Selling Hospitality

1. Selling Hospitality Chapter 14 Sales Professionalism: Ethical and Legal Responsibilities

2. Standards for Business Ethics • What gives your firm the greatest return on investment (ends justify the means) • What the law requires (rule of ethics) • The strategy and values of one’s organization (corporate ethics) • One’s own personal convictions and conscience (personal ethics)

3. HSMAI Code of Ethics As a member of the Hospitality Sales and Marketing Association International, I pledge myself to: • Strive to maintain and improve sound business practices; • Adhere strictly to a policy of truth in advertising and public expression, and issue no false or misleading statements to clients or the public; • Accept my responsibility for cooperating in every reasonable and proper way with others in my profession and conduct my business in a manner that will bring credit to the practice of hotel sales management; • Engage fully in activities for social and civic betterment and accept every opportunity to use my professional skills to improve my community; and • Maintain high standards of personal conduct.

4. The Law and Selling Breach of Warranty and Fraudulent Misrepresentation • In sales, a warranty is an assurance by one party of a fact on which the other can rely. • A warranty can be verbally given. • In general, all cases of misrepresentation are decided on an individual basis and are based upon two criteria: (1) were factual statements made concerning the product or service’s performance? and (2) the level of knowledge of the customer in the trade.

5. Fraudulent Misrepresentation? • “Our product or service is second to none” and “We are the best in the business.” • “Our HVAC system will reduce your hotel’s energy consumption by 10 percent.” • “Our firm can design an incentive travel program for your firm that will improve your bottom line by 5 percent.”

6. Business Defamation and Misrepresentation Companies have been sued under the Federal Trade Act for the following: • Accusing competitors of engaging in illegal or unfair business practices • Telling a third party (customer) that a competitor fails to live up to its contractual responsibilities when the allegation was untrue • Making false statements about a competitor’s financial health • Making false statements that a principal executive of a competitor is unreliable, dishonest, or incompetent

7. Other Statements That Fall Under Business Defamation • business slander—making unfair or untrue statements verbally to a third party construed to be damaging to a competitors reputation • business libel—unfair or untrue statements provided in writing to customers that damages a competitor’s reputation in the form of brochures, letters, and advertisements • product disparagement—providing false or deceptive comparisons concerning a competitor’s product or services • unfair competition—providing statements that misrepresent the characteristics or qualities of one’s own product or services

8. Tying Arrangements • When a seller conditions a sale of a product in the agreement that the buyer will purchase another product or service produced or distributed by the seller, a tying arrangement results. • Tying arrangements may be illegal if it can be shown that the arrangement is for the purpose of reducing competition. • Tying has been proved to be in violation of the Clayton Act (for products) and the Sherman Act (for services).

9. Bribes and Gift Giving • Gifts are not categorically unethical or illegal. • Gifts are a way to express to customers that you care and appreciate their business. • However, gifts can easily begin to resemble bribes particularly when companies begin to compete with one another to give their customers better gifts. • If a buying company has a rule prohibiting gift-giving, do not do it. • If gifts are acceptable, keep the dollar amount within reason.

10. Relationships with Competitors • It is unlawful to discuss with competitors means to fix or stabilize prices, or to enter into an agreement that has even a remote or indirect effect on prices. • Today’s global distribution systems (GDS) provide instantaneous access to competitors’ prices in the hospitality and tourism industry. • As a result, airline executives never meet with one another for fear of inviting the scrutiny of the FTC.

11. Ethical Scenarios Video Case Studies

12. Possible Outcomes of Negotiations • I win, you win (game is won and relationship continues). • I win, you lose (game over). • I lose, you win (game over). • I lose, you lose (game over).

13. Items That Hotels Negotiate • Room rates • Waiver or reduction of meeting room rentals for increased F&B functions • Waiver or reduction of exhibit space rental fees with adequate sleeping room block • Increased complimentary room ratio (usually 1 complimentary room for every 50 attendee rooms) • Complimentary presidential or executive suite during meeting for the meeting sponsor • House limousine or van shuttle service to nearby attractions • Free or reduced parking fees or valet service

14. Items that Hotels Negotiate (cont.) • Complimentary room for meeting professionals • VIP room upgrades at the group rate • Hospitality suites and receptions • Protection from slippage charges if registration falls below expectations—if early enough to inform facility • Room block reservation cutoff closer to meeting date • House telephone at registration within secured meeting office • Complimentary room setups and resets • VIP gifts and services

15. Dealing with Unethical Buyers Hardball Tactics • Good guy/bad guy • Lowballing—The lowball tactic begins with the buyer opening with a ridiculously low opening offer he knows you cannot accept. The theory is that the extreme offer will cause you to evaluate your own counteroffer and move closer to the buyer’s ideal price. • Bogey—Customers who use the price bogey tactic state a fixed dollar amount beyond which they will not go. Customers who use the concession bogey tactic indicate that an issue is important when it is not in an effort to acquire more concessions. • The nibble—Customers using the nibble ask for a small concession that has not been previously discussed to close a deal. The buyer assumes that the amount is too little for the seller to jeopardize the deal over and agree.

16. What Is a BATNA? • Best • Alternative • To a • Negotiated • Agreement Your ability to walk away.

17. Responding to Hardball Tactics • Recognize the hardball tactic being employed and attempt to negotiate over it. • Know your BATNA. • On the one hand, attempting to understand the buyer’s BATNA, particularly when he is employing hardball tactics, provides you with an advantage. • On the other hand, be careful about communicating your BATNA, particularly if it may weaken your position.

18. Factors That Come Into Play When Negotiating Time • Recognize that time is an investment and every salesperson has performance goals. • “I could really use the contract back by the end of the week.” • “What is it going to take to get this done by the 26th?” • “I need to sign a contract by the end of the week, and by the way, can I have three more dollars off the rate and six limo transfers?” • You set the clock. Do not allow time to become your enemy.

19. Factors That Come Into Play When Negotiating Information • Know the buyer’s business. Before you can sell the firm on the value of your product and services, you need to know how your buyer makes money and what the buyer’s “hot buttons” are. • Did you know, for example, that profit margins on hotel rooms can be 70 percent, food can be in the low 20 percent area, and beverages are 70 percent? • Show the strengths of your business and how it fills the other’s needs (historical data).

20. Factors That Come Into Play When Negotiating Power • Volume. • Competition. If a seller thinks that there is no competition, there is no reason to offer concessions. • Flexibility. The ability to be flexible automatically puts you in a position of power. • BATNA—the ability to walk away. Remember, every hotel has a walk-away rate as well.