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How Companies Can Save on Hotel Costs During Disaster Response

Former hotel insider offers agencies advice for controlling the costs of housing disaster workers.

by Corey McKenna / July 26, 2011
Photo courtesy of Dave Saville/FEMA Photo courtesy of Dave Saville/FEMA

For businesses, finding housing for employees during a disaster can be critical for business continuity, but the costs can be high. That’s why Michelle Lowther established Continuity Housing, which helps companies negotiate with hotels during a disaster. 

Lowther was a sales representative for a Houston-area hotel during Hurricane Katrina. Following the explosion of the Deepwater Horizon oil rig in April 2010, Lowther led a team that established logistics command centers along the Gulf Coast, negotiating contracts with 72 hotels in nine cities to accommodate the thousands of first responders, U.S. Coast Guard personnel and others who assisted with the effort.

She decided to let businesses in on some of the insights she gained during her experiences when she established Continuity Housing earlier this year, and offers little-known facts and advice to companies with this need.

“People often underestimate hotel contracting,” Lowther said, “but there are 60 plus negotiable items in a hotel and some of the things that you would think would be no big deal and very straightforward can save you a lot of money if you would just tweak it.”

Two Key Factors

Negotiating just two factors can reduce the cost of a hotel room by up to 40 percent. The first of those is attrition, or the portion of a room block that is allowed to go unfilled without the holder being required to pay for it. According to Lowther, the industry standard is 10 to 20 percent.

During Hurricane Katrina companies with recovery offices in Houston housed key employees and their families in hotels near the offices to keep business operations going. When checking in, employees indicated that they were staying for an undetermined period of time. They would come and go assuming the account on file for the room would be charged and they could return with the same key as if they’d never left.

“It was a big headache,” Lowther said.

Though hotels require check in and check out dates when booking rooms, those dates can’t be known for certain during a situation like the one during Katrina. That meant clients were buying blocks of rooms — one client reserved a block that averaged 100 rooms — at full price to make sure the rooms were available.

If an organization has reserved a 100-room block of which only 75 fill up, for the other five, a hotel may accept payment equal to the profit lost on the room, Lowther said, since costs incurred on the rooms were also lower.

In negotiating contracts with hotels on behalf of the U.S. Coast Guard and companies involved in regional business continuity operations following the Deepwater Horizon oil spill, Lowther chose to negotiate contracts for two months at a time, with the option to extend a reservation on a room block for an additional two months. She said the contracts have saved organizations 18 percent.

Reserving room blocks like this typically requires a deposit equal to two or three nights’ stay that is applied to the cost of the rooms if they are needed. If the rooms are not utilized, the contract generally allows for that money to be used for other purposes.

Helpful Hints

Other recommendations include: making sure someone is in charge of negotiating and managing the contract with the hotel, training responders to use issued vouchers, and having employees check-in and out with a command-center liaison who verifies who should be checked into the hotel and provides transportation to the response site.

Lowther acknowledged that this kind of contracting can make hotels uncomfortable, since she insists on removing the words “based on availability” from hotels’ standard language. “Hotels kind of feel like they’re losing a little control of their inventory,” she said. “Once they understand the program though, they always come back.”

Close contact with the hotel also helps resolve the company’s concerns. “We talk to them at least once a day, and we are doing constant audits of the room blocks,” she said.

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