<B> Banquet Fees Served</B>
By Chris Davis
As hotels begin to see some softening in the amount of revenue gained from guest room rates, many properties are adding ancillary charges, particularly banquet room rental charges, to their meeting contracts--to the consternation of buyers.
While never unheard of, banquet room charges are spreading out of the largest convention cities into smaller locations, analysts said, and the frequency of such charges is increasing as well.
In addition, though on a much smaller scale, one analyst pointed to the embryonic growth of another charge, one that befuddles buyers and sellers alike: a surcharge for master folio billing, or meetings with all attendees' hotel charges booked with one corporate credit card.
"One's outrageous, one's progress," said Bjorn Hanson, hospitality and leisure industry leader at Manhattan-based PricewaterhouseCoopers. Banquet room charges, he said, are becoming more widespread but master folio surcharges aren't and shouldn't be.
Banquet room charges, while always commonplace in major convention cities like New York and San Francisco, have sprouted with greater frequency in even secondary and tertiary cities in the past six to nine months, Hanson said. Previously, groups booking the banquet room for an event that included the hotel's food and beverage service often weren't charged for the room's rental.
"It's everywhere now," Hanson said. "But it is very negotiable. It may sound like a reasonable charge to planners who are inexperienced or plan only a few meetings per year." It is not a difficult charge to negotiate out of a contract, Hanson said, because the banquet room rental charge is not popular among all individual hotel salespeople, some of whom fear "nickel-and-diming" customers.
Once upon a time, the same could be said about charges for meeting room rental (<I>Meetings Today</I>, Aug. 17, 1998). That charge, while negotiable, is now a standard staple in meetings contracts in some cities. Some planners said this charge could well take the same path.
"It used to be that if you were paying for an F&B event, you never had to pay for the room," said Patricia Stemple, manager of meeting planning and travel services at Battle Creek, Mich.-based Kellogg Co. "Now, if there's an F&B event, but there's only 10 sleeping rooms, they charge. It's definitely getting more commonplace. At Kellogg, we still can negotiate it out of the contract sometimes, but we're not always successful. But then, if it's negotiated out, something else will find its way into the contract."
The trouble, Stemple said, is that the long seller's market has given some properties a bulletproof veneer. "In this market they can get top dollar," she said. "They're nickel-and-diming groups. They shouldn't make it ugly, because it will come around."
Other buyers stressed that while banquet room charges are spreading, rarely will hotel salespeople treat them as deal breakers. "They do try this once in a while, and they are occasionally not flexible about it," said Dan Baillie, travel manager for Block Drug Co. of Jersey City, N.J. "But as long as we have the appropriate food and beverage expenditure, they must reduce the banquet room charge appreciably or take it out entirely."
Major chains acknowledged that banquet room charges are spreading, but they don't fell the need to apologize. The charges are incurred when the number of sleeping rooms doesn't justify a large amount of free banquet space.
"The banquet room charge has always been around, but in the past few years, hotels have been charging for it more," said Fred Shea, vice president of sales operations for Hyatt Hotels and Resorts.
Shea said the F&B-to-guest room ratio that will earn a banquet room charge is something individual properties have to determine on their own. The charge is not only the result of a seller's market, where hotels simply have more leverage to include such charges, but also a product of better hotel revenue management than existed in the early part of this decade. "This was an area where many hotels have not historically done a good job," he said. "They lost money and we all saw what happened in the early 1990s. We learned and there's better revenue management today."
The chains denied, though, that the charges were standard policy determined on the corporate level. "There's no design on Starwood's part to say that now meeting space or banquet space will be charged in every case," said Bob Moore, senior vice president of global sales. "We have no strategy to create a free-standing policy like that."
The master folio charge, though, is a different story. It's not only perplexing but also indefensible, PwC's Hanson said, because a central charge card often streamlines the meeting-sales process for hotels, since there's no fear of bad cardholder debt or inconvenience if an attendee fails to check out before leaving the property.
The master folio movement is not widespread, nor is it seemingly a directive from the individual properties' parent chains, Hanson said. "But it's out there and it's outrageous."
The charges, which show up on the overall bill under headings like "accounting charge" or "master folio charge" tend to range from $50 to a few hundred dollars, Hanson said. Hyatt's Shea, though, had no knowledge of master folio charges. "I've never heard of it, though I can't say that means it's not happening," he said. "But why would we charge for it? It doesn't sound logical.