Boom In Citywide Events Spurs Boston Rate Rebound
Combined with the economic, cultural and historic attractions that already made Boston a popular travel and meeting destination, the city's recent resurgence, aggressive marketing and sluggish hotel construction could leave buyers in a precarious position as hoteliers begin to evaluate the 2006 market.
Figures released this summer by the Pinnacle Advisory Group continued to reflect the rising demand. General occupancy rates rose from 70.2 percent in 2003 to 73.9 percent last year and are projected to rise again, according to the Massachusetts Lodging Association. The city in 2003 hosted 15 conventions that required 107,000 room nights. Next year, however, Boston already has booked 25 citywide conventions that include 230,000 room nights. In addition, demand for rooms in the typically slow winter months is rising. Rates are going to increase, but it appears the negotiating climate could be friendlier than corporate travel buyers might fear.
On Sept. 8, the New England Business Travel Association held an education and professional development day at Boston University, where professionals from both sides of the negotiating table gathered to discuss the market. Terry Sullo, manager of travel and meeting services for Cambridge, Mass.-based Akamai Technologies, organized the event. She said that Boston hotels will be looking out for the companies that have been good partners during tougher times.
"Most of us are expecting we'll see some rate increases, even if we've done a really good job on delivering market share. Hotels can't hold the line to their shareholders in the face of such demand," Akamai's Sullo said. "People who buy need to really manage the market share delivery to the hotels they're negotiating with. If you have a program you haven't delivered on, you're out. It's going to be very hard to get an appealing rate if you haven't done a good job this year. For those of us who have been partnering—through lean years we had meetings, we gave them abundant transient room nights in exchange for better rates—we knew the tables would turn again. Hoteliers say that they're not getting haughty. They know another lean year could be around the corner."
Sullo cited Marriott as one hotel chain that will credit buyers who have managed their relationships well and will not be raising rates to unreasonable levels. "The theme of the meeting was the importance of relationships," said Doug Soares, Marriott's director of sales and marketing in Boston. Soares said he expected occupancy to grow about 1 percent in the coming year, but that increased demand, fueled largely by the new convention center, would lead to a 7 percent to 10 percent increase in rates from 2005 levels.
"We owe it to ourselves to really stay in touch with each other," Soares said. "The buyers have to realize that we are their voice in the organization. We have to have enough trust to be able to share those key issues that really make the difference. We have to understand the long-range vision of their company and what other potential sources of business exist in that organization. Then, we can do a better job internally to get them the lowest possible price point."
Soares said hotels are doing what they can to add value to their packages and that companies willing to streamline their travel purchasing and decision-making will be more likely to reap the rewards.
"A lot of organizations that we work with tend to be vertical in their hotel buy. Certain people manage group travel, others manage transient travel and others handle relocation and training. The travel manager will win from being able to consolidate that purchasing power," Soares said. "If the organization is spending that money, they need to know how they're spending it and where, and direct it in a way that increases their purchasing power. Things like training and being able to offer discounts for weekend business and leveraging their transient buy into additional group discounts are starting to emerge that really add value."
The Jurys Doyle Hotel Group has taken advantage of the Boston surge, opening its Back Bay luxury hotel last year. General manager Stephen Johnston confirmed that the upcoming negotiations would be collaborative.
"We don't take these people for granted," he said. "It's not acceptable that a supplier just sits down with a client and says, 'We're going to ask for 20 percent more next year. Take it or leave it'. Both sides need to understand each other's business. I hope I'm speaking for the hotel industry when I say we're going to negotiate in a very positive way. Let's remember hotel room rates and economies go through cycles," Jurys' Johnson said.
Bob Pellegrini, a former sales and marketing director with Westin, now is vice president of sales for the Boston Convention Marketing Center. He said that the number of hotel rooms, especially in the new convention center's South Boston neighborhood, will increase. Westin is opening a new facility next year and a Marriott Renaissance will open in 2008.
By that time, major conventions that book several years in advance will have more inventory available. Boston, in theory, would have a higher likelihood of becoming a year-round convention city. In the meantime, Pellegrini recommended that buyers consider looking off the beaten path for good rates.
"Some will look in the nooks and crannies and will be pleasantly surprised by the hotels that don't carry a national-brand flag but are very nice properties. They'll be entertaining bids," Pellegrini said. In the foreseeable future, it appears hotels will humbly let the business come to them.
"They don't need to be aggressive to fill the rooms. They are being aggressive to keep their relationships," Akamai's Sullo said. "What I heard from the hoteliers that day, juggling the demand and those that stood by them in the past couple of years and provided business when they needed it, will pay it back by giving buyers back the best price they can on transient and meeting business."