Hotels barter to combat low occupancy

Trading rooms for wine glasses, advertising and even window washing

04/29/2009 10:00 PM

Medill News Service

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Tough economic times are forcing Chicago hotels to get creative.

Chicago’s hotel industry has been hit hard by the recession. Occupancy rates downtown were 48 percent in February, down from 54 percent a year earlier, according to Smith Travel Research Inc., a firm that follows the hotel industry. The average cost of a room fell by more than $16 to almost $133 — an 11 percent decline.

One increasingly popular recessionary tactic is bartering, where hotels exchange room nights for everything from advertising to dry cleaning.

While bartering is not a phenomenon of the economic downturn, hotels have turned to it more and more since the recession took hold.

“With small hotels, we [barter] quite frequently because our budgets are quite small,” said Lanny Grossman, a spokesman for The Talbott Hotel, a 149-room boutique hotel near North Michigan Avenue. “We have to maximize our exposure, and what we have to work with is room nights.”

In February, The Talbott gave nine room nights to What’s Happening, a community newspaper chain, in exchange for Valentine’s Day weekend advertising. Companies receiving room nights often use them as employee incentives.

The 355-room Hotel Sax Chicago on North Dearborn Street is trading 20 to 30 rooms per month for advertising — up 20 percent from last year, director of sales and marketing Dan Dolan said.

“In this economy, we have seen a shift to conserving cash and we use this kind of trade agreement when it’s prudent,” Dolan said.

Hotels aren’t just bartering for advertising. The Best Western River North recently paid for its window washing service with free rooms, director of sales Travis Rank said.

Jill Halper, vice president of national accounts for the Niles-based National Trade Association, a bartering firm, said hotels desperate to cut expenses are becoming more receptive to bartering. Halper, who facilitates bartering for the Hotel Monaco Chicago and other local boutique hotels, said the phone calls she’s been getting are “almost like a crisis line.”

“Hotels are hurting,” she said. “For those hotels that maybe had a policy of not trading, now is the time where everybody is revisiting that.”

Halper said her hotel clients have traded rooms for wine glasses, napkins, exercise equipment and even manicures for housekeeping staff.

Besides bartering, hotels are also lowering rates to attract customers, but boutiques like Hotel Sax and The Talbott say there is a limit to how low they will go.

“We’re not going to drop down to $99 per room,” Grossman said. “It’s almost like giving it away for free.”

Instead, Grossman said the recession has forced The Talbott to “think outside of the box.” One result is a promotion, launched last week, which offers a special birthday rate for returning customers: one dollar for every candle in their cake.

Hotels are also making less quirky offers, such as complementary parking, wi-fi and multi-night packages. The Best Western River North started offering free breakfast in January, Rank said.

Even though they’ve become a less frequent sight, travelers like Steve and Kim Lakis of Galesburg still seek out special treatment when they visit Chicago. The Talbott customers say they’re willing to pay a higher price for a unique experience, no matter the economic climate.

“We want to be spoiled,” Kim said.

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