Hoteliers Negotiating Additional Items To Retain Bookings
<B>Hoteliers Negotiating Additional Items To Retain Bookings</B>
By Chris Davis
Faced with the realities that the slowdown in the corporate meetings market is not simply a one-quarter phenomenon, hoteliers have had to begin negotiating nearly every aspect of meeting contracts to not only attract corporate meeting buyers but prevent booked meetings from cancellation.
While, at its onset, previous debates and discussions about the effect of the slowdown have centered on which particular aspects of meeting bills would have to be more negotiable (Meetings Today, April 23), the consensus, particularly at hotels in particularly hard-hit markets, is that few costs are so sacred that they're worth turning away business.
"We've had to be more creative and flexible with attrition, cancellation and food and beverage costs," said Brad Rahinsky, director of sales and marketing at the Sheraton Atlanta Hotel. "We've not only extended attrition cutoff dates, but we're allowing 15 percent or even 20 percent attrition instead of 10 percent."
The Sheraton Atlanta now is handling cancellations similarly, not only permitting planners to use contracted space for a future event instead of swallowing the corporation's deposit, but also allowing them to separate that space into two or three meetings over time. Rahinsky also is upselling food and beverage services, offering $40-per-plate dinners for $25 per plate, and negotiations previously sacrosanct, meeting room rental charges.
While there has been no across-the-board room rate reductions at the Sheraton Atlanta, some regular buyers have succeeded in holding rates steady from a previous event, Rahinsky said, with the leverage from a healthy supply of other nearby properties. "We have to show value so buyers can, in turn, show that the meeting is an investment for the company," Rahinsky said. "Last year, we were in the driver's seat. Our biggest problem was being able to call everybody back, and maybe the industry as a whole got a little big for its britches. But it's survival of the fittest, and now it will make us bigger and smarter."
The industry is rife with sales managers without experience in selling during anything but a seller's market, and that has led to shifts in basic strategy. "A lot of hotel companies during the past 10 years have been pretty healthy by any measure," said Jay Riley, Philadelphia-based vice president of hotel marketing for Four Seasons Hotels & Resorts. "The phone rang a lot, but now we've had to reverse that process and work a little harder to attract meetings.
"We haven't changed our strategy all that dramatically," Riley added. "Our business travel volume in city hotels is lower, which means more pressure but more availability for meetings. As such, we are more negotiable now, but you can't talk a corporation into having a meeting."
Four Seasons, which has launched a summer meetings value package at certain properties that includes a night of free guest room high-speed Internet access and a $25 per-room night credit, has experienced pockets of weakness--particularly Northern California--that sparked assertive negotiating by some corporate meeting buyers, Riley said.
"Many of those planners who still book are watching their pocketbooks," Riley said. "Some have always negotiated, but some others who never had the time to enter into tougher negotiations now are taking the time."
Though Riley believes any comeback in the corporate meetings market won't happen until a preceding business transient travel uptick occurs, the news is not that bad in all areas. "Some of the healthier industries, particularly pharmaceuticals, have stayed just as healthy and maybe have booked a little more," Riley said.
Other hoteliers, though, reported that food and beverage service is a budget area buyers specifically don't want cut. "While buyers are looking to save money anywhere, they don't want to cut anything that affects the quality of the meeting, like food and beverage or audiovisual services," said Frank Fredericks, director of sales and marketing at the Washington, D.C., Monarch Hotel.
The Monarch has seen the meetings drop-off evolve into financial services companies as well as technology firms, but some of the decline has been ameliorated by an increase in business travel and meetings due to activity surrounding the new Administration, Fredericks said. Still, the hotel is cutting deals with corporate buyers, particularly on room rate.
"Rate is the first place to go," Fredericks said. "It's the largest single expense in a meeting contract. We're implementing new strategies, but we did not turn our back on our corporate customers like many other hotels did. It's more competitive, so we're trying to distinguish ourselves through value as well as service."
Even some of the most difficult markets for corporations to financially crack are showing weakness. "San Francisco has been one of the hardest hit. Though we have a lot of association business that has not been as affected, our short-term corporate business has slowed considerably," said Chuck Pacioni, director at the San Francisco Marriott.
Since many Bay Area hotels have suffered the same plight, buyers are aware of their leverage and have been able to score good deals in a city not known for them. "We're much more flexible in short-term pricing, contracting and space allotment," Pacioni said. "Right now, buyers are looking for cancellation clauses that allows them to walk from a meeting with as few costs as possible. More than ever before, they're insisting on cancellation clauses that let them book another meeting within a year in lieu of penalties, because they need that quarter-to-quarter flexibility."
Though Pacioni admitted that there's more pressure on guest room rates for meetings, he said average rate is still higher than it was 12 months ago. "It's just not as high as we had hoped," he said. "Because of our stature and location, we haven't had to discount as much as other San Francisco hotels, nor have we had to match other hotels' discounts." Pacioni doesn't think the local market will rebound until the end of 2002. "It's a good buy over the next 18 months," he said.