Buyers Using Prefered Hotels Still Minority

Arecent survey shows slightly less than half of all companies designate certain properties or chains as preferred meeting hotels, as buyers debate the merits of potentially sacrificing some leverage over each individual meeting negotiation in exchange for the long-term cost savings the approach can deliver.

According to an exclusive Meetings Monitor survey of 195 corporate meeting buyers, 46 percent of companies have developed preferred hotel agreements specifically for meetings. That move typically is tied with a corporation's ability to restrict the site selection of its meeting sponsors, and some hoteliers said they are receiving more requests to create such deals or, in some cases, are proposing such arrangements to clients.

The benefits to such an agreement lie in a company's ability to get a lower rate from a hotel or chain in exchange for a guaranteed level of business or marketshare in a particular city. In addition, limiting supplier choice can be beneficial when nonprofessional planners book events, particularly when the preferred hotel offers already negotiated rates and contractual terms.

Yet, not everyone subscribes to that viewpoint. The nature of meetings negotiating inherently is variable, with costs potentially varying widely based upon the time and location the event is booked. A prenegotiated deal at a preferred meeting property can prohibit a buyer from realizing the best possible deal for a given event.

Opinions also vary as to buyer interest in the approach. "There's more discussion of the topic, and there are some agreements that have transpired," said Steve Armitage, senior vice president of sales for Hilton Hotels Corp. "As corporations are consolidating travel and consolidating transient and group together, there's more of a commitment and effort to place more meetings into specific brand hotels."

Armitage said although most of the corporations that have designated brandwide preferred meeting hotel programs are large, there are smaller companies that have designated single properties or a handful of local properties as preferred.

Though price likely is the main driver of preferred programs for buyers, Armitage said some corporations, particularly those with decentralized meeting structures, ensure that nonprofessionals booking meetings can do so at an already negotiated rate. "It lets sales or human resources people have a central partner to deal with, with whatever the professionals have negotiated on their behalf," Armitage said. "It's a central solution for a large company—for all employees, not just meeting professionals." Hilton has broached the topic of preferred meeting deals with select clients, he added.

The upshot for the hotel of any preferred deal is marketshare, Armitage said. "It allows us to do our best for our best customers," he said. "It also means we can develop a better relationship and do more for that customer."

Other hoteliers said their clients have expressed little interest in the approach thus far and questioned its merits.

"We're not really seeing it," said Fred Shea, vice president of sales operations for Hyatt Hotels Corp. "Group needs are always fluctuating, and these deals go away from that. So much of group pricing is based on when the meeting is to be held, so how can you be sure you're going to get the best deal with a prenegotiated rate? Most planners prefer to negotiate individual meetings because it gives them the freedom to move around."

Shea said the growing influence of corporate procurement philosophies and personnel in the site selection process has prompted some buyers to seek wider deals, but usually only at a single property. "Purchasing agents like one price when they can provide transient and group business in the same hotel," he said, "but it's just not a major part of the market." Expanded single-property meeting deals make more sense in general than chainwide deals, Shea added. "If you have a large amount of business at the same hotel, it's easier to do consistent pricing, but it's hard if you have a large amount of spend at resorts and airport hotels too."

ING Americas of Minneapolis, however, expects to have a full preferred hotel program for internal small meetings by year-end, said travel, meetings and promotions sourcing specialist Kari Knoll Kesler. The program, she said, will involve a single property in major cities, at which standard contracts and meeting packages already will have been prenegotiated. The program would not apply to larger meetings, incentive trips or any meeting that involves clients, ING's Kesler said. "We want to limit hotel choice on that end of the spectrum," she said. "We'll have everything set up in advance, and there will be an uncomfortable and near-impossible level of executive approval required for [sponsors] not to use the program."

Kesler successfully has consolidated some travel and meeting spending and, with two years of historical data of meeting expenditures, the company is able to commit specific amounts of meeting room nights to specific hotels in specific cities. She said ING may negotiate such a deal with a hotel chain or individual properties, if necessary, and that current preferred transient hotels will be given "the most consideration."

Small, internal meetings comprise a significant minority of ING's meeting expenditures and therefore present high opportunity for savings, Kesler added. "When you look at this spectrum of meetings, where can you generate savings?" she asked. "Many of these are not being planned by professional planners, so more standards and processes would be welcome there." ING would drive nearly all applicable meetings to preferred properties, she said.

That would exceed the performance of most survey participants who already have created a preferred meeting hotel program. About 30 percent of those respondents indicated they drive at least 75 percent of their meetings to preferred meeting properties, while an additional 25 percent indicated they book between half and three-quarters of their company's meetings at those properties.

Schaumburg, Ill.-based Motorola Inc. has not designated any property as a preferred meeting site, although the company does consider preferred transient hotels. "Motorola has many preferred properties on the transient side of the business, and we do look at them," said Evelyn Laxgang, director of strategic programs and events at Motorola, "but the specifications of the event and the amount of time that we have will drive where we end up."

Frequently, Laxgang said, the company's preferred transient properties are unavailable to serve as a meeting site on the chosen set of dates. When a meeting is booked at a preferred transient hotel, she said, the negotiating process extends far beyond Motorola accepting the contracted transient rate. "I still negotiate the meeting," she said. "Depending on the value of the meeting, there could be tremendous value to the hotel by hosting it, and sometimes the negotiated transient rate does not take that into account."