New Tools, Strategies Help Cos. Tackle Lead Shrinkage

<B>New Tools, Strategies Help Cos. Tackle Lead Shrinkage</B>

By Chris Davis

As the dwindling amount of lead time for small corporate meetings continues to overwhelm every aspect of negotiations, many buyers are using new technological tools and better internal group travel management to develop cohesive strategies to minimize the cost of short-term meetings without sacrificing value or service.

While there is no simple, industry-wide solution to the problems that diminished lead time spawns--including lack of hotel availability and exorbitant prices for space--buyers today have access to more tools to mitigate short-term difficulties than ever before.

Today, Internet meeting portals can search for hotels with space and automatically distribute RFPs. Hotel consolidation has led to global sales offices that can access hundreds of properties in minutes. Airlines have developed programs specifically designed to secure short-term meeting business. And many corporations continue to move away from complete decentralization, allowing planners to catalogue all meetings and quickly take advantage of canceled space.

But as buyers develop tactics to alleviate the financial encumbrance of short-term business, hotels industrywide have placed a higher premium on managing meeting revenue than before--hence, the near elimination of free meeting space and the trends toward increased costs for banquet space and more onerous attrition clauses for food and beverage and audiovisual services (<I>Meetings Today</I>, Oct. 25).

But hotels have short-term space to fill too, so there are times when the need is just as critical for the seller to snare meetings business as it is for the buyer to find a venue. And it's still a seller's market.

The sophistication of the meetings market has increased on both sides of the buyer-seller equation, so negotiating a short-term meeting contract can be an intricate process. The key, then, is the flexibility of the buyer--not just in the willingness to consider many types and brands of properties, but also in the manners in which they locate, negotiate and secure quality space.

What is clear is that the trend of lead times shrinking into oblivion has shown absolutely no signs of abatement. A <I>Meetings Today</I> research study shows that 71 percent of corporate meetings of fewer than 100 attendees were short-term--planned with 90 or fewer days of lead time--in 1999. Of those meetings, about 75 percent were planned with less than 60 days of lead time and about one-third within a month.

"The decrease in lead time affects all aspects of what we do," said Patricia Stemple, manager of meeting planning and travel services for Battle Creek, Mich.-based Kellogg Co. and president of the Society of Corporate Meeting Professionals. "It affects our ability to negotiate and to communicate clearly and quickly with our internal clients. Contracts are so complicated these days and they're impossible to scrutinize quickly. We're on alert and very cautious, but the risk for error increases in the short-term, and people need to get that message."

And few expect the situation to change much. Only 5 percent of those corporate planners surveyed think their lead times will get longer this year, compared with 18 percent who anticipate even shorter lead times.

So it seems clear that there is no realistic way to eradicate the short-term trend, nor is there any particular reason to think market forces will lengthen lead times.

"Decisions made today need to be implemented tomorrow," said George Odom, manager of travel and meeting services at Eli Lilly & Co. of Indianapolis. "Internal clients have so many other things they're focusing on, they just don't think as much about the meetings until the date gets near. It slips through the cracks."

Before looking at their methods of site selection and contract negotiation, some buyers have found it helpful to address the structure of their own companies as a way to assuage the short-term process. One key to doing so is to ensure that all corporate planners are aware of the status of all corporate meetings, whether or not the company employs a centralized meetings department. But those employees sponsoring meetings, particularly those in companies that charge planning services back to individual departments, need to understand the financial value longer lead times offer.

"There's been an educational process for our internal clients with regard to lead times," said David Kassel, global conference group senior manager of Deloitte & Touche of Wilton, Conn., which has a centralized meetings program. "Many of our meetings are very space-intensive, which we try to direct to cost-effective and appropriate properties. Our clients are realizing that they're not going to get their preferred venues with short lead time."

Kassel actually has seen a slight increase in average lead time with Deloitte & Touche meetings, for reasons that all can be tied to the accounting giant's successful meetings centralization plan (<I>Meetings Today</I>, Nov. 15).

With all meetings data captured, Kassel's department is aware of many training meetings that occur annually and now is able to contact the appropriate department well before the start of the meeting.

"We've begun to almost mandate a certain amount of time for these programs," Kassel said. "Our internal clients are learning that by giving estimated numbers of attendees well in advance--at least six months--we're able to revise the contract as needed with minimal penalties. Oftentimes we use conference centers, for example, which usually let you reduce a block more than four months out without a penalty."

Since individual D&T departments are charged for contract-related damages such as cancellation and attrition, they quickly are learning the benefits of longer lead time. "It is a more beneficial and educated approach to room block and contract management," Kassel said.

Of course, there are times when very short-term meetings are unavoidable, but Kassel said internal clients work to minimize their frequency based on a centralized meetings calendar maintained by Kassel's department. Since those employees holding the meeting want full attendance, they look to avoid conflicts with other departments' events, which by nature leads to alerting Kassel's department as soon as they can.

"That can only happen in a centralized program," Kassel said. But few corporations have centralized meetings departments to the extent that Deloitte &Touche has, so different approaches are needed depending on the given corporate culture.

Stemple has no interest in establishing any new policies, much less mandates, to prompt Kellogg meeting sponsors to include more lead time in their proposals.

"There are some companies' planning departments that tell their workers there must be at least three months of lead time," Stemple said. "We're not willing to do that because we want to offer the finest level of service at any cost. That means taking on the burden of providing short-term service."

One of the most effective ways to indoctrinate the idea of longer lead times with internal sponsors is to prove to them that it saves money.

"If people know we're offering a service, once they start seeing the value of the process and the planning group, it can be a part of the process," Odom said. "But that will never happen until people recognize the value that planners bring. When that happens, all of a sudden, they can't do a meeting without you."

But even buyers at the most heavily centralized or completely consolidated meetings need to employ a sophisticated approach when looking for and negotiating with meeting sites in the short term.

"There are two schools of thought on the matter," Kassel said. "The first says hotels have a captive audience for short-term business and can charge what they want. The second said that planners are filling a hole in the hotel's schedule and therefore can negotiate better. I've found the captive-audience theory to be more prevalent at the moment, in this market, unless you head to a second- or third-tier city. But that often doesn't happen."

Both buyers and hoteliers said the key to maximizing short-term value lies in flexibility in destination and site and understanding the true value the hotel can derive from your event. If a meeting is very space-intensive but carries only a small guest room block with little onsite food and beverage, it is extremely difficult to book in a major city or in a property's most popular season, especially in the short term.

While many properties simply might take the business if there's a hole to fill and it's a week before the meeting, others might wait to see if something better comes along--not a bad bet, considering the sheer amount of corporate short-term business--particularly if the lead time is a month or two.

"It depends on the time of year," said Kim Golik, director of sales at the Westin Seattle. "In March, I would do my best to get it booked. But in June, we would be much more aggressive. Then, we would evaluate it the same regardless of lead time, based on overall revenue the meeting generates and the buyer's history with us. We have meetings every day to discuss precisely what we'll do that particular day."

As such, it is critical that meeting sponsors know that their particular short-term meeting profile could be a much better bargain in a secondary or tertiary city or at a suburban or airport property. Some buyers think the message is getting through.

"When we tell clients that we can move them to another property, the answer used to be no," said Andi Hall, director of meetings management at Maritz Travel of St. Louis. "But people are much more open to those kinds of recommendations these days, probably due to the overall move to greater cost containment.

"Now, clients often define the city they want to hold the meeting in but are easing up on the specific property. There are people who will be very specific about meeting space requirements, but they have to understand how the hotels make their money. There has to be the property room night to meeting space ratio, or placing the meeting in the short term will be a killer."

Switching the type of property booked also can result in savings, but it can be a hard sell to the meeting sponsor. "We usually get what we want, but there are times we have to consider alternate destinations," Stemple said. "But it is never drastic. Sometimes they want a resort and get a suburban property, or want a downtown hotel and get an airport, but they never get an airport hotel if they want a resort."

Many meeting managers rely on relationships with hoteliers, either on the local or national level, to guide them through choppy short-term waters. While not everyone agrees on the value of national sales offices, they often can guide buyers to opportunities, particularly in secondary locales, when planning time is short.

"There's a lot of jockeying for position; we're finding a lot of our customers are willing to be flexible with arrival and departure times in order to get the destinations they want in the short term," said Chuck Brownfield, senior vice president of marketing and sales of Bass Hotels & Resorts. "We try to channel them to properties with the appropriate dates, availability and product, where it makes mutual sense. Short-term meetings are always a concern for everyone, but the natural effect is that there has not been a huge impact on our side of the business aside from the fact that it's coming in a shorter window."

Other buyers, though, work with their local properties either out of preference or necessity. Not every company can consider all regions of the United States as potential meeting destinations, so relationships with local hoteliers are crucial.

"We've seen our lead times shorten quite a bit in the past 12 months, down to an average of 30 to 45 days for smaller meetings and about 75 days for midsize," said Dan Lauterwasser for Muscatine, Iowa-based office furniture manufacturer The Hon Co. "We try to keep our meetings to a limited geographic area, so there are times when there's not a lot of room for negotiating and we simply have to run with what the hotels offer."

Kellogg's strategy for short-term negotiations is to be as straightforward as possible with individual properties where a relationship exists.

"We're up front with our hotels because, hopefully, they'll be too," Stemple said. "If they've had a cancellation, tell us about, and we can fill it, it's a win-win. We use national sales offices selectively, because of concerns about service, but those we use, we use a lot. But most of the time we go directly to the properties themselves and rely on our relationships."

Even with positive relationships at the national or local level, finding appropriate sites with available space that are willing to take a meeting can be time-intensive, causing some buyers to consider selectively outsourcing some meetings. A major advantage, quite simply, is time saved.

Dan Baillie, travel manager with the Block Drug Co. of Jersey City, N.J., said there's not a lot he can do to grow lead times throughout his company, so he turns to third parties to ease the crunch.

"In our business, a lot of meetings depend on federal government approval of products, so we have to wait for it rather than plan and cancel," Baillie said. "We'd like notification earlier, but there's not much we can do. We do have a top 10 list of properties in the area that we rely on, but my staff handles transient travel too, so something has to give, time-wise. Unfortunately, third parties are in the same boat. We contact them without a lot of lead time too." When acting alone, though, Baillie prefers to rely on his relationships with individual properties to get the best deal in the least amount of time.

"I've never had a whole lot of luck in dealing with the chains themselves," Baillie said. "It's just easier and quicker to call the property direct and talk to the horse's mouth."

Large meeting management companies offer corporate buyers an additional potential advantage: the ability to plug business in to the canceled or shrunken room blocks of other clients at favorable rates.

"We try to find and take advantage of other clients' attrition," Hall said. "Because otherwise, the lack of lead time can have a damaging effect, particularly with larger conferences if attendees have to be split between properties."

<B>CVBs Add To Short-Term Mix</B>

Some hoteliers report an increased number of short-term corporate meeting leads from their local convention and visitors bureaus, perhaps indicating an increase in willingness of corporate meeting buyers to restrict their site selection to a particular city instead of a single property. "We've seen huge gains in short-term business involving 10 to 100 rooms, even since the first of the year," Golik said. "Most of it comes through Starwood's global sales office, our own sales department or through the CVB."

The CVBs themselves not only report more short-term traffic, but more sophisticated tools to generate, handle and direct short-term meeting leads.

"We're very much seeing a shrinkage, and not just with single-property meetings," said Dennis Edwards, vice president of sales and marketing for the Greater Ft. Lauderdale Convention & Visitors Bureau. "We're even seeing shorter lead times for convention center business."

Edwards said his CVB has turned to technology to assist corporate planners looking for space in Ft. Lauderdale by using its Web site (www.sunny.org) to post hotel room rates and availability for the next six months, as well as on online RFPs. Corporate clients, he said, account for the majority of RFPs received through the site.

"About half of the RFPs we receive for short-term meetings will indicate specifically which property or properties they want to hear from," Edwards said. "It shows that they've done their homework. The Internet offers great ability to research properties prior to notification, which is a key for these types of meetings."

The Internet, in fact, has the potential to be one of the strongest options planners have in finding and booking space for short-term meetings. Not only have several Web sites--with databases of thousands of hotels--dedicated to locating properties and sending electronic RFPs reported increased traffic since their inception, but new pricing models, unique to the Web, are always in development. Case in point: Meeting auctions, in which several hotels can bid live for a buyer's short-term meeting, seem to have caught the fancy of the industry.

"Planners are starting to figure out automated tools and appreciate them," said Glenn Bingham, president of meetings portal AllMeetings.com (www.allmeetings.com). "It will increase in the future. But right now, for very short-term meetings, many planners still just call their good old standard hotels."

Although AllMeetings, and other such sites, push for hotel responses to online RFPs in 24 hours, Bingham said many buyers still aren't aware of the sites' capabilities and feel more comfortable using traditional methods of distribution with such little time at hand.

"Many don't feel they have the time to mess with this kind of thing, which I can understand," Bingham said. "But the whole online RFP service is still a new concept, and many planners aren't sure yet how to deal with them. But they do like to have their responses via e-mail in 24 hours, which is what we've made our focus."

The average lead time for events booked through AllMeetings is less than 90 days, Bingham said, with two-week lead times not uncommon. Often, he's seen buyers submit RFPs to about six hotels and get back proposals from four the next day. The buyer usually makes a decision right at that point, he said.

"The hotels that are fastest in responding have the potential for the biggest share of the business," Bingham said. "But hotels aren't in the mindset of responding that quickly, so we've tried to help speed that process along."

As the impact of technology and online third parties grows, the trend will not reverse itself, Bingham said. "Particularly for small corporate meetings, our business will drive down lead times by itself," he said.

"There's no question that clients are looking for an end-to-end solution that involves all segments of the meeting and the ability to handle multiple vendors," Hall said. "Portal technology provides the means for managing lower-end, short-term meetings, and keep control of the data, that just aren't cost-effective to hire out. It's a wonderful option, and it's come a long way in the last year."

In fact, short-term corporate meetings seem well on their way to becoming the bread and butter of the Internet meeting portals. "Just about all of our business has been very short term, a lot of it within two months," said John Lavin, president of meetings portal StarCite (www.starcite.com). "The hotels are always glad to sell in the short term."

Though many planners have moved to incorporate various technologies into their work habits, there are others who aren't yet convinced.

"We're looking for something that can provide a link between rooming lists, negotiated rates and airfares, and has the ability to make all the GDSs talk to the meeting planning software," Stemple said. "So it's difficult, and we've spent a lot of time researching this. It seems like a lot of this is taking association software and trying to make it corporate."

Internet third-party leads, though, don't make up a significant portion of the Westin Seattle's short-term leads. "It's not a large segment yet," Golik said. "We certainly hope it becomes so."

The Hon Co., meanwhile, will use videoconferencing for smaller meetings that involve strictly employees, but Lauterwasser doesn't see it as a cure-all for short-term negotiating troubles. But the company is exploring meetings technology, which Lauterwasser thinks might be able to help.

"We continue to handle all meetings manually, but we look forward to exploring electronic RFPs over the next 12 months," Lauterwasser said. "It would certainly be more efficient to be able to do that, and I think it would help us reduce spending as well."

Perhaps the aspect of meeting purchasing least affected by the shrinkage of lead times is booking group airfares, a development related directly to the advent of zone fares. The fares, designed specifically for corporate groups, have set prices for city pairs in given geographic zones, with no Saturday night stay requirement and only a seven-day advance booking mandate.

"Zone fares really were structured for that reason," said Gail Bill, Northwest Airlines' senior manager of meeting and incentive sales. "They have the seven and 14-day booking windows, and they don't require a Saturday night stay, which few corporate meetings involve."

While Bill has seen many corporate meetings booking closer and closer to the meetings themselves, the zone fare structure usually meets the need.

"The zone fare seats are in what we call the midrange bucket and not in our lowest available class of service," Bill said. "Therefore, usually there's quite a bit of availability, especially considering the number of flights that go into major corporate meeting destinations like Boston, New York and Washington. It's not that hard now for the buyer to wrap up all the air needs for the meeting, especially compared to doing so for their other needs."

Many buyers who take advantage of zone fares agree. After widespread industry acceptance in the late 1990s, the fares now have been adopted and expanded worldwide by every major domestic carrier. "Zone fares usually work for us because of the seven-day and 14-day booking options, and our short-term meetings usually have at least 14 days of lead time," Baillie said. "But there are times, when you cut it that close, that even when you're in the airlines' window, they may not have the availability. It's not foolproof. As long as we can get our rooming lists quickly, it works out pretty well. We use our corporate negotiated rates when we can, but zone fares are a good option.