The economy has forced meeting managers to get creative and look for deals in new places. One of those places is barter exchanges.
The economy has forced meeting managers to get creative and look for deals in new places. One of those places is barter exchanges — companies that specialize in bringing together manufacturers and service providers in mostly cashless exchanges of product overstock and inventory. That includes hotel rooms, says Tom McDowell, executive director of the National Association of Trade Exchanges in Mentor, Ohio. “A lot of hotels and resorts are already organized for barter, and those that aren't are usually open to barter opportunities.”
For example, Les Grafman, publisher and owner of New Parent magazine in White Plains, N.Y., used trade credits for magazine ads to take his entire staff to an industryrather than just 40 percent of the staff, which is what he could have afforded otherwise. Grafman is a regular client of NTA Trade, a barter exchange company based in Niles, Ill.
“Everything went great,” he says. “There were probably 30 room nights involved. We used cash for taxes plus some miscellaneous meals and drinks. But 95 percent of it was on trade.”
How It Works
The essence of barter exchange is this: If your company makes widgets and finds inventory is higher than expected, you might commit $25,000 worth of those widgets to a barter exchange for credit. Meanwhile, across town or across the country, a conference hotel knows that February weekends are its quietest time. It makes 100 rooms and a banquet hall — valued at $25,000 — available to the barter exchange for every weekend in February.
Sales reps at the barter exchange then look for a match. The hotel and the widget manufacturer don't trade directly. The widget manufacturer might apply its $25,000 in barter credit toward a February weekend at the hotel; the hotel might use its value in advertising, office supplies, equipment for its operations, and so forth.
These are not entirely cashless transactions. Hotels will trade for room and meeting space inventory, but will expect to be paid in cash for food and alcohol, plus taxes and gratuities.
Mike Pratt, vice president of sales andfor Denver-based Magnolia Hotels, has been a barter advocate for the past five years. Pratt estimates he does $75,000 worth of business in barter annually.
“We've done one or two pretty substantial meetings every year on barter,” Pratt says. “Recently, we did 80 rooms for three nights at our Houston hotel, plus meeting space. The value was probably $20,000 to $25,000. The arrangement works out well for us off peak.”
What did Magnolia Hotels get in exchange? “Our entire fitness center in Omaha was built on trade,” Pratt says. “When we renovated that property, I thought, ‘Let's see if we can do it on trade.’”
Using a national barter company such as NTA Trade, Magnolia can sell its rooms in Houston and draw a benefit in Omaha. “Our hotels share the barter; it's one account. It allows the hotels not to use cash for other things. We get tchotchkes, gifts, flat-screen TVs. Once, we needed seven laptops and we got them through barter.”
Sometimes Magnolia Hotels will barter directly with companies that it knows are open to direct exchanges. In this way, it recently traded room nights for advertising with a national radio and billboard company.
“We won't do the barter if we're in peak season; then the turnaway business, as well as the barter, is too expensive,” he says. “If a company is flexible in dates and options, barter is always an option. A lot of barter is done for advertising. We're a $100 million hotel company. A lot of our national advertising — especially with in-flight publications — is done on barter.”
Inside the Industry
Jill Halper, vice president of the national accounts division of NTA Trade, is the person Pratt relies upon to bring him barter opportunities.“Jill is a go-getter,” he says. “If she doesn't have it, she'll find it. She's got a good core of companies that use her.”
Travel represents one-third of NTA Trade's business “and it's growing,” Halper says. “I have a magazine looking for 110 room nights in May 2009. What they'll do is come to me and say, ‘Here's what we're looking for: a four- or five-star property with a spa and golf.’ I'll go into the market and present the opportunity directly to the properties and see if they're interested and willing to trade for a portion of the meeting.”
Halper has seen more companies looking for alternatives to spending cash in the down economy. “In these times,” she says, “who is not sitting with excess inventory? You can use the value of that merchandise toward the value of a meeting.”
A barter rule of thumb, says David Holland, president of Barter Network Ltd. of Toronto, which services trade clients across much of eastern Canada, “is that anything with low profit margins or any high-demand goods are typically not available on barter. When you're trading, you have to look at your profit margin. For computer or high-end electronics, where profit margin is slim to none, it makes less sense to do barter. That doesn't mean we can't get computers, but it's a lot harder.
“If you're interested in a restaurant with a six-month waiting list for reservations, they're not going to do barter. The idea is to turn empty time into something,” he says. “Barter is about filling in excess capacity: room nights, tee times, etc. If you are willing and able to change things around, do a meeting or event a day or a week or a month later, then barter works better.”
If your company has never used barter before, Halper suggests you talk with your CEO or CFO to discuss what they might have to offer in trade and up to what amount. “See if this is a direction they want to go,” she advises. “Then you want to talk to a trade company that can develop what you're looking for.
“If you want to participate in barter for this one need, you'll want aconfirming your needs for a meeting before you release your product,” she says. “The last thing you want to find is that they can't deliver.”
The barter house is nothing more than the method of payment. “are signed between the property and my client,” says Halper. “They indicate what part of the meeting will be paid for through NTA Trade.”
Most important, she adds: Do your due diligence, ask for references — and get everything in writing.
Sidebar: Barter Links
THERE ARE AT LEAST 400 BARTER COMPANIES ACROSS NORTH AMERICA, AND ALMOST ALL INTERACT WITH EACH OTHER IN SOME FORM — THROUGH THEIR PEOPLE, A NETWORK, OR DIRECT CONTACT.
HERE ARE A FEW SITES TO GET YOU STARTED:
A state-by-state directory of barter exchange companies. www.barter.net
The periodical of the reciprocal trade industry. Includes a list of barter companies internationally. www.barternews.com
International Reciprocal Trade Association:
A nonprofit industry association whose Web site includes a membership directory. www.irta.com
National Association of Trade Exchanges:
A national association whose Web site includes a membership directory. www.nate.org