Copyright © 2006 Thomson Delmar Learning All Rights Reserved Selling Hospitality Chapter 14 Sales Professionalism: Ethical and Legal Responsibilities

Copyright © 2006 Thomson Delmar Learning All Rights Reserved 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)

Copyright © 2006 Thomson Delmar Learning All Rights Reserved HSMAI Code of Ethics 1.Strive to maintain and improve sound business practices; 2.Adhere strictly to a policy of truth in advertising and public expression, and issue no false or misleading statements to clients or the public; 3.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; 4.Engage fully in activities for social and civic betterment and accept every opportunity to use my professional skills to improve my community; and 5.Maintain high standards of personal conduct. As a member of the Hospitality Sales and Marketing Association International, I pledge myself to:

Copyright © 2006 Thomson Delmar Learning All Rights Reserved 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.

Copyright © 2006 Thomson Delmar Learning All Rights Reserved 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.”

Copyright © 2006 Thomson Delmar Learning All Rights Reserved Business Defamation and Misrepresentation 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 Companies have been sued under the Federal Trade Act for the following:

Copyright © 2006 Thomson Delmar Learning All Rights Reserved 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

Copyright © 2006 Thomson Delmar Learning All Rights Reserved 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).

Copyright © 2006 Thomson Delmar Learning All Rights Reserved 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.

Copyright © 2006 Thomson Delmar Learning All Rights Reserved 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.

Copyright © 2006 Thomson Delmar Learning All Rights Reserved Ethical Scenarios Video Case Studies

Copyright © 2006 Thomson Delmar Learning All Rights Reserved 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).

Copyright © 2006 Thomson Delmar Learning All Rights Reserved 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

Copyright © 2006 Thomson Delmar Learning All Rights Reserved 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

Copyright © 2006 Thomson Delmar Learning All Rights Reserved 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 c oncession 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.

Copyright © 2006 Thomson Delmar Learning All Rights Reserved What Is a BATNA? B est A lternative T o a N egotiated A greement Your ability to walk away.

Copyright © 2006 Thomson Delmar Learning All Rights Reserved 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.

Copyright © 2006 Thomson Delmar Learning All Rights Reserved 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.

Copyright © 2006 Thomson Delmar Learning All Rights Reserved 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).

Copyright © 2006 Thomson Delmar Learning All Rights Reserved 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.