Hotels Adapt Processes To Ever-Shrinking Lead Times

The inescapable trends toward shrinking lead times for corporate meetings have led to drastic changes in the manner in which hotel space is pursued and bought. As formal, written requests for proposals become less of a key factor in the sourcing process, hotels have had to develop new systems and processes for speeding response time and simplifying contracts to ensure the most rapid response available.

The lack of lead time affects every part of the hotel booking process, from destination and property selection to RFP usage and distribution methodology, borne out by Meetings Today's Short-Term Meetings survey. Dwindling lead time has rendered somewhat archaic the concept of textbook sourcing: extensive property evaluation, in-person site inspections, multiple and competing RFPs and thorough negotiations.

"Given the state of corporate earnings, companies are managing quarter to quarter," said Dave Johnson, executive vice president of sales and marketing for Wyndham International. "Companies are not committing dollars until they have to, so short-term meetings have even shorter lead times. As demand is curtailed, we have to be flexible and communicate as best we can to capture business. If you're not responsive, you lose. Speed is critical, but cost is paramount too."

According to the survey, RFP use is one part of the hotel sourcing process most affected by shrinking lead time. More than 60 percent of respondents said they rarely or never use RFPs for meetings with less than 90 days of lead time, compared with about 43 percent who don't for longer-term events.

"There's no writing now," said Mike Beardsley, Marriott International director of field sales for the United States and Canada. "They call, and they want space quickly. Right now, in many cases, the first to get back to the planner with an answer wins the business. It's too soon to mess around. Most people are using the phone, although a few have the time—three months of lead time, say—to use a third party."

In response, hotel chains over the past few years have implemented a variety of internal and external measures to speed the process, including offering standard meeting bookings through Web sites, negotiating multi-meeting contracts with boilerplate amenities and further automating internal yield management systems. All are required, hoteliers said, to keep up with corporate buyers who learn of the need for a meeting just days before they need the space.

"Lead time has been declining for a few years now due, in part, to advances in technology and business processes," said Steve Armitage, Hilton Hotels Corp. senior vice president of sales and marketing. "Now, we're really seeing the short-term trend ramp up, and we're going to see that more in the coming months. We're fortunate, though, that we have the technology and processes in place that allow us to watch these trends, even on a daily basis."

These measures, though, also often include the booking of distressed inventory, unsold hotel space that buyers can secure in the very short term to generate savings. About 36 percent of buyers said taking advantage of distressed inventory is part of their corporations' overall meeting strategy, and about 60 percent said they pay a premium for non-distressed space booked at the last minute—more than a quarter said that premium averages more than 10 percent.

Still, not everything has changed: The factors affecting site selection decision making remain constant. Respondents said the affordability of the destination, hotel availability and ease of transportation are the three most important factors, followed by transportation cost, distance traveled, climate and leisure options—exactly the same order of importance as in early 1999, when Meetings Today last conducted such a survey. All of this, of course, fails to take into account the upheaval in the industry following the Sept. 11 terrorist attacks on the United States. If anything, hoteliers said, the economic questions about holding meetings and any hesitancy to travel will cut lead time even more, at least temporarily.

"Since the events of Sept. 11, we are seeing companies making fewer long-term decisions and concentrating on the short term," said Bob Moore, Starwood Hotels & Resorts executive vice president of sales and marketing for North America and senior vice president of global sales. "We have seen lead time for booking small, intermediate and corporate meetings go from 90 to 100 days to 30 to 40 days."

Or even shorter, Beardsley said. "What used to be two-week lead times now might be a week and a half," he said. "Right now, it's very short term, but that will lengthen a bit as things get going."

"From the meeting planner's point of view, there's no urgency because they know there's going to be availability," said Fred Shea, Hyatt Hotels & Resorts vice president of sales operations. "They're not going to be forced to make a decision any earlier than they have to. They're confident they can get what they want and the type of property they want."

RFP usage likely will slip further in the few months past Sept. 11, Shea said. "There's more telephoning now, on both sides," he said. "There's no hard sales now either. But there are also more bookings on that first call—if our offer is somewhat reasonable, people are taking it. They're not looking to get three competitive bids now, with the exception of those planners using third parties to negotiate, since they have to."