Meetings Buyers Face Hotel Seller's Market

<H1>Meetings Buyers Face Hotel Seller's Market</H1>By Cheryl Rosen<H3>Meetings World Town Hall Hot Topic</H3><B>A</B> rowdy crowd of meetings buyers and suppliers came together earlier this month at <I>Meeting News' </I>annual Meeting World show in New York-and hurled more fightin' words at each other than the meeting industry has heard for some time.

In between the two sides at the show's Town Hall discussion was Bjorn Hanson, national hospitality industry chairman at Coopers & Lybrand. Hanson provided the cold facts of hotel negotiations in 1996.

The hotel room market in the United States is at its highest capacity in 15 years, and rates are skyrocketing in prime seasons in major cities, Hanson said. For buyers, things are not going to get better any time soon: Of the 88,600 hotel rooms under construction nationwide, 82 percent will be at limited-service properties with little meeting space.

The best advice for buyers in a record-setting seller's market seemed to be: Educate your internal customers as soon as possible about the realities of the 1996 marketplace and go into negotiations with the biggest possible stick in terms of consolidated volume.

"If you want to be where everyone wants to be when they want to be there, you have to expect to pay 20 percent more this year-and I don't think the hotels are charging all the market will bear, given the rates and the occupancies they are getting," Hanson said. "And occupancies are going to continue to go up for the next two years."

Planners in the audience and on the panel were not surprised. Often, even paying more is simply not enough when you're looking for meeting space in major cities this year, they reported.

One frustrated planner asked the panel for help in placing a meeting of 450, including three full meals and 50 room nights, in the bursting Big Apple this year-and got no takers. "We'll take the room nights and help you arrange to hold the meeting at New York University," offered Paul O'Neill, who serves as North America division vice president for ITT Sheraton.

<B>Volume Is Key

</B>That's not to say it's impossible to book a meeting in a hotel this year. Even a 75 percent occupancy rate year-round leaves 25 percent of the hotel rooms available. But don't expect much in the way of rate concessions.

"It's not that group business is not attractive to us," O'Neill said. "We have months where occupancy is 90 percent and months where it's 60. It's a seller's market for specific periods of time, for specific properties, for specific countries. But I know what my rate has to be every day of the year-and the rate is the rate."

Corporate planners are in a stronger position than associations because they have the potential to deliver both meeting and transient business-and especially so if they can tie in long-term preferred relationships-in an environment in which negotiating skills and personal friendships count less than the clout that comes from volume. The hoteliers on the panel were able to quote figures on the value of return business, and are focusing on giving such customers the earliest crack at available space.

"The percentage of people that book Sheraton over six years is far lower than the percent that book us once," O'Neill pointed out. "It seems reasonable to develop efficiencies in booking meetings and in pricing structures that will deliver lower cost to planners and more profit to us, instead of planners bouncing from hotel to hotel for one-shot deals." (For more on meetings discounts, see Meetings Monitor, Page A4).

O'Neill acknowledged that combining transient and group volume is a good idea from a negotiating perspective. However, he added that meetings business, with its requirements for scarce public space and a higher level of service, will be priced differently.

"Corporations should be understanding of what transient and group rates should be," he said. While Sheraton does offer its global preferred accounts contracts that combine the two, it uses different pricing structures for transient and group business.

Fred Shea, vice president of sales operations for Hyatt, said that 82 percent of the company's group business comes from 20 percent of its customers, and that a planner who has used a Hyatt once is five times more likely to use it again.

But his focus seemed to be more on high-volume meeting customers than on combined meeting and transient business-and even volume contracts are increasingly rare as occupancies climb. "It's always in our best interest to work with centralized meeting departments and centralized planners who understand and control more," Shea said.

"We look at total revenue, total number of properties and total number of meetings. Each of those factors help," he said. "There was a time when we gave our best customers an annual rate, but we're not doing that as much now. There is such a thing as a bad piece of business-and I can't ask my owners and employees to lose money on your meetings."

As in all negotiations, Shea explained, the more data a company has, the better. "On the group side, what you'd like to do is negotiate a rate based on when they come, but that's difficult data to get," he said.

"If you know when your meetings are being held-especially if it's not in prime times-or even what day of the week you will be coming, that would help as well," Shea added.

<B>Book Through Agencies

</B>Panelist Tony Pastor, who plans 200 training meetings a year for McKinsey & Co. in New York, said that loyalty seems to be eroding if hotels are asking corporate customers to deliver not only volume, but the right kind of volume.

"The hotels are saying they don't care if I've been a good customer for six years-now they've got a better customer and they're going to take him," Pastor said. "So I'm focusing on small properties that have worked once for me, trying to bundle meetings together into those properties to gain leverage and familiarity and time. I think what we need to do is build some clauses into our transient contracts that relate to groups."

For firms with smaller meetings volumes, Shea suggested that they pool with others through corporate travel agencies or independent meeting companies in order to gain more leverage.

"Unless you are dealing with a single property where you deliver more volume than even an agency can, the agencies get the best discounts," he said.

O'Neill also advised planners to move their events out of peak seasons whenever possible. "Meeting in New York in the second week of October costs you money," he said. "Come in July-we're here today, aren't we?"

Panelist Anne Boehme, a planner of medical association meetings which use a lot of exhibit space and 100 room nights, has given up on negotiating with hotels. Instead, she is focusing on colleges and corporate conference centers.

Boehme's next meeting will be held at the "well-located and prestigious" New York Academy of Medicine, located off Fifth Avenue, where she is paying for meeting space.

Another solution is simply moving meetings to less expensive and overseas locations.

"I'm moving more meetings to Europe," Pastor said. "Amsterdam is just as effective for me as New York.