Major pharmaceutical firm Eli Lilly & Co. during the past 18 months developed, negotiated and implemented a preferred meetings hotel program and mandated its use by internal meeting sponsors. Almost all of the firm's nearly 1,000 domestic meetings now use one of four preferred chains, allowing the company to negotiate standard contracts with favorable rate, service levels and conditions.
Lilly achieved these deals without committing a certain amount of meetings volume nor a certain percentage of share. The chains agreed to Lilly's terms, said manager of meeting and travel services Anne-Marie Christian, because Lilly's mandate-friendly corporate culture ensured the likely success of influencing sponsors' site selection behavior, as evidenced by the success of its mandated meetings consolidation program
(Meetings Today, March 20, 2000). Restricting site selection choices inherently guaranteed chains a significant increase in Lilly's booked meetings volume.
Under the terms of the new hotel program, which was introduced throughout Lilly's domestic operations on March 1, internal meeting sponsors are restricted to one of four chains, unless a preferred property is unavailable or senior management approval allows an exception. Both scenarios are quite rare, Christian said.
Lilly employees since the late 1990s have been familiar with the concept of companywide central meetings management, following the creation of mandated policy requiring sponsors to register all events through a central sourcing group, where contracts were negotiated and signed. However, site selection choice resided in the hands of the sponsors, which Christian said led to a scattershot hotel program that did not best take advantage of Lilly's volume.
"Our spend was extremely spread out through every city and every property," Christian said. "We used no hotel more than twice and no city more than six times in a year. We decided in early 2003 to create value here by steering meetings to certain areas."
Once that decision was made, Christian's first step was to discuss its implications with Lilly's sales and marketing divisions, the groups that produce the most meetings. "We already had credibility with them, and this offered the opportunity for further savings, but this also involved behavioral changes that some people might not have liked," she said. "Overall, they were very supportive. They're our largest customers, and it was important to get their buy-in."
With Lilly's largest internal sponsors onboard, in September 2003 Christian and Lilly's meetings management and consolidation firm, Maritz McGettigan, developed a strategy to create a roster of preferred chains to which sponsors would be restricted. Lilly chose to send requests for proposals to seven large and midsize chains, each of which operated a sizable number and breadth of properties and types of hotels. Despite their collective size, those seven chains were the sites of only half of Lilly's meetings volume. "Because of that, those hotels that would be in the program would see a dramatic increase in their business from us, even if all seven were included," Christian said. "There was a real opportunity for them."
Some of the chains selected to receive the RFPs were those Lilly meeting sponsors and attendees cited for high customer service in previously conducted post-meeting internal surveys—a fact that eventually would smooth the transition to mandated site selection, Christian said.
Evaluation of responses to the RFPs was based not only on the chain's willingness to commit to low room rates and food and beverage and audiovisual prices but also on commitment to service levels. Additionally, Lilly wanted to negotiate a single contract with the selected chains that included standard terms and conditions, including those for attrition and cancellation. "There's a huge opportunity for efficiencies there," Christian said. "If properties agreed to a standard contract, it meant that all we would have to do is plug in rates, dates and space for each meeting. No terms would be negotiated anymore. It would shorten the cycle time for sponsors and raise the level of risk management, since our lawyers would not have different terms for each meeting."
Some of the chains wanted too many changes to the standard contract, in Christian's estimation, to remain in the process. "We did not submit identical contracts across all the chains, and we did not submit what would have been the ideal contract for us. It was realistic," Christian said, "but we wanted minimal changes."
Following the evaluations of the chains' proposals, Eli Lilly & Co. selected Starwood Hotels & Resorts, Fairmont Hotels & Resorts, Hyatt Hotels Corp. and IndeCorp, parent company of the Preferred, Summit and Sterling brands.
Christian led a strong effort to shore up support for the new program, including securing senior management backing.Though the initiative still is too new for Lilly to have fully calculated the savings, Christian's team will tabulate the hard-dollar savings and costs avoided that the standard contracts will provide.