Introduction

Negotiation is a daily activity. Children negotiate with parents about household chores; adults negotiate with the company over salary. When it comes to shopping, the bargain is always there. Although it is not a skill that comes naturally. Fortunately, everyone can learn the skill and practice improving it. Like other skills, good preparation can increase your success rate and make the negotiation process effective.

The specific characteristics of the hotel industry

If you are serious about the hospitality business, you know that negotiation plays a huge role in business. Customers negotiate room prices, room types, and special upgrades with hotels every minute. Speaking from a business perspective, for many years, it has always been an evolving topic in the hospitality industry: what is the best business model? The service-oriented model and the customer-oriented model are the two most popular recently. In addition, according to a research article presented at the International Scientific Conference Economics and Management 2015, for the hotel services industry, four essential factors that influence success are: value creation, development of the relationship with partners, information and communication technologies and customer relationship management. . Considering services, customers, and these four factors, it is reasonable to conclude the importance of negotiation skills for hospitality professionals. Instead of negotiating at the individual level, this article will focus on negotiating between companies.

The case for the consolidation of Marriott-Starwood

The recent Marriott-Starwood merger case is an excellent example to discuss the importance of negotiation. The case itself can provide many different perspectives to discuss the negotiation. As of April 29, 2015, Starwood was launched on the market for the first time. Since then, Starwood, Marriott and a Chinese insurance company, Anbang, have started a trade negotiation battle. It took nearly a year for Marriott to finally succeed with a total settlement of $ 13.6 billion on April 1, 2016. But that was not the end of the story. Marriott has waited another six months for authorization from the Chinese government. It was on September 23, 2016 when Marriott announced that the merger with Starwood had been completed.

The whole story is a negotiation between: Marriott, Starwood, the Chinese insurance company, Anbang and even the Chinese government plays a role. Did Starwood prefer to merge with Marriott or start a whole new chapter with another company like Anbang? From a business perspective, whoever may have a better deal will win the battle. But effective and successful negotiation will bring the company more than money!

Key points to prepare for the negotiation

Speaking of the objective of investing in the hospitality business, acquiring the best ROI (return on investment) effectively is essential. To do this, investors will want to prepare well for the anticipated trading activity. Here are the main points:

A. Price is number one but not the ONLY one

Yes, profitability is definitely a priority for all hotel investors and the returns come from high room occupancy and average daily rate. Profitability also comes when you get the best time to sell the property. When it comes to negotiating with your potential partner (maybe that’s your current competitor), the number on the offer isn’t the only benefit to consider. Other potential benefits, such as brand reputation, likely new market, or even potential marketing effects in conjunction with business activity, are all valuable.

I. Positive negotiating attitudes and intentions

Preparation will start with getting to know your potential opponents as much as you can. The information will cover, among others, the financial status, operational skills and legal aspects of the company. In addition to the “data” you can collect, attitudes toward negotiating are even more important. You need to maintain a positive attitude and intention towards the process, at the same time, you will expect opponents to be positive as well. Having a positive attitude about possible outcomes, as well as intention towards the process, can be helpful to mutual benefit.

According to a Chinese media report, Anbang insurance company did not maintain sufficient financial capacity to meet Chinese legal criteria for investing in foreign markets. (A Chinese insurance company cannot invest more than 15% of net assets in foreign markets. At the time Anbang negotiated with Starwood, the offer was more than 15% of Anbang’s net assets). Attitudes of the three companies and preparation can be improved under the circumstances.

II. Long-term relationship

Besides the money supply, what else can you get out of a business negotiation? This is also part of the preparation. Many times the company focuses solely on the money supply. The party may consider a long-term cooperative relationship. With enough research on the opponents, establish the bottom line of what the company must secure after the negotiation. For example, opponents may seek ideas for technical innovation; there is a creative executive team on your side. Opponents may need advice to improve guest services, the firm you belong to can offer excellent consultations on this. These are things that could be offered in the process rather than adjusting the money supply. As you prepare for the win-win situation, maintaining or even creating hotel value is also crucial.

In the case of Marriott, there was a common business consolidation between two seasoned hotel groups. Both groups have a unique business system. One thing worth watching in the near future is how Marriott will embed the value of Starwood or create a new value system at the united firm.

B. Moment of the negotiation process

In addition to gathering as much information as possible and deciding the end result of the negotiation, the time required must also be planned in advance, especially when you want the process to be effective. Estimating the time frame reasonably will also help you evaluate the process thoroughly. In the case of the Marriott-Starwood merger, after April 1, 2016 for the two who signed the contract, Marriott still waited another six months for the Chinese government to agree. However, when Anbang started its action early on, it is not difficult to predict the next disruption by the government if you observe and study the political environment in China from the beginning. Time is money!

C. Culture, culture and culture

There are many cross-cultural discussions and studies on cultural differences in business negotiation. Dr. Nancy Adler discussed the characteristics of the US, Japanese, Chinese and Brazilian negotiators. It is interesting to see how people with different cultural backgrounds classify negotiating characteristics so differently. Take the American and Chinese negotiators as an example, the ranking of the key characteristics you listed for Americans are: preparation and planning ability, thinking under pressure, judgment and intelligence, verbal expressiveness, product knowledge, perception and exploitation of power and integrity. As for the Chinese negotiators, he presented the following characteristics: perseverance and determination, gaining respect and trust, preparation and planning skills, product knowledge, interest, judgment and intelligence. Culture defines your opponent’s “definition” of negotiation, the preparation process, and the range of meanings for the upcoming conversations.

Dr. Chang also described the differences between Chinese and American trade negotiations in an article published in the Journal of Human Resource and Adult Learning in 2006. Generally speaking, Americans prefer to persuade other people based on logic. For this reason, if you are negotiating with an American company, providing data and statistics to support your proposal can easily convince your opponent. For the Chinese group, the key point is to establish the mutual relationship between the two parties and to know who the crucial person is. Trust is the fundamental value of this type of relationship. Once the relationship exists, each subsequent discussion is a flow.

I. Non-verbal communication

In addition to learning about the various culture-based communication styles, pay attention to non-verbal communication as well. Approximately 70% of human communication occurs non-verbally. Preparation to observe and interpret non-verbal communication is sometimes ignored during the negotiation process. You can focus on body language, such as facial expression and gestures. Keep this in mind that whatever your company has prepared for negotiation, it is mutual. The other party could organize a similar observation.

II. Actively listen, respect and find specific meanings behind the conversation.

American culture encourages frank and direct speech. This does not apply to all other cultures. The unspoken language is common in some cultures such as Chinese, British, and Japanese. The interpretation of unspoken language is part of the culture that is passed down from generation to generation and is not limited to commercial situations. As you prepare to negotiate with another culture-based organization, practice active listening skills. If possible, a person who comes from the culture will be perfect to be the interpreter. An interpreter not only of the spoken language but of the “tacit” one.

It is impossible to decipher the entire negotiation process of the Marriott case for a stranger. However, it is not difficult to imagine the potential clues throughout the process. By learning from the case, paying close attention to latent vocabularies, it is conceivable to move the case faster than it is now.

D. Deal with possible conflicts

No matter how well the preparation has been, there is always the possibility of conflict. Smart preparation for trading includes risk management. For an investor in a hotel business, remember that a successful business negotiation begins with respect and understanding of the cultural and cognitive backgrounds of your opponents. Keep in mind that price is the priority but not everything. There is an old Chinese saying: “Money comes and goes, the relationship is forever!” Here the “relationship” refers to the one we discussed earlier. Confidence is the key.

conclusion

From a larger scale, negotiation is not only a process about profit but also other potential benefits. When you want to exchange and influence the thoughts or behaviors of the other party, it is time for the negotiation to occur. Mutual benefits and needs can come to a consensus if you prepare well. In the end, you can still maintain the relationship for the long term.

References:

Adler, N. (2008). International Dimensions of Organizational Behavior, 5th ed. Cincinnati, OH: South-Western College Publishing, 2008.

Chang, LC (2006). Differences in business negotiations between different cultures. Journal of Human Resources and Adult Learning, 135 – 140.