The continuing proliferation of shorter lead times combined with hoteliers' lack of contracting leverage have left suppliers with the difficult tasks of negotiating current, and forecasting future, corporate meeting revenue.
Short-term meetings once were a key component of hotels' ability to drive income, as buyers—with little lead time and little recourse due to high occupancy levels—had no choice but to accept contracts that not only included high guest room rates but also ancillary fees, including meeting and banquet room rental charges and strict contractual attrition and cancellation terms. Those days, for now, are gone, and many hotels have to make do with little leverage. Some even are in a position of bidding on meetings against other local properties.
"In the past nine to 12 months, lead times have decreased dramatically," said Crowne Plaza Hotels and Resorts vice president of brand management Kevin Kowalski. "It varies on a regional level, but, because of supply and demand, buyers know they can get away with it. They can take advantage. Yet, in the past few months, and this is anecdotal, lead times have seemed to settle where they are. I have not heard of any lengthening."
The difficulties extend beyond revenue generation. With a significant amount of corporate meetings business being booked within 90 days of the event, hotels have little basis to bank on a particular amount of business.
"It makes forecasting harder, but you learn not to get as nervous if there's not a ton of business already on the books well in advance," Kowalski said. "It's a difficult adjustment, but it's one we've made. You have to be very aggressive. We have to ensure interaction with our best customers as frequently as possible without being a pain."
Buyers, though mindful of the fact that eventually the market will turn from its current state
(see story) nonetheless are capitalizing on their advantages at the negotiating table when creating contracts for short-term meetings.
"As long as buyers have flexibility, they can really drive value in the short term," said Maritz Travel Co. vice president of operations Steve O'Malley. "They can state what their deal must be, or they can play off a number of suppliers, essentially having them bid against each other for that business."
Buyers have several avenues to reduce their hotel costs, O'Malley added—room rate, ancillary charges, specific contractual clauses—and are pursuing all of them. "Right now, buyers are primarily concerned with rate," he said, "but they'll look at food and beverage and meeting space charges. Anything we can do to reduce the overall expenditure. We'll look at complimentary meeting space, upgrade possibilities, any number of amenities. If you can get two or three properties involved, it can be a very attractive proposition."
However, some suppliers see the market changing.
"In the recent past, many meeting planners would not come to market until they were within 30 days," said Mike Fahner, conference center chain Aramark Harrison Lodging's vice president of sales and marketing. "Now, we're starting to see 45, 60 and 90 days. They'll come to market with all the appropriate disclaimers—'We might have to cancel'—but this is the first we've seen of this in the past 18 months."
Fahner believes the recent lengthening of average meeting lead time is emblematic of corporations consciously returning to more predictable patterns of conducting their business. "A lot of plans for the fall of 2001 and 2002 were knocked off the rails," Fahner said. "There were early signs of a return to normal in early 2003, then came Iraq, but businesses are realizing that this can't wait—this is the new normal—and they must get on with their business and stay flexible and nimble." Still, Fahner noted that despite the optimistic trends he sees at Aramark Harrison properties, he does not yet feel comfortable with assuming extensive corporate meetings growth in actual sales projections. Similarly, few hotels are in the position to reject corporate meeting business on the assumption that more attractive business will be offered in the short term.
"That's a pretty big gamble," O'Malley said. "They'll look at different pieces of business at different price points like a puzzle, but with less than 90 days of lead time, they just want to fill the rooms."
Resorts, however, largely have adjusted their philosophies on short-term meetings, easing or completely eliminating the insistence upon daily resort fees for amenities and offering new styles of pricing. Many resorts particularly have been hard hit during the downturn, as some corporations remain wary of the perception of extravagance inherent in resort meetings, regardless of actual costs.
Several resorts have offered the complete meeting package style of per-day, per-attendee pricing popularized by conference centers as a means to offer hesitant buyers cost certainty and guarantee themselves a level of F&B revenue.
Sabena Robinson, director of sales and marketing at Myrtle Beach, S.C.-based Kingston Plantation's two resorts—The Embassy Suites Myrtle Beach and the Hilton Myrtle Beach—said that in the past six months both properties have offered CMP pricing. "We hadn't done it beforehand because no need was there, but we're seeing the trend," Robinson said.
She acknowledged CMP pricing has done little so far to attract corporate meetings. "That sounds negative, but people are still shying away from it because it locks you into a rate even if you don't want lunch, say, but we haven't positioned it properly yet, and we will do so," she said.
The Kingston Plantation properties are not alone. "We've done it, and we've had more requests for it," said Ken Choy, director of sales and marketing for the Embassy Suites Hotel Deerfield Beach Resort Boca Raton in Deerfield Beach, Fla. "A lot of planners are directed that this is what the budget is and they have to work with it however they can and get the most bang for their buck."
Choy's resort, he said, has been open to negotiating room rates, as well as ancillary meeting services, adding that "Planners are looking at the whole package in addition to rate: They're looking at food and audiovisual, but the room rate is still the biggest part of it." He noted that buyers also have expressed interest in complimentary rooms, be it one for every 50 booked down to one for every 30 booked.
Some buyers, however, noted resorts have been far more eager to offer reduced-cost or complimentary banquets, parties or meeting rooms rather than agree to significant room rate reductions.
"Some have been flexible, but most are not," said John McConahy, president of Pittsburgh-based meetings consultancy Imagination Plus. "Business is down and they have to make a profit, so they have tried to hold rate. They are offering some incentives, but those are soft dollar versus hard dollar." Typically, he said, the resorts' soft-dollar incentives are proffered via cocktail parties or room upgrades.
"We fight for some discounts and we get some, but it's difficult," McConahy said.
Short-term bookings also are affecting resort strategies concerning meeting negotiating, as heavily group-dominated properties are challenged to project future business. "You have to position rates in anticipation of what will happen based on current availability," Robinson said. "We're finding creative ways to sell—including teambuilding events or complimentary hospitality rooms. This can entice business in a down period. It can be an easier sell, but some corporations have rate restrictions."
Choy noted in the past six months corporate meeting business and requests for such have perked up somewhat, but he was wary of forecasting the revenue a significant return to resort meetings would provide. "We're never confident about that, and there's good reasons for it," he said. "Two years ago, everyone thought there would be a rebound, but then there was terror, corporate scandals, bankruptcies. Forecasting that would put my neck on the line, and I'm hesitant to do that."