Hotels Reconfigure Space For Conf. Biz

Several hotels suddenly have embraced a new method of attracting lucrative corporate meeting and training business: transforming parts of their properties into full-fledged conference centers that often fulfill the rigid and extensive membership standards of the International Association of Conference Centers. The movement underscores the lengths to which hotels are prepared to go to entice corporations to bring group business—which continues to command some of the highest rates in a hotel—to their properties.

The movement is not yet widespread enough to classify as a trend, considering the weakened state of the hotel industry as a whole and the current reluctance of hotel chains and owners to sink millions of dollars into renovations. Yet, it is significant that several owners are making the expensive and not-risk-free decision in order to attract corporate meetings.

Called "ancillary conference centers" by the industry, these centers typically occupy a portion of a hotel that is underutilized by the property, be it an underperforming restaurant, a set of meeting rooms or just empty space. Frequently, the ancillary conference center has a separate sales force and convention services staff than does the hotel.

"There is a major influx of ancillary conference centers," said Tom Bolman, executive vice president of IACC. "Some are making bona fide IACC centers out of a wing or a floor of a hotel." IACC's board last month was expected to review the applications of five conference centers, four of which are ancillary. That's very unusual, Bolman said, given only 27 such centers are members of the association, nine of which joined in the past two years. "We might get one per board meeting, but usually not even one," he said.

"I have a few clients who are having preliminary discussions about refocusing their marketing or making minor changes to their space, but I have no doubt that others are much further along in the process," said Bjorn Hanson, head of PricewaterhouseCoopers' hospitality and leisure practice. "Intuitively, it makes sense. Hotels now recognize their exposure to downturns better than they ever have before. The reality is that, in the long term, meetings are a growing, less-volatile demand segment, and it makes sense that there would be a greater focus there."

Cleveland-based Boykin Lodging Co., which owns 30 hotels and resorts, is installing ancillary conference centers at three of its properties.

"We've been educated on the ancillary conference center space," president and COO Richard Conti said. "We're not converting the entire hotel to a conference center, and we will offer all of the same traditional meeting space, but they will meet IACC standards and be very high-tech spaces focused on training. This opens up a whole new market segment: pharmaceutical and financial training."

Conti expects two Boykin properties—the DoubleTree Berkeley Marina in California, which is converting meeting rooms, and the DoubleTree Omaha Downtown in Nebraska, which is converting a rooftop restaurant—to complete their conversions this fall. A third, the Oregon-based DoubleTree Portland Downtown, which is converting one of its three restaurants and space leased to local businesses, should be completed in April 2004. "You don't need three restaurants," Conti said. "One has been closed for five years."

Those locations were chosen following feasibility studies, Conti said, because of their proximity to corporations who use conference center facilities to hold training meetings. A fourth location, which Conti would not disclose, was rejected due to a lack of commensurate corporate business.

"We conducted feasibility studies about the local corporate base and the local training base and what properties they use now," he added. "One market we did not do because it did not stand up to snuff. Yet, in the other markets, companies were driving 40 miles by us to get to training facilities."

The Boykin centers will meet all IACC membership standards, Conti said. However, IACC standards are tremendously detailed, covering issues ranging from the availability of technology and audiovisual service to the width of acceptably ergonomic conference room chairs—18 inches, minimum. Complying with all the standards, though attractive to corporate meeting buyers, can be costly and leave a hotel with fewer options for that space in the event no corporate meeting is booked—banquets, wedding receptions and the like. Conti said the options for his hotels' targeted space weren't plentiful anyway. "This was underutilized space," he said. "The upside is excellent, and we weren't getting a lot of revenues out of it anyway." Each of the three renovations, he said, will cost Boykin between $3 million and $3.5 million.

Conti and Bolman both cited Annapolis, Md.-based Thayer Lodging Group as the pioneer of the ancillary conference center concept. Thayer already has built such centers at five of its 22 properties, with three more planned for next year and as many as seven additional ancillary centers planned for the next few years.

Thayer, which operates IACC-certified conference centers in DoubleTree properties in Rockville, Md., Skokie, Ill., and Somerset, N.J., a Crowne Plaza in Austin, Texas, and an Embassy Suites in Richmond, Va., has developed a five-person national sales force to sell only meetings at ancillary conference centers.

The concept has been quite a boon for Thayer, said vice president of sales and marketing of Thayer's executive meeting center division Jody Wallace. "We drive three times more revenue out of the centers than we did before out of the same space," Wallace said. "We have increased marketshare at those properties by 15 to 20 points apiece."

Wallace attributed the success of the concept to restricting the use of formerly multipurpose space to conference center activities. In addition to attracting a corporate clientele familiar with what she said were the advantages of the CMP style of pricing and the IACC certification, the concept also allows for better use of the existing space: Meeting rooms do not have to be tied up with luncheons, for example, when the CMP includes three meals at the hotel restaurant.

The process has caused Thayer to shift its sales focus toward corporate meetings, natural fits for the ancillary center concept.

"There is the educated buyer who understands the benefits of the IACC certification and the CMP," Wallace said. "It means a tremendous amount to them. They don't want to be nickeled and dimed with à la carte pricing, where they can't turn around without being charged."

Play It Again Sam

This song, though, has been played before. About a decade ago, several hotel chains, most notably Sheraton, installed so-called conference centers in their properties, which rarely met IACC criteria, or bought conference center chains. That trend has waned. Bolman said this movement is different.

"When Sheraton first tried this a decade ago, they built these beautiful centers but didn't know how to operate them," Bolman said. "The had the right tables, and they had the right chairs, but they diluted the concept, booked general business for them and eventually dropped out of IACC. None was operated like true conference centers, which was a shame.

"In the Thayer model, they have a separate director of conference services, a separate sales force, so there is no bleeding between the hotel side and the conference center side," Bolman continued. "The people who operate the hotel don't operate the conference center, but they do share leads to fill beds. The wall between the hotel and conference center in the Sheraton model was too porous."

In recent years, hotels have emulated conference centers in a different manner, with some open to negotiating complete meeting packages of per-day, per-attendee pricing—a conference center staple. "There has long been an interest by hotels to emulate what conference centers do in terms of packaging their 'meeting express' products," Bolman said. "Boykin finally figured out how to do it and make it profitable."

Though Bolman is optimistic about the development, that feeling is not unanimous throughout IACC's membership, he said. "It's not without concern to some of our members," Bolman said. "They worry that hotels are eating their lunch and whether these properties belong in IACC, but our board feels they do, as long as they maintain the integrity of the concept."

Established conference centers were somewhat less than optimistic about the hotels' chances for success and unconcerned about the movement's effect on their own businesses. "It's not surprising," said Jack Schmidt, vice president of sales and marketing for The Woodlands, Texas-based conference center chain Benchmark Hospitality. "Everyone is looking for out-of-the-box solutions, but the challenge for them is to deliver a product consistent with standards. Hotels have a more difficult time delivering a CMP product, because of concepts like paid coffee breaks—which they must put in a meeting room—and dining concepts."

"Hotels are tremendously desperate to do whatever they can for business," said Rory Loberg, executive vice president of Philadelphia-based conference center chain Aramark Harrison Lodging. "We have not seen a tremendous hit to our business from that side."