Planners See Higher Rates

<H1> Planners See Higher Rates</H1><H3> meetings Buyers point to hidden setup fees, but hoteliers say prices are fair</H3>By Lauren Bielski

<B>I</B>n a market where the advantage has swung to the hotel side of the court, many meeting planners assert that rate increases are rapidly going beyond just sleeping rooms. This year, many say, they also are being charged for meeting facilities and hit with incremental A/V, setup and banquet-related fees that they believe are unreasonable.

Planners also claim that the seller's market has created an unfair negotiating environment, where contracts include either extremely restrictive provisions, or charges and penalties that are vaguely worded and poorly explained.

But hoteliers insist that despite a clear market advantage, the climate is basically one of "business as usual" between hoteliers and planners, albeit with everyone more concerned about cost control.

In fact, some analysts say, planners are being confronted with a much more formulaic approach to pricing that often ignores the history of a group's business and the net revenue streams upon which true partnerships focus.

"Planners have a sense that negotiating with hotels is tougher because we've recently ended a 14-year buyer's market-which might span the entire length of the average planner's career," said Bjorn Hansen, hospitality industry chairman at Coopers & Lybrand, New York. "Now that the environment is more normal, hotels aren't merely competing on the basis of price. But even the most sophisticated of planning veterans aren't necessarily equipped to articulate the value of their business as a line of defense."

While he doesn't believe that most hoteliers are gouging, Hansen does think that planners may be experiencing higher group and meeting rates as a result of the hotels' yield management philosophy.

"Because there is no universal standard among hotels for yield management, as with the airlines, you have a variety of practices out there," Hansen said. The average hotel has two to five default rate schedules, and some have as many as a dozen, depending on what type of centralized revenue strategy they use.

"If hotel X takes the tack of forecasting fill rates based on historic activity, they may determine that the 'blue' rate schedule will be used during the week of October 1," he noted. "That schedule would be pre-empted only if, as the date approaches, the expected fill rate doesn't materialize." And this year, that simply does not occur as often as in the past.

In another possible variation, a group might be charged a higher rate despite booking a substantial block of sleeping rooms because it hasn't committed to public space, or because it booked rooms even though public space wasn't available.

Finally, changes in organizational structure-with decision-making power taken away from salespeople-coupled with stasis in the construction of luxury properties also are affecting the industry.

Whatever the reasons, the negotiating environment has the potential to make planners look very bad on their own turf, said Tony Pastor, site and contract specialist for McKinsey & Co. in New York. As the soft spots in cities like New York recede (with demand outpacing supply for luxury properties and fewer open dates all year round), the traditional lever that planners use for controlling costs-getting a good price because of sudden availability or seasonal downturn in activity-no longer does the trick.

The seller's market also has resulted in cavalier treatment of planners, Pastor said. "All sorts of additional setup charges, for things like moving plants or tables, are creeping into the bill," he said. He told of one case where, as a result of a vaguely worded contract provision, he was charged $1,300 for ice removal during a five-day meeting. While such an occurrence may be extreme and rare, it is indicative of a changing climate between hoteliers and planners, who must must now be exceedingly familiar with the fine print and insistent upon strict interpretation of the clauses.

Dobby Wall, director of meeting services for the American Physical Therapy Association in Alexandria, Va., said she has had disagreements with hotels over meeting charges. "I've had problems with costs like trash removal, and other problems with portable sound systems suddenly appearing on my bill, when those capabilities were initially presented as inherent in the room and part of the meeting room rental fee," she said. Wall now asks what hidden charges aren't being reflected in a contract.

Hoteliers, on the other hand, insist that with few exceptions, their sleeping room rates have only moderately increased from last year-and that their contract terms, while more stringent, are fair. Pricing, they said, always has been a function of location and seasonal demand.

In light of the bad feelings such "surprises" generate, some hotels are beginning to focus on alternatives. At the Omni Hotel, a luxury facility in New York that recently doubled its meetings facilities and is actively soliciting meetings business, the focus is on the top line rather than the bottom, according to director of sales and marketing Holly Waterbor.

"During a 14-month closure to reposition and renovate the property, we worked very closely with a corporate advisory committee of 35 travel executives and meeting planners to develop our rate structure," she said. "We took their advice to not nickel-and-dime clients."

Mark McGehee, sales and marketing director at New York's Grand Hyatt (where about 30 percent of revenue comes from meetings), said the hotel charges for meeting space "according to what our costs are for opening up the room in the first place." But, he added, "we definitely consider the entire value of the business-and price the meeting facility by taking the value of the rooms and food and beverage into account."

According to aggregate market data from American Express, group travel packages are up about 6 percent in most of the 25 cities profiled-the same amount as transient travel in deluxe properties. Hotel rates are up 5 percent in an aggregate of upscale, midprice, economy and budget properties.

Mark Lomanno, an executive vice president at Smith Travel Research in Hendersonville, Tenn., said that data that breaks out group from transient rates-and compares the two, particularly on a property-by-property basis-"is extremely difficult to get, so it's hard to trust any sort of aggregate data on this."

Still, he believes hotels are increasing costs as they try to cover operating expenses and please demanding owners. "We do know that hotels are under more pressure to boost their average daily rates," he said. "And we also know that running a meeting in a property adds a series of expenses related to staffing that transient travel doesn't incur.