Corporate meeting buyers have some general opportunity to save money on resort meetings through the remainder of 2004, particularly on ancillary meeting charges, according to both buyers and suppliers, because the market segment simply has not grown at the pace resort operators had hoped for, if not expected. As meetings become smaller and with less lead time, however, some resorts now anticipate more short-term meetings and negotiate and manage yield and revenue accordingly, leading to no guarantees for good deals for buyers.
Longer-term, resort operators have shifted their optimism to 2005 and beyond and are less likely to negotiate on ancillary and service fees for meetings held during that timeframe. The current market is marked by inconsistency and varied sales strategies. Some properties are pleased with the pace of business for 2004 and generally are offering fewer discounts, while others aggressively are pursuing deals.
"It's been kind of spotty," said John Meissner, executive director of corporate group markets for Fairmont Hotels & Resorts. "There's new product in Scottsdale, but we're growing share there. Banff is okay, but Lake Louise is not. Overall, I'm basically seeing little change, and I'm a little nervous because every day in the news there's something new." Yet, Meissner said, overall revenue trends are positive: Fairmont's resorts exceeded their forecasted revenue in the fourth quarter of 2003, he said, and met targets in January. Some of this, he noted, was the continuation of a trend of major corporate incentive groups holding events in North America rather than overseas.
"One year ago, the resorts were hurt and cooperating," according to Steve Damerow, president of Atlanta-based incentive and meetings management firm Incentive Solutions Inc. "Six months ago, they felt more confident and stopped cooperating as much. Now, they're scared again, though some are quicker to respond than others. Some have not budged on pricing."
Damerow said the resorts collectively had hoped for a stronger business rebound by now, accounting for both the tightening of negotiations in the fall and the current inconsistency. "They expected the economic recovery to be more substantial and substantiated by now, but the lack of job creation has hurt," he said. The effect, Damerow said, is more negotiability from some resorts on both room rate and ancillary meeting services and fees. "They are a lot more amenable to soft-dollar reductions than they are on rate, but they will do rate," he said.
Meissner said buyers have become more sophisticated in their negotiations for ancillary meeting services and seek concessions there in meeting negotiations. "There's a lot of pressure for value-adds," he said. "Buyers are looking for one complimentary room night for 40 booked instead of 50, suites at group guest room rates, air transfers for VIPs, complimentary welcoming cookie and coffee receptions and turndown service, which is very labor-intensive and expensive. All of these things cost money, and buyers will not sacrifice any rate for it."
Corporate buyers currently shop three or four resorts, seeking the best package, Meissner said. Despite that, he anticipates Fairmont's resorts will be able to charge slightly higher room rates for corporate groups this year, "but not 10 percent or 15 percent higher. It's a very transitionary year. The competition is there, and you really have to sharpen your pencil, evaluate the business and decide how far you will go. We'd love to have that business spread out over the next three years, but we do not want to confirm a lot of extras that far out. We got caught with that in the early 1990s. There's risk involved."
The wave of short-term meetings throughout the industry has impacted resort meeting negotiations, as the properties refine their projections to account for the trend and alter yield management strategies.
"There is some strength returning, but it is very short term," said Rodger MacDonald, Destination Hotels & Resorts vice president of strategic sales. "If you stay the course, the meetings volume is here, but it's even coming 60 days to 75 days out. That keeps us on our toes, and it's dictated to us that we have to maintain our position every single day. A tentative meeting on the books is very serious and impacts our transient distribution."
While MacDonald acknowledged the spate of short-term resort meetings potentially could allow the chain to tighten negotiations for those events, it is difficult to project that volume or anticipate such an influx and increased prices beforehand. "If supply diminishes, it can create some machination to adjust pricing and move nimbly," MacDonald said. "Yet, we have to remain very sharp on our daily revenue maximization meetings and our evaluation of group business." To that end, he said, Destination last year upgraded its revenue and yield management technology and procedures. "It's good to need to have done that," he said.
Given that lead times for corporate meetings have remained consistently short for years
(see story), MacDonald said there is the opportunity to assume some growth in that particular sector in line with hoped-for general economic improvement. This, he said, can have an impact for Destination's negotiating strategies for longer-term events.
"We can play a bit of that," Destination's MacDonald said. "If it can be consistently applied, we may not have to be as aggressive with long-term groups. Yet, transient demand is not back on the whole, so there is a lot of comfort in layering in group business from six months to nine months out."
In the longer term, there is more optimism among resorts for a meeting rebound in concert with an anticipated general economic rebound. "We see modest improvements this year and then onward and upward in 2005," Fairmont's Meissner said. "Yet, we're very cautious in negotiations for 2005 and 2006 regarding how much we will add because we see demand improving."
Resorts overseas have felt the sting of the decrease in U.S. corporate meetings and group incentive business ever since the 2001 terrorist attacks lessened the appeal of international locations as motivating incentive destinations. However, there is some sense that, two and a half years after 9/11, companies are exploring a return to European destinations, though a terrorist attack in Madrid earlier this month likely will dampen some of that curiosity. Incentive Solutions' Damerow recently has seen more interest among corporations in holding meetings and group incentive events in Europe, which he attributed partially to a general sense among buyers that the area has been avoided for too long. Ironically, he said, as interest in Europe has increased, so have prices for reasons outside of normal meeting supply-and-demand issues. "We're seeing interest in Europe, but companies can't afford it now," Damerow said. "There's pent-up demand, but because of the exchange rate and higher euro prices, they can't do it. Now, croissants and coffee for two will cost you $25 in France."