite the “cash cow” for hotel operations, according to McDowell.
The industry has worked hard to dispel nasty myths – and sometimes truths – associated with bartering. Company and organization officials are focused on educating the public and self-policing the about 500 agencies doing $4.3 billion annually in trade in North America, McDowell said.
The widespread use of computers and the Internet has only further aided barter agencies as they strive to expand the goods and services they offer. However, despite significant bottom-line bonuses, just about half of today’s hotels actively barter and only about 10 percent of these to their full capability. “If you’re in the half that isn’t involved in barter, you’re really missing out.” “Any hotelier that’s not using some sort of barter to improve its bottom line may still be riding a horse to work.”
HOW BARTER WORKS: Hoteliers can cash in on empty rooms with little risk and great return by swapping with corporate barter companies, trade exchanges, buying consortiums or even trading direct with individual vendors.
Corporate barter companies, which account for 85 percent of trades, typically represent a few hundred large businesses. The agents usually take possession of the goods and services being swapped.
Retail trade exchanges usually represent small – and medium-sized firms, said Jack Schacht, President of the National Trade Assn. of Niles, Ill. They may charge a one-time initiation fee and a surcharge — usually split between both trading parties — of 10 percent to 15 percent of the total transaction.
Two trading roads less traveled include buying consortiums, which can purchase specific goods in large volumes straight from the manufacturer and bartering directly with individuals suppliers. In any case, most trades involve many parties, or even several exchanges. About three-fourths of all room night bartering is for radio and TV time or print ads, but that trend is changing, Schacht said.
PLAYER’S PERCEPTIONS: About two-thirds of the firms listed on the New York Stock Exchange actively trade and that bodes well for barter.
One key is assuring hotels stay in their rooms won’t be re-traded at a lower price, advertised as such or resold to a cash customer.
The Ritz Carlton is open to room night trades, but high occupancy rates from cash customers and lopsided offers douse many barter requests, company spokesperson Vivian Deuschl said.
Best Western International has had strong trade success since implementing its barter program in 1985, said Vicki Meyers, managing director of the firm’s worldwide advertising and sales/marketing. About 1,900 (90 percent) of Best Western’s U.S. properties already have traded room nights.
Bartering has extended Best Western’s advertising budget 10 percent (more than $1 million), filled empty rooms and brought the company business that otherwise would be going to competitors, she said. Best Western is exploring new barter avenues, such as local trades and national deals to acquire hard goods such as computers. Sometimes seen as a wolf in sheep’s clothing, barter can get a bad name from empty promises, accorindg to Kaufman and Peter Benassi, president and CEO of New York-based corporate barter company Media Resources International.
“It isn’t something that is taught at hotel school,” Benasi said. “Barter’s completely out-of-the-box thinking.”
Nevertheless, there’s a tremendous upside to trade and hotels can limit risks through experience and education, according to Benassi.
Bartering turns empty rooms into valuable commodities. Trading room nights brings hotels new customers to feed other profit centers – – such as food-and-beverage, telephone, laundry and parking – with opportunity for the barter client to return as a cash customer and even refer a few friends.
At the very least, trade allows hoteliers to delay their receivable, and properties can expect 6 percent to 12 percent of the room nights they trade never to be used, said Allan Chernoff, assistant to the president, at time-share developer Central Florida Investments
. When it comes to room night bartering – especially for hard goods – CFI may stand alone, the NTA said. CFI checks what’s available through barter – via the 12 plus exchanges it belongs to and the more than 100 vendors with which it trades directly –
“before writing check [No.] 1,” Schacht said.
CFI annually trades nearly $2 million worth of stays at many of its 3,600 rooms for everything from foods and furniture to printing, computers and office equipment to locksmith, landscaping and pest control services, Chernoff said. Since initiating its barter program in 1994, CFI has increased its number of room nights traded 50 percent or more annually to more than 4,000 redeemed last year, he said.
Any hotel with occupancy rates below 90 percent should be exploring bartering for whatever they currently pay cash for, McDowell and Schacht said. CFI’s Chernoff warned hotels to abide by his golden trade rule: “Never buy anything [via] barter that you wouldn’t pay cash for.” If hoteliers break the rule, they must not fault the system for their misguided purchases, he said.
“That’s like blaming the car for the accident,” he said.