Conf. Chains Report Growth, Which Sourcing Could Stymie

A recent upsurge in corporate training and sales meetings has boosted the collective confidence of the conference center industry that corporate meetings business will increase throughout 2004, possibly spelling fewer negotiating opportunities for buyers than in recent years. However, the growth of corporate procurement-based site-selection strategies, in part, has left the chains susceptible to competition from hotels.

The major conference center chains all report increased business that has given them some negotiating strength, especially in peak periods, as they express optimism that this year will be the transition from an economic downturn to more of a seller's market.

"The market looks good, but it has not returned to its heyday," said Jack Schmidt, chief marketing officer of The Woodlands, Texas-based Benchmark Hospitality. "We are seeing the booking pace increase, we're getting a little more lead time and corporations are beginning to book meetings they had stopped holding the past few years, including large training and sales meetings."

Buyers can expect less negotiating flexibility than they have had in the recent past. "Our strategy throughout the downturn was to continue to sell the product at a fair price," Schmidt said. "We did not succumb to rate reduction like parts of the industry did. There were always periods of peak demand and our prices reflected that. Now, the peak periods for meetings will yield the demand that we're used to."

Steve Giblin, president of the Americas of Montvale, N.J.-based conference center chain Dolce International, said there recently has been an increase in business, and those customers have been more likely to hold additional functions and dinners than in the recent past. "Over the past two years, we couldn't forecast 60 days out, but now we have a good handle on the next 90 to 120 days," Giblin said, adding that Dolce's large financial services and pharmaceutical corporate customers have been the drivers of the increase, primarily through training meetings. That has given the chain the ability to take a harder line in negotiations, he said. "When there is unlimited availability, customers take over pricing and negotiations," Giblin said. "Now that more demand is forecasted, it does give us the ability to demand higher prices. We can get back some of what we lost." Dolce soon will embark on a chainwide initiative to "reinvigorate service standards," Giblin said, to better ensure customer requests will be handled immediately.

Mike Fahner, vice president of sales and marketing for Philadelphia-based Aramark Harrison Lodging, described the chain as "cautiously optimistic" for a healthy increase in 2004 meetings business, pointing to spikes in corporate training bookings, particularly those involving high-level executives. "That's our power alley," he said. An increasing number of companies also have expressed interest in negotiating a series of meetings, Fahner said.

The chain's parent, conglomerate Aramark Corp., has designated its conference center operations as a separate line of business from its other operations. As such, chain head Rory Loberg has been promoted to president of Aramark Harrison Lodging, allowing him better and quicker access to corporate resources, he said. The company has committed $60 million to improvements to existing facilities, Loberg added.

Meanwhile, conference centers long have needed to combat hotels for corporate meetings business, particularly so in the past few years, when luxury hotels slashed room rates, sometimes heavily. The chains always have had to explain their complete meeting package style of per-day, per-attendee pricing to new clients, stressing the differences between pricing philosophies among conference centers and hotels.

Yet, as procurement-based strategic sourcing grows, the chains have found an audience less receptive to the potential advantages of conference centers—including technological capabilities and training-conducive environments—and more concerned with comparing the centers' CMP pricing costs with hotel room rates.

"It's a depersonalized process and if we don't get to explain our story, it makes it more difficult for us," Schmidt said. "Procurement has come around a little bit, but we do our best when it's people doing business with people. That allows us to ask the objectives of their meetings, and purchasing is not about objectives." Schmidt said Benchmark of late has attempted to negotiate multi-meeting deals with buyers as a method of competing with hotels.

"As an industry, we've poorly trained the buyer," Schmidt said. "They hammer away at $2 on room rate before they even discuss the menu, and they give the hotel carte blanche on that. When we explain the difference, they get it."

"Ten years ago, planners would just talk to the property, but the lines of distribution have grown, and now there's lots of disruption and turmoil," Fahner said. "We constantly need to explain what we're offering and ask corporations to compare unbundled hotel pricing versus the CMP price. Once we get the purchasing department's attention, they can see this is a value versus à la carte pricing. They also see the CMP offers ease of billing and the ease of staying on budget, but it's a hard sell."

Dolce has developed a "CMP calculator" designed to offer a better comparison of actual meeting cost at conference centers and hotels, and will give that tool to corporations, including procurement executives, to allow them to better determine the cost of a given event.

"It takes some education to go through that process, and procurement is getting smarter with it," Giblin said. "We give them the calculator to run the numbers and see which is more cost effective and get that apples-to-apples comparison. We have to sell to the segment better, but if we do, we can have customers for life."

One factor working in conference centers' favor in the battle with hotels for meetings is the desire of many companies to avoid the perception of opulence. "People tell us they can get a meeting at the Four Seasons for the same price," Fahner said, "but they do not want to appear extravagant. They demand high service but are careful about their image."