Leveraging a combined transient and group travel spend with hotels this year has become increasingly difficult, said corporate meeting buyers, as hoteliers—especially those in top-tier cities—push to negotiate events as individual pieces of business. The growing inflexibility on the part of hoteliers is an example of more sophisticated yield-management techniques and the "low priority" status of corporate group business, consultants said.
Some travel buyers said they have seen pushback from hotels on attempts to leverage a combined transient and group volume.
"With occupancy rates so high now, the chances of hotels doing that are probably less than they've ever been," said Robert Zartarian, manager of travel and meeting services at Davidson, N.C.-based Ingersoll-Rand Corp. The company recently launched an initiative to consolidate its meetings management, but Zartarian said he has the impression that most hotels would not accept combined spend.
"I know the meetings management consolidation companies are using it as feature of why companies should use them," he said. "I question how successful that can be."
Bjorn Hanson, head of the hospitality and leisure practice of New York-based PricewaterhouseCoopers, said the hotel industry sees corporate groups as less desirable than transient business due to the higher costs associated with events, such as hotel staffing, and because hotels are unable to raise rates and increase profits if they become unexpectedly busy.
In addition, corporate group business often is uncertain, PwC's Hanson said. As lead times remain short
(Meetings Today, April 3), many companies do not know how much group business they may be able to place at a property in a given year.
Even if hotels claim that they welcome leveraged corporate volume, Ingersoll-Rand's Zartarian said he would be hesitant to believe chains unless they make changes to the organization of their sales departments.
"They still have very distinct sales organizations, one that does the transient and one that does the group," he said. "I don't see a lot of method on the hotels' part to make it happen."
Working with Ingersoll-Rand's preferred hotel partners can help in negotiations, Zartarian said, but most transient salespeople are unfamiliar with the group side. "A lot of it is relationships," he said, "but a lot of them are dealing only on the transient side."
Zartarian said the company is working to prove the value of the business to hotels and show that they can drive business to the properties.
"We really want to leverage our spend, so I think the first thing to do is identify what percentage of it is coming from meetings and what is the transient. That's half the battle," he said. "We found on the locally negotiated rates, those properties are more apt to allow you to use the transient rate for groups and meetings, because you do smaller-size meetings."
The company has been most successful in leveraging small meeting spend—defined as 100 attendees or fewer, usually of internal employees with simple service needs—with transient, Zartarian said.
"A lot of that comes from training sessions that have been planned out ahead for 52 weeks of the year, so you have a better target to work from," he said.
Philip Pena, manager of worldwide sales for Four Seasons Hotels and Resorts, said whether or not hotels accept leveraged volume is decided on a case-by-case basis.
"Every hotel is unique or different and every management company is unique or different," Pena said. "Some companies are more willing and open to listen to opportunities about leveraging, particularly large-scale chains."
If a hotel is a preferred vendor for transient business, Pena said that property would be more likely to accept leveraged volume.
"When a piece of group business comes along, we'll certainly recognize those relationships and we'll analyze based on specific dates, time of the event and location," Pena said.
"We'll do our best to work with a company to make things a win-win situation. It's looking at the different components. Certainly, there's flexibility in pricing. It's no secret to know that hotels can be flexible at different times of the year. The key thing is whether the client is flexible and willing to move dates or move the program in a different way that makes financial sense," he said.
Lynn Ridzon, director of global meeting management for New York-based Bristol-Myers Squibb, said many travel managers don't realize that meeting costs are more than just room rate. Often, leveraged volume can be used to negotiate service upgrades and amenities, she said.
"It's not just about the rate when you're dealing with groups. The cost in the end is probably fourth or fifth on the list of what you're negotiating or what you need when you're booking a meeting," she said.
Bristol-Myers Squibb has begun to evaluate strategies for its meetings of less than 30 attendees. There is significant savings to be made in this area, but implementing a companywide strategy may be challenging.
"Small meetings are certainly the ones that you're able to leverage against your transient contracts. If you look at where your business is based, you normally have preferred transient hotels, so it makes sense to have your small internal or external meetings at those properties and structure a small meetings package. This allows the administrative assistant or whoever is putting this program together to pick up the phone and communicate what that package is. I just think on a global basis that would be extremely difficult to do and manage and probably isn't something in the scope of managing small meetings," Ridzon said.
American Standard Companies, based in Piscataway, N.J., uses extensive data on group volume and expenditures to convince hotel partners to give them a better rate, said Ernest Guerra, director of global travel and meeting services for the company. The company also holds many events in second-tier cities, such as Dallas, where availability is better.
American Standard Companies also has adopted a separate program for small meetings, placing the bulk of those events at preferred transient hotels, Guerra said. Contracts for small meeting volume is negotiated once a year with individual properties. ASC tries to secure its transient room rate for small meetings.
"Hotels know we can move the marketshare there and they know we don't change hotels," Guerra said.
For large conferences, American Standard Companies relies on long-term partnerships with specific properties. The strategy so far has worked to keep rates steady, Guerra said. "My meeting planners tell me that it's all about relationships."