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January 28, 2014

Written by Bob Meyer, Editor of BarterNews

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From the desk of Bob Meyer... 01/28/2014

A Look Back (from 2005) ... The Rich & Famous Used Barter To Get Started

Barter Was 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 immigrated 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. There he built International Lease Finance and 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 a long-time 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 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 stuff ... free 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.

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Hoteliers Benefit When Working With 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 bottom-line. Simple economics determine that the empty room is invested dollars producing no income; it is essentially an untapped, non-producing asset.

An empty room's 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 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 eradicate 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 clientele will spend cash at restaurants, gift shops, the golf course, the spa, for telephone charges, video rental, and numerous other options within the property. This is especially true since they have more disposable dollars available when 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. 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, should be welcome new business.

Savvy hotel management that 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.

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