Hotels Further Pile On Ancillary Mtg. Fees

A continued seller's market, coupled with a shortage of available meeting space, has hotels inserting more ancillary fees that are harder to negotiate out of contracts and showing more willingness to sign multiple-meeting contracts, industry analysts said.

"Hotels are being more aggressive on pricing, but whereas pricing was aggressive in the fall for room rates, it's now being more aggressive for other services," said Bjorn Hanson, global industry leader for hospitality and leisure for PricewaterhouseCoopers. "There are fewer new fees, but more fees are becoming standard, and they're less negotiable than they have been," he said. Such services include food and beverage, early departure fees, luggage handling charges and meeting room rentals.

Those fees will "become more and more of, 'We will not negotiate those out. They are part and parcel of the price,' " said Jonathan Howe, hospitality industry attorney and president of Howe and Hutton Ltd. "It is certainly much more a seller's market because of the old laws of economics, supply and demand. The demand is substantially up, the supply is pretty much the same."

Buyers also are being charged additional fees for the meeting room rental. "Increasingly the practice is for rooms that used to be included without a room charge, there now is a room charge," PwC's Hanson said.

Charges have even been appearing for managing master folios and hotels are asking for larger deposits earlier, according to Hanson.

Since demand for hotel and meeting space is continuing to outpace supply, hotels have the upper hand in negotiating, especially with such things as extra fees.

"The new construction in the hotel industry is disproportionately in the types of hotels that don't provide meeting and convention space. We have growing demand with not much growing supply," Hanson said.

Beyond supply and demand, hotels' embrace of ancillary fees, and the lack of negotiating power buyers often have against them, illustrate the increasing effectiveness of hotels' yield-management techniques. Hotels also can use technology to gather better historical data.

"We're finding in the marketplace today a much greater awareness of what you have done in the past," said Howe.

"There are more databases and ability to gather and reflect information and therefore the hotel is more knowledgeable. That is good and bad, and not so much for meeting rooms or conventions but for rate negotiations," said Hanson.

Such technology can work in the buyer's favor as well.

"We track all our spend by hotel chain so we can go back to them and show them what our business is to their whole company, not just to that particular hotel, and that usually gives us more leverage. You can use that to get some relaxation of some of the business clauses," said Michele Snock, global manager of meetings solutions for Cisco Systems.

Hanson advised buyers to "come very well-armed with information," including such data as the number of rooms that were booked, the number of rooms that actually picked up and the spending habits of meeting attendees.

"Negotiations are getting more prolonged because we're talking a lot more about it before we write it down. It's probably better in the long run because the document will serve its purpose much more," said Ron Naples, president of hospitality consulting and training company Maple Mountain Hospitality, Inc.

"It's a litigious society and we're all thinking how we prevent it and being much more exact about what we're trying to say. Generalization is leaving our contracts and people are getting much more specific," he said.

Hotels also seem more willing to bundle multiple meetings, said PwC's Hanson. Hotels likely are game to lock in future meetings at current rates, and buyers can get some level of discount due to the multiple bookings.

"You're seeing agreements that are annual, and they take into consideration discounts or severance given back for volume in business," said Danny Dolce, national director of sales for North America for the Dolce International conference center chain.

"A lot of the larger companies are trying to negotiate standardized contracting so that they're not negotiating each and every new contract with each hotel," said Warren Woodard, director of sales and marketing for the Evergreen Marriott Conference Resort in Stone Mountain, Ga.

Hotels' upper hand in negotiating, though, means they also are in a position to reject meetings.

"We're seeing some hotels right now who will bounce out a group because they have a much more favorable situation coming in," said Howe.

"If it doesn't make good business sense, the likelihood that there's something else right behind that that will fit our economic profile is very high," said John Leinen, corporate director of global sales for Omni Hotels.

Although buyers are in a difficult position to negotiate, some companies still insists that hotels agree to certain clauses, or the meeting won't happen.

"We have an addendum and the addendum really is around the legalese that needs to protect our company. The negotiations on the concessions and rates is one thing, but the legal stuff, we can't really negotiate on that. That's all mitigating liability, which can cost you far more money if something goes wrong than the meeting itself," said Cisco's Snock.

"I'm pretty bold on attrition. I like to have attrition up until the last possible moment," said Tony Pastor, manager of conference services for McKinsey & Co. Pastor said he uses the hotel's contract as a starting point and adds addenda important to his company.

Buyers in a seller's market with limited space availability said they need keep their options open when negotiating.

"In any negotiation, it comes to a point where here is all you're going to get," Snock said. "I'll take it or I'll leave it."

"The secret to me for negotiations is to have options. If you don't have options then you better be a real good bluffer," Pastor said.

Rather than trying to negotiate attrition and cancellation out of contracts, industry analysts recommend instead having a clause that works in the buyer's favor.

"The difficulty is, if you don't meet your obligation you are now in breach of contract," said Howe.

"Anything that you could think could go wrong should be addressed, because if you don't address it, then a court of law is going to decide it. Just because you don't talk about it doesn't mean you can't be held accountable for it," said Maple Mountain Hospitality's Naples.

While the current market is expected to continue for at least the immediate future, major events or catastrophes always can change that.

"A lot of times the market is dictated by tomorrow's headlines," Howe said.