Hotels Learning To Manage Short Lead Times For Mtgs.

The evaporation of lengthy corporate meeting lead times has changed the face of hotel yield management: With reams of historical booking data that has lost some of its relevance in an unpredictable economy and meetings market, hotels must walk a tightrope between determining rates and prices that will generate revenue and attract corporate buyers with fair deals.

The lack of lead time colors every aspect of hotelier strategy, from determining whether to accept or reject a corporate meeting lead to rate and ancillary charge levels, all with the knowledge that the buyer may well accept the first realistic offer from the first hotel to respond to the request.

"It's a big challenge. There's no question lead times continue to drop," said Steve Armitage, senior vice president of sales at Hilton Hotels Corp. "It takes more time to bring a contract to closure because buyers are delaying their decisions. We're getting a lot of requests for meetings two weeks out, even for large meetings with hundreds of room nights. There are buyers looking for 1,000-room meetings six to eight weeks out."

Perhaps the most critical aspect of short-term meetings lead management is the speedy response to requests for proposals. Hoteliers must balance the need to develop a contract offer that is returned quickly enough for the planner's needs but maximizes the hotel's available space.

"Whoever returns the call first often will get the business," said Mike Beardsley, Marriott International senior vice president of field sales for the United States and Canada. "Customers are dealing with budget and staff cuts too, and they want to get that meeting off their desk."

In today's soft hotel market, of course, many hotels are cursed with plenty of space for any short-term meeting requested. Depending on seasonality, however, that decision can be much trickier for properties with healthy bookings for a given time period.

"Looking at it with the glass half full, once it gets closer to the date of the event, it makes it easier to decide what to take and what we can offer," said Dave Johnson, executive vice president of sales and marketing for Wyndham International. "It lets us make quicker, easier decisions, but it also creates a lot of headaches for forecasting two to four quarters out."

The difference, Johnson said, is that the current lack of lead time forbids hotels from assuming a standard base of early booked future group business. Without that base, decisions on whether to accept individual meetings, and what prices to charge, become rife with uncertainty.

"It creates an inverse thought process regarding pricing," said Brian Stage, executive vice president of sales, distribution and reservations with Carlson Hotels Worldwide. "As it gets closer to the date of the meeting, if there's empty space, certainly we will take what we can, but we have to establish rates that make sure that when we get that business, there is an impact."

Generally, hotels will try to get what business they can within two weeks of a given date, although that figure is not a hard and fast rule and many factors can reduce it considerably, Beardsley said. "Within two weeks, a hotel will try to sell out and take business," he said. "But that could be less than one week if group booking levels are already high."

Johnson is impressed with corporate meeting buyers' sense of restraint and general lack of desire to exact financial revenge for the seller's market of years past, but acknowledged buyers seek discounting and are in a position to succeed.

"Rate is certainly very important," Johnson said. "Attrition and cancellation are also hot, and there's certainly more flexibility for short-term meetings. But for 2004 and 2005, there's less flexibility, because we think that will be a strong market and we want to protect ourselves."

Other ancillary charges need constant review in short-term situations, Johnson said. "We have to look at that on a case-by-case basis and look for effective ways to create results; things like not charging for meeting room rental, because maybe we can get them to buy lunch anyway," he said. Wyndham also is more likely to sell meeting room space without accompanying guest room nights, Johnson said, an anathema only a few years ago. "We have meeting and conference space to sell guest rooms. That's why that space is there," Johnson said. "But we will take more free-standing meetings because they are unsold. Typically, it's not a risk for us with short-term meetings because it's unlikely that will displace someone later."

Other hoteliers agreed that, even for short-term events, rate is far from the lone deciding factor—particularly since some hotels are offering rates that don't match buyers' expectations. "We offer what we can, but buyers are not as rate-sensitive as everyone thinks they are," Beardsley said. "If there's decent food and beverage and we offer 10 percent to 15 percent off the corporate rate, they'll usually do it in the short term. If they want to shop around and play that offer off others, we have to decide."

"Planners look at total costs and they look for the best value, not price only," Carlson Hotels' Stage said. "They'll pick a facility where there's value in price and reliable service. But, in many cases, they'll stay away from high-luxury properties because of the perception." The best that hotels can do now, in a buyer's market with dwindling meeting lead time, is depend on yield management technology and historical data to offer them a road map—if an inexact one. "Automated yield management systems do a good job using historical trends to project the future," Stage said. "Hotels can use them to make better estimates on revenue of a piece of group business."

"It's difficult to apply historical results at all," Hilton's Armitage said. "At no time have we ever seen this type of continual change. There's inconsistency in trends, and buyers are trying to react as quickly as they can. Yield management is a challenge and marketshare is the name of the game. We have to make sure the appropriate data is at our fingertips. With technology, we can virtually immediately know the situation throughout our systems, and we must have a very good idea of our inventory."