October 01, 2015
Not Your Traditional Corporate Trading Model
What are the biggest challenges facing providers of hotel accommodations?
One of the main challenges that the hospitality industry faces in any market environment is how to properly allocate money for property improvement plans (PIP), which are the investment plans that hotel owners and management companies oversee in order to remain a part of their corporate brand(s). Hotel owners and managers want to ensure they get the highest average daily rate (ADR) possible, and one of the ways to do that is to invest in updating their properties and rooms with the latest technologies and amenities.
How are your hospitality clients utilizing Active International’s trading programs to meet these challenges?
We have an all-cash trading program, our Cash Cross Purchase Program, which is designed specifically for our hospitality clients, including hotel owners, REITs, brands and management companies, to enable them to efficiently make investments in their properties while simultaneously improving their RevPAR. Under this program, when they buy goods and services to meet their budgeted PIP purchasing requirements from Active, they receive, as additional value, a guaranteed future revenue stream in the form of cash room bookings.
How does your corporate trading program work?
Our hospitality clients purchase goods from us for cash, at the same purchase price they would typically pay and with the same terms and conditions that they normally would get when purchasing for cash. Additionally, we do not disrupt the normal procurement process and work with our hospitality clients’ existing procuring team/agents. Where our Cash Cross Purchase Program really impacts their bottom line is in the commitment we make to spend a certain percentage of the purchase (typically 10+ percent of the pre-tax purchase price) in cash bookings (individual and new group bookings) at
their hotel property(ies). We also back fulfillment of our booking commitments with a 50% cash-out guarantee. It is important to note we are able to provide the benefit of a cash revenue stream not because we buy better, but because we trade with our suppliers, often paying them in a combination of our Trade Credits and cash.
How are you able to generate these cash bookings?
The bulk of the business we book is business travel (individual stays and groups/meetings) for our corporate clients who hold our Trade Credits. Our clients are Fortune 1000 corporations in industries ranging from apparel to electronics to HBA to media. We treat our client base as a unique