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December 11, 2001

Entrepreneur Snaps Up Unused Hotel Credits For Resale To Meeting Planners

Combine a new idea with excellent timing, and you get MyHotelBroker, a company that offers a different twist on savings at hotels.

When an organization has to cancel an event, as is happening more frequently these days, the cancellation fee paid to a hotel is often kept as a credit that the group can redeem for future bookings within a certain time frame.

But many groups wind up never rebooking with the property, and so lose tens or even hundreds of thousands of dollars of credit. MyHotelBroker's patent-pending business model is to buy these credits and resell them, at a steep discount, to other groups.

Jay Fortgang, the founder, pays 10% to 40% of the total value of the credits, depending on factors like when they expire (within 12 months), and what they can be spent on. Another negotiable item is whether the seller of the credits receives cash up front, or only after the credits are sold by Fortgang.

The hotels have an opportunity to attract new customers, and they can demonstrate to holders of credits that they are doing everything they can to assist them out of their financial predicament. And they can obtain incremental revenue--the credit might bring a very attractive piece of business into the hotel.

Practical Business Thinking Overcomes Diplomatic Relations

Japan does not have diplomatic relations with North Korea. But that's not going to keep the two countries from launching a barter deal that makes sense for both countries.

Thinned wood and scrap wood from the Sea of Japan will be sent to North Korea by ship, and then the ship will be loaded with fine quality sea sand and river sand, which are no longer sufficient in Japan, for the return trip home.

Lawsuits Can Pave Way For Barter Transactions

When Alcoa Inc. agreed to buy aluminum-making rival Reynolds Metals Co., a pesky federal antitrust suit by McCook Metals, a smaller metal-maker, stood in the way. To settle, Alcoa delivered its Longview, Washington, aluminum smelter to McCook in exchange for dropping the litigation.

Indeed, these days such outcomes as cross-licensing provisions and the assignment of equity stakes frequently result from legal settlements.

"When you're dealing with business people, there's the opportunity to get things done that they wouldn't be able to get from the lawsuit itself," says Eugene Lynch, a retired federal judge in San Francisco who has been resolving cases for 40 years. (Lynch says 40% of his cases incorporate some type of non-cash solution into the settlement terms.)

Global Strategies Being Reassessed

Major companies around the world are carefully looking at their global plans, and the result is that cross-border mergers are down 50% since this time last year. And flows of direct foreign investment around the world are expected to drop this year by 40% from 2000.

Two noticeable exceptions in the slowdown are the NAFTA region and China--a new member of the World Trade Organization. (Investments that would have gone into many Asian countries is now flowing into China.)

Hopefully this slowdown is temporary, as global economic development will give poorer nations the chance to become something other than breeding grounds for frustration and violence.

Here And There. . .

  • A $10 drop in oil prices, from $30 a barrel to $20, over the next year will translate into about $50 billion in U.S. consumer spending power--roughly the size of the tax rebate.

    Such a drop could also be a major help in turning the world economy around. (Non-OPEC producers refuse to lessen the amount of oil they're pumping, and OPEC's answer is to continue flooding the market with oil, which creates gluts and softness in prices.)

  • Marketing sage Regis McKenna (author of Relationship Marketing) says distribution channels in today's marketplace are extremely important. That's good advice for every small business owner to embrace. One of the best channels is a local trade exchange that provides onewith a sales and purchasing conduit.

  • Microsoft is considering bartering equity (preferred shares held) in AT&T to gain an equity position in whichever company acquires AT&T's cable unit, as Microsoft faces off in its future battle with AOL.

  • Large advertisers are increasing their online marketing activities, but not necessarily dipping deep into their budgets. That's because the Internet is able to validate the poor response rate, creating a credibility problem among web site publishers.

    Solution: Companies barter for space, i.e. Nestle's Kit-Kat candy bar last year sponsored MSN Messenger service in the UK through an elaborate barter arrangement. Basically Kit-Kat had the MSN Web address printed on millions of candy wrappers in exchange for getting its brand name on the Messenger service.

  • While China has plenty of large, inefficient and fragmented industries that are sure to be shaken up by the country's membership in the World Trade Organization, the first to see dramatic change will be wholesale distribution, as foreign companies can engage in the wholesale business for the first time.

    Initially it will be done through joint ventures, but after two years through wholly owned enterprises. Presently logistics and distribution costs now average 40% of a product's total cost...whereas in the U.S. and Europe that figure is around 10%.

  • Advertising forecasters disagree on where we are headed. Robert J. Coen, senior vice president and director of forecasting at Universal McCann media buying service, sees U.S. advertising spending picking up 2.4% in 2002.

    According to Coen, U.S. marketers as a group spent 4.1% less on advertising this year, the first yearly contraction in advertising since 1991.

    Jack Myers, chief economist of the Jack Myers Report, a newsletter that follows trends in the media marketplace, is more pessimistic than Coen. He expects another decline of 5.7% in U.S. advertising spending for 2002.

  • A growing trend by large media companies are "intracompany ads"...or commercials for their own products and programs on their own media outlets. AOL Time Warner recently disclosed in a securities filing that it had boosted the amount of intracompany advertising to $252 million in the first nine months of this year, compared with just $12 million on a pro forma basis for that period in 2000!

  • Japanese golf courses that cost $150 million to build in the 1980s are selling for $10 million today, as the sport has become a luxury many can no longer afford and Japan's banks are more eager to sell their golf-related debt.

  • Deflation coming to the U.S.? Don't bet on it as yet. Consumers don't appear to be taking on a deflationary mindset. Instead of postponing purchases, on the logic that things will keep getting cheaper, they have splurged on low-cost cars and kept shopping at discount stores.

    Additionally, prices for services--a much bigger part of the U.S. economy--are still rising. So the $10 trillion U.S. economy is still far from the deflationary quagmire Japan is presently experiencing.

  • Never seen a copy of BarterNews? Go to our home page, www.barternews.com, and click through to the form for your free sample copy. (Due to shipping costs, offer available in U.S. only.)

  • Major, high-end hotels are moving to bargain pricing and using clearinghouse sites to move inventory. This is an admission that the old reservation channels just aren't filling up the rooms. Hotel Reservation Network now has 4,000 properties in its database.

  • Trade exchange owners looking for an easy way to motivate their client base and stimulate more trade activity among their clients can obtain a copy of the 15-year-old, proven, informational marketing tool--The Competitive Edge newsletter. E-mail bmeyer@barternews.com for a sample copy and details. (Be sure to include your complete mailing address in your e-mail...this is not an e-mail newsletter.)

 

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