Though the corporate meetings market remains scattershot, hotels continue to look to the segment to buttress occupancy and revenue levels, leading to the continuation and expansion of a recent unusual trend in which guest room rates in corporate group blocks are sometimes the highest charged by a particular property.
In many large chains, guest room rates for meetings traditionally run about 10 percent to 15 percent less than corporate transient bookings, although that figure can vary.
Overall, the year has been disappointing for hoteliers. Revenue per available room figures for 2002 consistently have underwhelmed projections
(BTN, Aug. 26). Yet, while most buyers have had little trouble finding availability throughout the United States, even for short-term meetings, hoteliers have been able to prop up this year's business, to a point, with meeting revenue.
"Corporate meetings are the one segment across the United States that are holding together the best—that is, they have decreased the least—versus association, business transient and leisure business," said Bjorn Hanson, leader of PricewaterhouseCoopers' hospitality and leisure practice. "This has two important implications: It boosts occupancy and, for many hotels, the group corporate rate is the highest rate achieved for many, many nights of the month."
PwC's Hanson specifically excluded resort locations from that trend.
Though certainly part of the rationale behind this trend is hotels' willingness to apply very heavy discounts for transient business to gain marketshare, at least part of the impetus seems to lie in corporate meeting buyers' seeming lack of desire to use their buyer's-market leverage to negotiate every possible guest room concession from their vendors.
"As a professional courtesy, corporate meeting planners are not beating up on hotels for every last dollar," Hanson said. "There's a disequilibrium of value. There seem to be discounts offered to leisure travelers before they even ask."
Bruce Himelstein, Ritz-Carlton senior vice president of sales and marketing, declined to discuss meeting rates and transient rates specifically, but did say all rates are appraised on their own terms. "Each segment is evaluated on strength, and there's no goal that one segment has to be higher than the others," Himelstein said. "As long as customers can receive fair value for the negotiated segment, how they match up is a separate conversation."
To be sure, corporate meeting contracts offer far more opportunities than transient contracts to receive negotiated advantages beyond room rate.
Popular concessions planners are receiving successfully include free meeting room use and late checkout, neither of which are particularly costly to the hotel, Hanson said. Other traditional targets include favorable attrition and cancellation clauses.
"We are obtaining more concessions, as hotels are eager for business and our contracts reflect that," said Rich Del Colle, meetings program manager for Palo Alto, Calif.-based Hewlett-Packard Co. "We're seeing concessions in pricing, attrition and cancellation, and availability is a non-issue."
Del Colle has not found instances where meeting rates were higher than corporate transient rates, but pointed out group revenue can be buttressed outside of room rate.
However, the trend and hoteliers' reliance on meeting revenue have led some buyers to be unpleasantly surprised at the levels of discounting offered. "Occupancy levels are still fairly solid, but there's a different mix of business," said Steve Armitage, Hilton Hotels Corp. senior vice president of sales. "We know we can still project some transient business from two weeks out. So some buyers are surprised if they can't find space because all this information says that business is soft."
It is unclear how long this trend might last. Though some forecasts indicate a mild RevPar rebound in 2003, many buyers believe corporate transient rates will stay the same or even decrease further next year
(BTN, Sept, 23). Regardless, actual levels of meeting bookings likely will tell the tale.
Himelstein is "cautiously optimistic" about 2003, but noted that revenue per available room forecasts have been changeable. "2003 is an Etch-a-Sketch forecast," he said. "The RevPar forecasts change every other day."