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The Tuesday Report

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January 25, 2005

Written by Bob Meyer, Editor of BarterNews

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A Look Back...The Rich & Famous Used Barter To Get Started

Barter Was The Start For International Deal-Maker

Leslie Gonda, 85-year old founder of International Lease Finance of Beverly Hills, started his business career after spending a part of World War II in a labor camp in Nazi-occupied Hungary. From there he emigrated to Venezuela where he scored his first business success trading costume jewelry with Indians in the jungle.

He used the profits to invest in Venezuelan real estate and launch his own construction firm before expanding into the U.S. where he built an independent chain of gas stations in Southern California.

International Lease Finance now places orders in the billions for the latest in passenger jets, which are then leased to major international and domestic carriers.

* * *

Superstar Actor Used What He Had To Get What He Wanted

Decades ago when Hollywood superstar actor and producer Sidney Poitier first arrived in New York City, it was by bus with $3 in this pocket. He slept on the roof of the Brill Building and got a job washing dishes.

Then, with the help of an old waiter at the restaurant where he worked, he made a trade with the American Negro Theatre. They took him on as a student when he agreed to become their janitor.

* * *

Noted Analyst Bartered For His Luxurious $500,000 Bus

The nation’s best-known “non-flier” is football analyst John Madden. Back in 1986, on a national TV program he discussed his aversion to flying, saying he was “thinking about getting a bus.”

George Gravley, Greyhound Lines’ public relations man, heard Madden’s comments, and spotted an opening to bring his company some valuable P.R. The result: Greyhound seized the opportunity, received millions of dollars worth of press coverage (at no cost), and secured Madden’s services for the next three years in exchange for one of Greyhound’s products—a bus.

Greyhound traded Madden the plush bus with special modifications for his cross-country travel, worth about $500,000 at the time. In exchange Madden agreed to give motivational talks to Greyhound employees in the major cities he passed through during the football season. Madden had to make 30 talks per year for three years...and the luxurious bus was his free and clear.

* * *

Minnesota Man Became Billionaire With Barter Assist

In 1989 Forbes magazine estimated Marvin Schwan’s net worth at $1 billion. Operating in almost total obscurity in Marshall (MN) Sales Enterprises was totally owned by the 60-year-old Schwan. He had built a national door-to-door frozen food delivery company, serving mostly rural households in 49 states.

He additionally owned three frozen pizza companies that sold to supermarkets, convenience stores, school lunch programs, hospitals, military bases, and the like. (A list of his many other enterprises would take several more paragraphs!)

It was during the 1980s that Schwan attacked the $500 million school lunch frozen pizza market in a very creative way. At the time, to work off huge stockpiles of cheese, the Department of Agriculture gave the nation’s public schools the of charge. To Schwan, the cheese looked like an opportunity.

In 1984 he won hundreds of school lunch pizza contracts by offering discounts in exchange for their government cheese allotments! But by 1989 the federal cheese stocks were nearly exhausted. No problem. There was a flour surplus. So Schwan set up a pasta company and contracted to sell discounted pasta entrees to schools in exchange for the government flour credits.

“What we have here is a failure to communicate!”

Years ago, one of the most visible people in the barter industry said the #1 reason why the industry wasn’t farther along in its development was due to a “failure to communicate” by those in the business.

This realization was the genesis of The Competitive Edge newsletter, now into its 18th year of publication. Trade exchange owners who use this powerful marketing and promotional tool are never guilty of “failing to communicate.”

As the owner of a trade exchange you must stay in front of your clients. Informing, educating, and inspiring them, because your clients’ bartering is a relatively small percentage of their overall business. So if you don’t keep their interest and enthusiasm for trade at a high level, you lose.

Your primary aim, like all other businesses, is to get your clients coming back for more. Every extraordinary business (and every trade exchange owner who wants to be extraordinary) knows that the customer you have, is a lot less expensive to sell than the customer you don’t yet have!

Want to take your exchange to a higher level? Use The Competitive Edge newsletter in your operation—it “sells” the many benefits of working through your trade exchange like nothing else!

To learn more about The Competitive Edge newsletter and how it can help build your trade exchange, click here.

From the Archives of BarterNews...

Hoteliers Benefit When Working With A Barter Organization

By George Otras, VP, Active Media Services

The income from each hotel room represents a significant amount of money to a hotel. It is the revenue back-bone, and biggest money maker for any chain or individual property.

However, if unutilized, the vacant room contributes nothing to the bottomline. Simple economics determine that the empty room is invested dollars producing no income; it is essentially an untapped, non-producing asset.

Its estimated worth isn’t going to buy the necessary cash purchases, both goods and services, that the hotel needs to keep the property well promoted, well furnished, and financially alive.

One can convincingly argue that hotels which are at peak capacity or near peak capacity have no need for bartering room-nights. How many hotels can make this claim year-round?

An increasing number of properties and chains have been awakened to the practicality of bartering empty rooms for supplies or other cash expenditures in the service sector, namely advertising and promotion.

However, bartering is nothing new to the hotel business. For many years hotels have set up cross purchasing agreements (or “contra” accounts) with suppliers in exchange for accommodations at other participating hotels, or in exchange for goods and services.

Both parties keep running balances on what each party has used from the other. A difficulty arises when desirability or suitability of the product and/or service involved is not what the other party wants or needs.

The existence of a third party organization, whose exclusive business is facilitating trading between hundreds of parties, enables the typical trading partner, or hotel, to eliminate this drawback. Aside from eliminating the added expense of maintaining a barter department, the hotel has access to the barter organization's computer-based network of media clients, service clients and manufacturing clients.

The barter company has “steering power” which increases the hotel's market share of a barter company's client travel spending that they would never have realized otherwise.

This is clientele which spends cash in restaurants, gift shops, at a golf course, at a spa, for telephone charges, video rental, and numerous other areas within the property...especially since they have more disposable dollars available as their room-stay is obtained on trade.

Furthermore, the integrity of a hotel's rate structure is protected since no discounting occurs in the remarketing of the hotel credits, because they are being traded and not sold into a trading community.

Working with a barter organization enables the typical hotel to barter for a wider variety of services, be it advertising, contract work, office supplies, rent-a-car vouchers, or printing, etc. This type of operation prevents the hotel from having a liquidity problem with its barter credits, since the barter company has a wealth of goods and services to offer—more so than any bilateral arrangement developed by the property.

The arrangement also creates a tremendous word-of-mouth following which is communicated to business associates and others, the price of which is invaluable. A pleasant stay at a property creates a following and a loyalty to that particular property which remains long after the individual runs out of barter credit. The exposure factor of getting live bodies into a hotel to sample the accommodations must be welcome new business.

Savvy hotel management who appreciate the benefits of bartering have recognized the necessity of these programs, in weak and strong economies alike. The evidence for this is the continued usage of barter programs and their successes. Programs can be designed to avoid peak period usage by barter clients. This way marketing people can avoid losing any available room nights during heavy convention or weekend periods.

AMS is one barter company that has pioneered hotel trading programs, with enlightened management of major hotel chains during periods of explosive growth and restructuring. These progressive and innovative programs were developed by people with decades of experience in hotel room trading. The major emphasis of all of these programs has been designed to ensure the following points:

  • The client maintains complete control of the transaction.
  • The programs are directed towards both revenue and profit generating.
  • The program is designed to meet clients' individual specifications.
  • Complete turn-key operation—administration, execution, billing, audit, post-analysis.
  • No fee programs.
  • Responsible hotel credit remarketing.
  • Professional media, goods and service delivery.

Get New Money-Making Ideas And Valuable Contacts!

You can obtain useful, informative ideas and contacts in every available back-issue of BarterNews.

Every barter company in the world is listed on our web site, click through to our Global List of Barter Companies.

Here & There...

  • International Monetary Systems (OTCBB:INLM) enrolled 1,049 new clients through its outside sales team for Continental Trade Exchange, and added another 1,240 members through two acquisitions in the 2004 calendar year. CEO Don Mardak stressed, “These numbers represent a very dramatic increase in new-client sales. Also quite significant is that they are not just in one or two areas, but cover the entire spectrum of the 25 markets that we now serve.”
  • ICON International, a corporate barter company that pioneered real estate transactions in the barter industry (leases, sale-leasebacks, restructuring synthetic leases, and purchases), has hired James R. Tully for the position of VP Director of Real Estate. He was formerly a VP at CB Richard Ellis, a global leader in real estate services. ICON is a subsidiary of Omnicom Group (NYSE:OMC). For more information visit:
  • Have you signed up to receive a summary via e-mail of the Tuesday Report every week? If not, go to the top of this issue (right hand corner) and sign up!
  • The next time you’re drinking your Starbucks, or feeling a bit sorry for yourself, consider that almost 3 billion people live on $2.15 or less per day...according to the United Nations’ Millennium Project.
  • The world’s most recognized and valuable brand is Coca Cola. What does Coke spend a year on their marketing efforts? In 2005 its advertising efforts are expected to top $2 billion.
  • Many hoteliers in Phuket, Thailand, (where beaches and facilities are largely back to normal after the tsunami) are offering guests free meals and free massages in an effort to raise occupancy rates from the present 10% average.
  • The International Energy Agency, a Paris-based advisory group to 26 industrialized countries, says crude oil prices might surge again this year if global demand does not slow down, because the world still lacks sufficient production and refining capacity. Demand this year is expected to reach 83.9 million barrels daily...up 1.4 million barrels from last year.

We welcome your comments, questions, and observations.
? Copyright BarterNews 2005. Redistribution of BarterNews content expressly prohibited without the prior written permission of BarterNews.

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