<B>Deals Go Chainwide</B>
By Chris Davis
Corporate meeting managers, beset by rising airfares, shrinking meeting budgets and hotels applying more sophisticated yield management methods to meeting expenditures, increasingly are making deals on the chain level to increase market share in specific cities in exchange for prenegotiated rates or other service and cost benefits.
Meeting managers, hoteliers and third parties agree that this time-honored tactic is becoming more prominent this year for a variety of reasons, including the still tight hotel seller's market in some locations and an influx of procurement and corporate travel personnel into the corporate meetings negotiating mix.
As a result, the large, centralized companies that have had the most success with this negotiating method are able to book their small, short-term meetings into tight markets, such as New York and San Francisco, even without an abundance of ancillary revenue. Some are saving money with prenegotiated room rates.
Mike Doran, director of travel services for Madison, N.J.-based Schering-Plough Corp., has chosen to direct heavy meetings market share to eight properties in four cities. Under Doran's plan, which would be part of corporate meetings policy if approved, the company would designate a primary and secondary hotel in each city to direct a majority of business.
"It will help us maximize our savings potential and they can maximize their revenue potential, since they'll get eight meetings instead of two, for example," Doran said. "We're attempting to get a set rate, but there are some areas where we can't due to seasonality and peak usage issues. What we're really looking for are enhanced amenities to reduce cost and increase quality-VIP upgrades, discounts on staff rooms and additional complimentary rooms."
Doran is working on the program with Atlanta-based WorldTravel Meetings & Incentives, which is considering offering the program to other accounts. "It's a multi-dimensional program," said Kaye Mulkeen, COO of WTMI. "We are working with hotel companies to identify market share where they need us to push business and working with our clients to see if there is a good match. The concept is relatively new, so there are not a lot of success stories yet, but we are working with some companies that are starting with their smaller meetings in their local markets and trying to consolidate into fewer properties."
Hoteliers are noticing the trend as well. "We're seeing more corporations driving more business to us to break into difficult cities, and in return they help us with some cities that may be harder to book business," said Dave Scypinski, senior vice president of industry relations at Starwood Hotels and Resorts. "Small corporate meetings of 50 people or fewer compete with a lot of other business and are subject to some degree of revenue management. Usually we take the best piece of business. Smart companies know that each and every meeting is not necessarily desirable but, as an aggregate, represents a large amount, so if they give us right of first refusal for your meeting, we could give you first crack at the property."
While individual hotels may not enjoy passing up a meeting with a high amount of ancillary revenue for one with little in the way of room nights or food and beverage revenue, Scypinski said it helps Starwood as a whole, as weaker markets can receive business in return and the chain would get first crack at more expensive meetings.
But, Scypinski said, these situations typically occur with corporations that have centralized meeting programs, because they can establish policies that afford the chain a certain level of market share.
"The centralization factor is key, and we're trying to identify corporate accounts that are in that process," Scypinski said. "We've only done a few, but it's an idea that is gaining prominence. There's no set dollar amount of the account that would lead us to negotiate this kind of deal. We need to see where meetings would go, how much of our portfolio they would hit, especially in those markets where we need help. But if a corporation does it with only 10 vendors, it's not worth getting into."
As more corporations have considered strategic alternatives to completely decentralized meeting programs, these types of deals only will increase, said Christine Duffy, executive vice president at Philadelphia-based McGettigan Partners. "There are more procurement folks and corporate travel managers getting involved, and those people are looking to leverage," she said. "Not many companies are considering mandates or policies directing meeting sponsors to specific properties, but they certainly will push certain hotels."
Duffy said McGettigan will go to hotel chains on behalf of its clients, to try to negotiate deals in certain cities based on the amount of market share the company can guarantee.
"We could get last room availability, a standard contract or improved levels of cancellation and attrition," Duffy said. "It's more of a list of value-adds secured by moving share. This is attractive to the hotels, as they like to have a good mix of business throughout the year. A corporation with a small meeting of 15 people may not get much attention, but tied into some bigger programs, there can be great value-adds."
The key to this type of negotiating is more widespread acceptance of the meetings consolidation concept, Duffy said. "That trend has gone more slowly than I predicted five years ago," she said. "But as more procurement and non-inventory sourcing initiatives take hold, people are going to keep looking even more closely at meeting negotiations and manage it differently."
Consolidated Montvale, N.J.-based KPMG is negotiating deals with all major hotel chains that would offer pre-set room rates for meetings in nine cities, said director of meeting services Carol Muldoon. The driving force behind Muldoon's plan is the amount of money KPMG spends on the 880 meetings with less than a month of lead time it holds annually (Meetings Today, April 24).
"We want to see if we have the opportunity to leverage volume and save money, and we've learned we can provide a much higher level of service for short-term meetings," Muldoon said. "The response time can be quicker, the processes more efficient. We absolutely will save money with pre-negotiation. There are times we pay top dollar booking in the short term."
Other hotel chains, however, haven't completely embraced the concept.
"We have noticed it, and it's similar to how travel mangers approach transient travel consolidation," said Ellen Wright, vice president of marketing for the meetings segment of Marriott Hotels & Resorts. "It's not widespread yet, but it's moving in that direction."
But Marriott has not opted to prenegotiate annual meeting rates or guarantee entry into crowded markets in exchange for increased market share or meetings volume, instead choosing to highlight the chain's 11 brands as options for less-expensive or more facility-appropriate meetings. In markets the chain considers overbuilt, however, it might consider a prenegotiated annual rate, Wright said.
"There is a combination of two forces at work," Wright said. "First , the hotel market is still tight in most places, which requires new ways of finding efficiencies. Secondly, there's been a lot of success with this type of negotiating on the corporate travel side."
Other properties prefer to negotiate with more traditional bargaining chips.
"We have preferred vendor status with certain clients, which specifies that we both agree to their contractual requirements, primarily that if a meeting is canceled, the hotel will agree to charge only for lost profit versus lost revenue," said Mary Vogt, director of sales and marketing at the Hotel Inter-Continental Chicago. "It also provides a rebooking clause. But all other items that are traditionally considered negotiable are not affected.