Despite industry analyst forecasts of further rate and occupancy increases and difficult meeting negotiations ahead, meeting buyers still can find discounts, add-ins and favorable contractual clauses by being flexible in meeting time and location in this continuing seller's market.
According to a Meetings Monitor survey of 145 corporate meeting buyers, 70 percent reported that hotel discounts had remained the same from 2006. However, discount rates may seem higher because hotel costs are rising
(BTN, Sept. 10)."In cities like New York and San Francisco, cities that are achieving high occupancy or increasing occupancy, negotiations will be much more difficult than even last year," said Bjorn Hanson, principal of PricewaterhouseCoopers' hospitality and leisure group. "In many other markets, it will be similar to last year or even slightly more favorable for the buyer. The reason for that is that, according to us, occupancy for 2008 will be lower for the country than 2007." PricewaterhouseCoopers forecasts a 63 percent average occupancy rate for 2008, compared with 63.3 percent occupancy rate projected for 2007. PricewaterhouseCoopers also forecasts a 5.7 percent average increase in hotel rates.
"The rates have all gone up 6 to 8 percent. The discounts are the same, but off a higher rate," said Michele Snock, global manager of meeting services for Cisco.
"The discount might seem larger compared to rack rates, but I don't know that that is meaningful," PwC's Hanson said.
Counteracting hotel cost increases has necessitated buyer flexibility in several steps of the meeting sourcing process, including when choosing the meeting venue. Almost half of survey respondents used an alternate property in order to mitigate limited availability or higher rates. Twenty percent said they used a lower-tier property and 17 percent said they shortened the length of the event. Above all, being flexible is key in a seller's market.
"We do bid it out to at least three different hotels. We keep negotiating," said Snock. She added that most hotels are willing to negotiate in return for a percentage of the company's meetings.
"All the hotel chains want to look at how they can get more marketshare, and they're willing to talk to us. They're knocking on our doors. They're saying, 'How can we get more marketshare?' " Cisco's Snock said. "There are hotel chains that are saying, 'We're looking for partnerships, we're looking for long-term and we're looking for what we can give you as well as what you can give us.' Those deals can be had. It's just a matter of finding them and supporting them."
Communications within a company detailing the need to be flexible about meeting days, meeting months and destinations also can help get the best price possible for hotels.
"We definitely have been telling our folks here that we need as much flexibility as possible," said Heather Haley, manager of travel and meetings for David's Bridal and Priscilla of Boston. "We have made sure that our company understands that flexibility will lead to us having greater control of pricing, if they're not set on it being in a certain market, or if they can be flexible from week to week. We might have to go and look beyond where we normally would. This year, I felt that we were very successful because we had flexibility in location for a couple of our large meetings where our rate dictated where we went. We got to make our selection based on the final financials of evaluating not just multiple properties but multiple cities."
When hotel negotiations progress beyond rate to contractual terms, cancellation and attrition ranked as the top two clauses included in contracts, used by 93 percent and 84 percent of respondents, respectively. Other popular clauses included food and beverage and payment, both included in more than 70 percent of contracts. More than four-fifths of the respondents said meeting facility providers had the same amount of flexibility in agreeing to standard contract addenda as compared to 2006.
"We have legal clauses that are really critical to our company, so we actually request that in the RFP," said Cisco's Snock, citing "typical clauses of cancellation, liability and mitigation" as well as making sure that the hotel in question has insurance.
"We negotiate a cancellation clause that varies from what the contract states. That's required. It depends on our level of flexibility and how close we are to that meeting, but it's one of the first areas that we look at," said Haley of David's Bridal.
She added that she also will negotiate around "all the things that, if you don't get them for free, really impact the cost of your meeting," such as parking and complimentary Internet access.
"Nowadays, you have to ask for anything. One of the things we'll ask of our suppliers is what concessions they're willing to give us up front before we even negotiate on those," she said.
Negotiated price breaks on such incidentals can offset paying a higher overall rate, said PwC's Hanson.
"Hotels are trying to overcome the fact that rate increases may not be as large in 2008 as they were in 2007, so we're seeing room rentals, menu prices and the costs of other services increasing. There may be times when it's better to agree to a higher room rate increase but limit any other type of increase," he said.
More than one-quarter of survey respondents said their company does not have preferred vendor arrangements with properties for groups. Of those that did, 20 percent used the properties for 51 percent to 75 percent of their 2006 meetings, while 16 percent used them for 21 percent to 50 percent of their meetings. Fifteen percent said they used preferreds for 1 percent to 20 percent of their meetings, 8 percent used them for all of their meetings, 7 percent did not use preferreds for any of their meetings, and 6 percent used them for 76 percent to 99 percent of 2006 meetings.
Snock said that while her company had two preferred vendors that always get an opportunity to bid, she will not limit the options to the preferreds.
"We use a request-for-proposals tool, so if we're looking at a particular city and one of those chains has a hotel there, they always get to an offer to bid, but it doesn't mean they get it," she said. "We're still looking for the best value."