<B> Rates Down At Last?</B>
By Chris Davis
There may be relief in sight for corporate meeting planners reeling from negotiating with a weak hand in a scalding hotel seller's market. A new study by PKF Consulting found that average hotel rates dropped in the first quarter of 1999 in one-fourth of 44 cities surveyed compared with Q1 '98--and growth in average daily rates was a paltry 1.9 percent, less than half the 4.5 percent that PKF had forecast.
Members of Meeting Professionals International's corporate special interest group reported faring better in secondary and tertiary locations than in large cities, where rates are still high. Meeting in Las Vegas last month, SIG members bemoaned their enduring lack of leverage in hotel negotiations. It's still easier to turn lead into gold than to stuff a short-term meeting into a New York property, they said, though they reported better luck in smaller locales.
Industry watchers have predicted for a year that the hotel seller's market would begin to crumble (<I>BTN,</I> Sept. 14)--but buyers said staying out of big cities is still the best way to save money, and PKF's findings back them up. Nine of the 11 cities reporting lower rates--Albuquerque, Corpus Christi, El Paso, Nashville, Oklahoma City, Portland, Raleigh, Salt Lake City and Waikiki--are secondary or tertiary locales. The other two are Orlando and Washington, D.C.
The drop in rates surprised even PKF. "It's very rare," said director of research Robert Mandelbaum in Atlanta. "You usually see slower growth or a flat rate rather than an actual drop." Indeed, in light of the new data, PKF may revise its projection of a 4.5 percent rate increase for 1999, "because it won't reach that figure at this pace."
PKF anticipated slower growth in the first quarter because of new hotel builds and a slowdown in corporate travel and meetings after the stock market slide in late 1998. "Hotel salespeople read the headlines about the pendulum swinging back from the seller's market, and they know that corporations are scrutinizing meeting expenditures more closely," Mandelbaum said. "They may hold rates flat to maintain occupancy and be more willing to negotiate."
Jan Hennessey, manager of corporate meeting services for Oakland, Calif.-based health management organization Kaiser Permanente and chair of MPI's corporate SIG, has felt the pinch of the past few years greater than most. "We've been looking further down the food chain to find hotels that are hungry, and I've had some limited success," she said. "We're holding more meetings in southern California, where there are less expensive rooms and even food and beverage charges."
Hennessey also picks destinations by analyzing airfares based on the departure points of her attendees. "Phoenix has popped up a lot in the off season for low airfares, and though it's not our corporate culture to meet in Las Vegas, it comes up as one of the least expensive places to fly into over and over. I may have to make a case for it soon," she said.
Michele Carney, corporate meeting planner for Wayne, Pa.-based financial consultancy Brinker Capital Inc., has noticed a very slight slowdown in rate growth this year. She also has been looking toward smaller markets for the 40 meetings she plans, but her circumstances make that difficult. "We'll run training sessions of 75 people, but only need 10 sleeping rooms," she said. "It's a double whammy." Carney often turns to independent planners and personal relationships in the hunt for lower rates, and uses PlanSoft software for RFPs.
Others, though, said a rate decrease is purely anecdotal. "Here in Richmond, a secondary city, we're not seeing any softening in rates," said Connie Knisley, manager of meeting services for Va.-based Wheat First Union bank. "We've had to suck up the rates by increasing our meetings budgets or cutting something out."
Eve Edwards, corporate meetings and events manager for Mentor Graphics Corp. in Wilson, Ore., finds it difficult to bring international attendees to secondary cities, and so relies on negotiating two-year contracts to get the best deals.