A light bulb lit up over Jay Fortgang's head last spring when he read an article in the San Jose Mercury News about someone who was helping bankrupt dot-coms liquidate their hardware. Since hotels typically issue credits for cash deposits on canceled meetings, and companies often can't use them before they expire in six to eight months, why not provide a similar service for companies that want to liquidate the “assets” of their canceled meetings?
No newcomer to great ideas (he opened the first espresso shop in Seattle), Fortgang founded MyHotelBroker (www.myhotelbroker.com). The company finds firms that need to unload hotel credits and buyers who can use the credits before they lapse. The service is different from the usual hot dates/hot rates programs because the deal takes place after the meeting dates have come and gone and after liquidated damages have been paid.
“The hotels were hesitant about transferring the credit at first because they weren't sure about the quality of the client they'd be getting, and what the terms and conditions would be,” says Fortgang, adding that he's had to do more educating on the hotel side than he had expected. He squelches hoteliers' doubts by making it clear that neither the hotel nor the buyer is obligated until there is mutual agreement.
“The credit isn't transferred until there is a finalincorporating the credit between the hotel and the buyer,” says Fortgang. The original credit-holder is free to use the credit or find its own buyer until the moment the credit is transferred. “I've had success with hotels that originally said flat-out ‘No.’ Now, they're not just accepting the credits, they're accepting extensions on the credits.
“It's a win-win-win,” says Fortgang. “The original credit-holder gets some money back on a credit that otherwise would have been a wash, the buyer gets a 40 to 60 percent discount, and the hotel gets business.” And don't forget the fourth winner: Fortgang buys the credit at 10 percent to 25 percent of its retail value, and resells it at 40 percent to 60 percent; his cut is the difference between the buy and sell prices.
“It worked like a charm for us,” says a meetings and events manager for a high-tech communications firm in Sunnyvale, Calif., who prefers to remain anonymous. He brokered two credits through Fortgang's firm: one for $100,000, another for $22,000. “We were just going to let them lapse until Jay called me,” he says. “The organization that bought our $100,000 credit got it for $40,000 — what's not to like about that?
“It's a slick process,” he says. “We're starting to book more meetings now, and we're thinking about buying some credits instead of selling them.”
The inventory on MyHotelBroker.com is limited mainly to West Coast properties, but Fortgang hopes to expand quickly. “My big push is to get a corporate hotel chain on board so a credit that's not going to be used in Maui can be applied to New York City,” he says.
Fortgang admits that the economic downturn has enabled him to establish relationships with buyers and sellers to a degree that wouldn't have been possible under sunnier circumstances. “Yeah, there's an abundance of credits right now,” he says. “I spoke with one five-star hotel in the Midwest that has $8 million in credits this year. Their normal load is ‘only’ $2 million or so. And that's just one hotel.”