With rising room rates and limited guest room availability in hotels, some smaller companies are looking to negotiate multiyear and other creative contracts to limit hotels' negotiating leverage.
Without sizable meetings volumes to leverage or the extensive preferred hotel directories offered by CT100 or other large companies, midmarket firms are struggling to hold hotel costs down at the negotiating table.
"We try to negotiate multiyear agreements," said Bill Davidson, manager of corporate travel and meeting services of Austin, Texas-based Sematech. "The rising rates are hard. It's a seller's market. We just try to leverage everything we have: long-term relationships and the ability of the planners to negotiate on our behalf."
The company also keeps records of meetings held in the past and encourages planners to share their negotiating experiences with each other.
"We have all the historical archives of our meetings here, our past meeting costs and properties we've worked with, and who our contacts were. All our planners are right here, so they're able to share experiences," he said. "We look at what our offerings are, and we track what we negotiate in terms of cost savings. We really try to get what we think is a fair and competitive value, but more about that particular event. We have a huge size range of meetings—some may be 25 or 50 people and some may be 400 people—so we don't look so much about how big Sematech is as a corporation," he said.
Coming to the table with better historical data is becoming more common due to the availability of information, said Bjorn Hanson, PricewaterhouseCoopers hospitality and leisure group principal.
"These people in these roles are more than capable. They know how to collect information. Meeting planners are entering into negotiations with more info than they've ever had before. Hotels which have traditionally been able to out-report the companies are finding companies coming into it with more accurate and more up-to-date data," PwC's Hanson said.
However, some buyers feel that it is better not to talk about history and budgets in negotiations.
"I don't necessarily talk about history," said Patricia Carlin, purchasing manager of global card and travel for Dublin, Calif.-based Sybase, adding that she would rather start with the parameters of a meeting and then work toward a price. "I will say if it's a kick-off and it's something we've traditionally done in that area. I'll certainly let them know that. I'll tell them what we're looking for in terms of parameters, the numbers the dates, all of the components."
Hotels sometimes try to negotiate in reverse, she said.
"I've had hotels say to me, 'What's your budget? What do you want to spend?' I don't like that because I don't want to tell them I'll spend $85 a head and have them build up to what they give for $85," Carlin said. "I'd rather tell them what I want and drive the price down than have them build up. Maybe they're pricing high because they know we're going to negotiate it, but at the end of the day we get it to where it's generally acceptable to all of us."
"Generally, people can be really accommodating. They'll try to do what they can. As long as they're making something on the deal, they'll do it," she said.
PwC's Hanson said that multiyear agreements are becoming more popular, but still are a rare occurrence.
"The sense right now is that rate growth will slow, so meeting planners are saying, 'Why should I commit now?' And anecdotal reports are that hotel companies are looking for what are perceived to be higher rates, meaning two years at a higher rate rather than a rate for this year and a lower rate next year. Companies are saying they'd rather take their chances and negotiate a year from now," he said.
Hanson said that the new generations of meeting buyers are less willing to stick with preferred properties.
"Companies are trying to concentrate on a smaller number of hotels to increase their bargaining power," he said. "That still is the norm. There are companies that appreciate the fact that Millennials and younger Gen-Xers especially like the freedom and the choice and are willing to do the research to find lower rates. An increasing number of companies are setting travel guidelines about pricing rather than entering into preferred hotel negotiations, but that's a relatively new phenomenon and an exception still."
Shopping around and having choices also helps with the negotiation process.
"You have to be able to walk away and to have other options. You've got to be able to have choices. You don't want to be backed into a corner," Sybase's Carlin said.
"We shop, first of all, based on the parameters given," said Tim Bone, director of union conventions, events, meetings and travel for Washington, D.C.-based Service Employees International Union. "It's a selection of best price and regions that we find tier one, two and three cities and we'll do a comparison shop to find what makes sense."
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