Q & A Table of Contents
Gaining Credibility for a New Business
From: MV, The Netherlands
Question: I am a starting tour operator and I want to contract quite a number of hotel rooms in a certain popular hotel (on an allotment base). Since the hotelier does not know my company and I am starting (so there is no evidence of success from the past) he will either refuse to give such an allotment or he will charge me a fancy price, which will make my product expensive and not marketable anymore. How to overcome this?
Response: Starting a new business requires creating credibility -- and credibility requires a record of past experience. Banks have the reputation of lending money to people with assets, not to people who haven't got any.
Have you and the hotelier had conversations, or are you basing your thoughts strictly on assumptions? There's an English language lesson that to assume can make an ASS of U and ME.
In your situation, you need to examine what you can offer to a hotel to give them a feeling of safety and dependability about you and your business. Take a look at their most likely interests in the situation: a hotel does not want to take rooms off the market only to find out that the rooms will not be sold. They run a financial risk in offering you a discounted price.
On the other hand, perhaps you can meet with the hotelier and say, "I am starting a business. Here are my credentials. If you will give me a chance, then I will promise to continue selling rooms in your hotel as my top priority for X years or until I have sold X number of rooms." You might also try a different approach: rather than coming to the hotelier with a plan in which you have thought of all the answers, you should ask him/her "What do you need from me to make the deal work well for you?" Then listen to what s/he says and base your proposal on his/her interests rather than your own.
There may be a number of things you can consider:
1. Do you have any connections or personal relationships with people in the hotel business who believe in your capacity to deliver?
2. Are there other tour operators, perhaps from other communities or other countries, who have blocks of rooms booked who would be willing to give you the opportunity to 'sell' some of 'their' rooms up to a certain point in time so that you can show the hotelier your capacity to sell rooms. You may make less money, but it establishes your 'track record'.
3. Can you offer the hotelier any kinds of financial guarantees? If you don't sell X% of the rooms by a certain date, you'll pay more for the rooms for you sell. This cuts into your profit, but it is better to have a little profit than none at all. You can think of this cost as part of your capital investment in starting the new company.
4. Is there any kind of insurance or performance bond you can buy? For example, if you buy a policy for 10,000 florins, with the hotel as the beneficiary, will the hotel accept that as a guarantee?
5. Can you sell rooms to the public at a set price, put the money in a bank, and guarantee a refund to your tourists/buyers if the deal with the hotel does not work?
6. Do you have any experience in the travel business or other businesses that strengthens your credibility?
As you can see, you need to investigate both the hard facts and the creative options as you prepare for negotiations. I wish you good luck.
Let me know how it works out, Steve.
| 
