Hyatt Delves Into Negotiating Amid Econ. Downturn

By BTN / June 24, 2001

Hyatt Delves Into Negotiating Amid Econ. Downturn

Fred Shea, vice president of sales operations for Hyatt Hotels Corp., late last month spoke with Meetings Today editor Chris Davis about the effect of the slowdown in the corporate meetings market on the chain's negotiating strategies.

MT: How has Hyatt viewed and managed the downturn in the corporate meetings market?

Fred Shea: There's definitely been a softening in that marketplace, but I think we'll do better due to our organization. We're a little bit leaner and meaner than other chains, but it's not all over. In some markets, there's no downturn; in others, it's hitting big time. Silicon Valley, Texas and the area around Dulles Airport are getting whacked. Obviously, the high-tech market has been hit the worst, with other industries following it. Association meeting business has helped to shore up the losses, but business travel is tailing off, too. At Hyatt, we need to focus on the basics of sales, due to the fact that many of our salespeople have never worked through an economic downturn before. We have to requalify our leads, use the phone more and make sure we don't lose any business that's coming in. We have to go after other segments to make up for the loss, including government accounts that may have been shut out in the past. But we just don't know how long this will last.

MT: Is it even worth your while to solicit meetings business from companies in the technology industry, or other hard-hit industries?

Shea: It's not productive to chase them now. We'll take their calls, of course. But everyone thought this would be a short-term blip, and it's clearly not. There's been a bit of denial. Instead of those technology meetings, we've redeployed our national salesforces as quickly as possible to explore other segments. We have quite a bit of variety in our base, and now that our national sales managers have reacted, our field force is reacting as well. I feel good that we're redeployed, but a comeback will take a while.

MT: How has Hyatt's strategy regarding meeting negotiations changed?

Shea: I'm not sure it's changed that much. There's more availability and that means we have to be more flexible. Actually, last year we began focusing on increasing our flexibility to prepare for this situation. That's a good business practice anyway. I've visited a number of hotels recently and seen greater flexibility on that level, be it attrition, pricing or availability. One change is that more buyers are able to book on their preferred meeting dates, and there's less of a need to ask them to shift the meeting to another time.

MT: Has Hyatt reviewed its strategy regarding ancillary meeting charges, like meeting room rentals or attrition clauses, or have your hotels focused instead on flexibility with room rates?

Shea: There is no set directive to reduce prices, because prices should be set in accordance with the level of profit margin we need to have. But the reality of supply and demand has caused greater flexibility on our part. We're not dropping rates across the board, because it's not a situation where corporations aren't holding meetings because rates are too expensive. They're just not coming at all. It's not a price issue, with the exception being technology companies, which are just trying to hang on. So we're not dropping prices, but I would think there will be more flexibility with ancillary charges.

MT: How has the current economy changed corporate meeting buyers' strategies when negotiating with Hyatt?

Shea: Food and beverage services are the first thing to be cut from the corporate meeting budget. I have a sense that the length of stay is shorter. I just returned from San Francisco, where both meeting and business transient stays tend to be longer, but our general managers there feel that is down. It makes sense, but I can't confirm that or provide numbers to back that up.

MT: When do you think this market will bounce back?

Shea: Not this year. Not until the second quarter of 2002. Take that with a grain of salt, because we were all wrong about this year. We all knew that the technology market was overheated, so what's happened there has been no surprise. But we're baffled like everyone else in the industry as to everything else. The economy as a whole isn't that bad, the consumer confidence is there, corporations are generally doing well. The year 2000 was an anomaly. It was unbelievable for the hospitality industry. But the economy is a very fragile thing, and business travel is based a lot on confidence. When corporations are confident, they travel and hold meetings, but it's very easy to cut that back when the confidence isn't there. This industry will lag a little behind an overall economic recovery, but we'll know a little better in the third and fourth quarters about what will happen next year.

MT: Has the market caused any changes in Hyatt's new meeting programs, such as the initiative to install high-speed Internet access in every meeting room (Meetings Today, May 21)?

Shea: No. That's all been budgeted for, and nothing will change. We already have high-speed access in meeting rooms at about 60 properties, and all the meeting rooms will be ready by year-end.

MT: Have you seen the distribution channels for meeting requests for proposals change as the Internet evolves?

Shea: We've received some leads from the third-party Web sites. It's an additional distribution channel, and it will save some phone tag. I'm probably the most conservative person in sales here, with regard to the impact of technology on meeting sales and distribution, but I still think we can book small meetings through the Hyatt Web site this year.

MT: That's been a goal of the industry for quite a while.

Shea: For us, it's a function of single-image inventory and installing our Envision sales management product in every hotel. We've focused on providing our salespeople with a single tool to book centrally at a single rate. With all the pieces together, it lets us overlap guest room pricing and function space and meeting room needs to get real-time meeting room and guest room pricing.

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