The long-held conventional wisdom that short-term meetings cripple a corporation's bottom line because hoteliers can charge a premium when lead time is scarce appears completely to have reversed itself. During the past six months, hotel rates for meetings with fewer than 90 days of lead time are, at worst, no different than those for longer-term events and, in many cases, are lower.
The findings are part of a Meetings Today study of the preponderance and effects of corporate short-term meetings. Only 10 percent of respondents to a poll of 101 corporate meeting buyers, taken in February and early March, reported that during the past six months hotels have charged somewhat higher rates for short-term meetings than for meetings with more than 90 days of lead time. Not a single respondent said those rates are much higher.
About 34 percent of respondents said they get better rates in the short term, a sliver of whom said their rates are much better. The remainder, more than half, indicated that their rates were about the same regardless of lead time.
"It's definitely lower. There's a lot more flexibility in pricing, and sometimes they will beat out the negotiated transient rate," said one corporate meeting buyer. "A lot depends on location and timing, but overall, hotels are showing that they really need this business."
"If you hit a window or fill a niche, the hotels will be really flexible," said one corporate buyer from a pharmaceutical firm. "You'll still pay a premium if there is no flexibility on your part, but our people have been trying to plan meetings as far ahead as they can. There are less emergency short-term meetings, so that gives us more flexibility and we're certainly not hitting that window with any less frequency."
The results illustrate a few trends about the state of the hotel market, including how desperate many properties are for any kind of business—considering last year's significant declines in occupancy and revenue per available room
(BTN, Feb. 10)—the lack of optimism for a significant reversal of those trends this year and with military action in Iraq depressing corporate meeting business in the immediate future. It also underscores hotels' desire for group and meeting business, given that many properties are able to charge higher rates for guest rooms in a meeting room block than in other travel categories
(Meetings Today, Jan. 20) and the ancillary revenue meetings generate.
With occupancy soft in so many locales, inclined buyers with any flexibility have the potential to shop around their short-term meetings, and, even with little lead time, coax many properties into playing their best cards early in the game. "There are a lot of new options out there, and buyers can find two or three hotels that have the necessary space quickly," said Rodger MacDonald, vice president of sales and marketing at Destination Hotels & Resorts. "If a property is sitting there with a few hundred rooms available, there's 90 days in front of the meeting and a buyer can take up a large share of those rooms, they will find great value. The market compression isn't there, so properties will get creative."
One of the driving factors behind the trend, MacDonald said, is the Internet's role in short-term room distribution of distressed inventory. "It's a difficult case to argue when people are finding low Internet prices through Expedia, Travelocity or Hotels.com 90 to 120 days away," MacDonald said. "That drives meeting prices down as well."
Some chains, though, have intentionally and specifically put their best collective foot forward in negotiations. Within the past six months, Le Meridien Hotels & Resorts has issued directives to its properties in the United States, Canada, South America and London to offer extremely aggressive rates as part of its first offer to corporate buyers of short-term meetings, said director of global sales Jim VanDevender. As such, it is inevitable that the chain offers at least some group rates that are lower in the short term.
"Our directive is that those properties should be very aggressive right off the bat," VanDevender said. "We do this for a competitive advantage for planners who just want to get that meeting off their desks and not waste time with the negotiations game. We don't want to offer a $150 rate, then drop it by $30 a week later after negotiations. In this economy, that's where you want to be."
The move was sparked by the soft economy and a generally shrinking pool of potential corporate meetings revenue, leading to a landscape in which properties of different service levels compete for group business. "Many hotels are not doing this yet," VanDevender said. "The competitive set has changed. You might see a Ritz-Carlton and a Hilton compete for a piece of corporate business, which may not have been the case three years ago. If you want the business, you must reevaluate how you approach the market." The move has paid off thus far, he added, "We're becoming known as an aggressive competitor."
Other chains, though, are less ready to declare short-term meeting negotiating as better for the corporate buyer. "There was a perception that if planners wait until the last minute, they may pay the highest rate," said Charlotte St. Martin, Loews Hotels executive vice president of marketing. "Certainly, that's the case during boom time, and that hasn't changed a bit. If the hotel is full and it's close to the event date, you will pay a premium, but there can be opportunity."
St. Martin pointed out that much of short-term meeting negotiations, and much of hotels' flexibility, might center on areas other than room rate, as properties look at contractual clauses, services and amenities as enticements to lure short-term business. "Properties are much more flexible than they used to be for short-term meetings," St. Martin said. "They'll do things like close down sections of restaurants or move furniture out of a suite for a meeting that they may not have done in the past."