Negotiating in Today's EconomyBy Sandi Cain

Tips from both sides of the fence

The economy may begin to turn around by year’s end, but it’s likely to be a long time before meetings are restored to their rightful place in the public eye as necessary and efficient business tools. Add in tighter budgets, scrutiny of every expense and an intense focus on ROI, and it’s clear that good negotiating skills may be a meeting professional’s most valuable tool in today’s climate.

The sudden turnaround from good times to uncertain times caught many venues and meeting planners by surprise. On the surface, there was a sudden shift from a seller’s market to a buyer’s market. But negotiators on both sides of the equation still need to exert caution. Venues still need to make a profit, and groups still need reasonable deals and terms.

The popular mantra is that everything’s negotiable today—but that hardly means you can demand free rooms for your entire group. Nor does it mean your CEO will give the go-ahead to anything that might appear frivolous to outsiders. But there’s no question the rules of the game are changing. For some planners, that may mean more time spent staving off an unnecessary cancellation.

Brian Fitzpatrick, general manager for the events division of Frost & Sullivan, which has an office in Mountain View, Calif., sees that issue in black and white: If the program isn’t for a business reason, it shouldn’t proceed, but if there’s a sound economic reason for it, it should. “Don’t operate on knee-jerk reactions,” he says.

Apparently, more planners and clients are starting to think that way. Cancellations have slowed from their early year peak in Las Vegas, and inquiries about future group business are picking up. “There’s reason for optimism,” says Jordan Clark, vice president of sales for Harrah’s Entertainment. Yet there’s an abundance of caution from planners about every detail of future events. “They have to go get the approvals,” he says.

Steve Marlin, president of Prestige Accommodations in Santa Ana, Calif., says there are great rates and concessions available right now to those willing to have faith in the future—even into 2011. “It’s a wonderful time for us to be booking meetings and negotiating,” he says. But Marlin concedes that planners still shouldn’t sign on the bottom line unless the dates, rates and concessions make sense for their clients.

With that in mind, there’s no time like the present for a refresher course in effective negotiations, along with tips and tools to use in slow economic times. Call it planner boot camp, smart planning or just plain survival training that will take you into better times.

The Basics
Proper planning and strategic thinking have to come before negotiations if you’re going to be effective, says contract negotiator Jeffrey Gordon, who has offices in California and Seattle. “Most people fall down with the first step: information gathering and strategic thinking.”

Sure, you need to know the mission and purpose of the meeting, but you also have to understand your group’s dynamics before heading into contracts with venues. For instance, it might be tempting for an association to sign a multiyear deal now to lock in lower rates. But if members renew on an annual basis and you sign on to a three-year contract, you might need to protect the group from a possible downturn in membership. It’s all part of doing your homework, Gordon says.

Once you get to the table, other basics come into play.

  • Only negotiate with people who can say yes, says Michael Soon Lee, author of Black Belt Negotiating. There’s no point in negotiating with people who don’t have the authority to provide a final decision.
  • Ask for help. “Pick up the phone, and let’s get back to talking about what a group specifically needs,” Clark says. Hotels want to help customers get what they need, but planners shouldn’t go into the negotiation pushing the limits. “We can do anything, we just can’t do everything,” he says. Also, ask questions about anything you don’t understand before signing a contract, says Amita Patel of the Ontario Convention Center in Ontario, Calif. “It’s better than trying to back out,” she says.
  • Be honest. Joni M. Peru, director of convention sales at The Mirage in Las Vegas, says planners need to state up front what’s most important to them, and whether there are things that are not flexible. Clark says “a level of candor” about the budget also is critical if the planner wants to stage an effective meeting.
  • Have good relationships and partnerships in place. “In good times and bad, I focus on relationships,” Fitzpatrick says. Perceptions always are a consideration, and Frost & Sullivan is careful about how its programs are structured. “Frost, like many corporations, can’t afford to do something that will fail, so we focus on goals that will result in successes for the firm,” he says.

Partnerships also are top of mind now—on both sides of the table. “It is a partnership…and right now it’s 50/50,” says Peru of The Mirage. The current economic climate makes it more important than ever to be clear about needs and hot-button issues up front. “The time of beating around the bush [is over],” she says.

Phelps Hope, vice president of meetings for The Kellen Co., an Atlanta-based association management company, says hotels today realize that associations are “vested partners” and are helping those groups drive attendance to their events. Some offer room upgrades for the first 50 attendees who book; others may lower their rates to match Web rates. Hope says attendance building is particularly important to nonprofit associations because they’re limited in how much cash they can have on hand. If they get hit with attrition penalties, they can be forced into bankruptcy. “[Negotiations] can’t be us-against-them; then we all lose,” Hope says. “This [economy] is like post-Katrina or 9/11.”

A Win-Win Proposition?
Should you aim for a win-win deal? Most people contacted for this story agreed that’s a good goal, especially when it comes to renegotiating in the current climate. “We have a responsibility to do that when it comes to the long-term viability of our business,” Clark says.

Marlin, who has spent the past few months reworking client deals, said it absolutely is a win-win if you can negotiate an agreement that helps both the hotel and the client. In one case, he prevented a cancellation doing just that. The client agreed to hold a half meeting this year and rebook its original full meeting for 2011. In return, the hotel waived half the cancellation penalty, and the rest was applied as a deposit for 2011.

Some win-wins are long term. Janine McBee, senior events director of the Texas Credit Union League in Dallas and a veteran planner, regularly looks for such deals. “Find out what has value for the hotel, when they need a block of business and the ratio of meeting space to hotel rooms [they need],” she says. That information led to better rates for the group’s Leadership Conference, held over Labor Day weekend.

Not everyone agrees to win-win negotiations. “If you’re focused on making sure your opponent is happy, you’ll make bad decisions,” says Jim Camp, an Ohio-based negotiation coach and author. “Neediness is the No. 1 reason people make bad deals.”

DOS AND DON’TS
The ebb and flow of economic times may result in some different priorities for negotiations for the time being—and that’s as true on the supplier side as on the planner side. Here’s what a few of our story contributors had to say:

DO

  • Know your bottom line, set realistic expectations and know your agenda for the meeting, says Ontario’s Patel. Sometimes a small adjustment in your hours of operation can save money if it affects convention center staffing.
  • Go into hotels with a buyers’ market attitude, says Christi Evans of K Hotels in Beverly Hills, Calif. “It’s up to the hotel to say no when they’re pushed too far,” she says. “And it’s up to them to demonstrate the value you get from their facilities.”
  • Try for a standard rebooking clause in your contract. Frost & Sullivan includes a clause that says 50 percent of any cancellation fee can be applied to a future event at the same venue within one year. “It’s a safety net,” Fitzpatrick says.
  • Do look for line-item costs that will impact your budget. “Free Internet is nice, but won’t impact your budget,” Hope says. Instead, aim for lower food and beverage charges, or free flip charts, podiums and microphones. “Those are the things you should be negotiating,” he says.
  • Do try to bolster your attendance by working with CVBs that have attendee marketing programs or other partnerships. In Southern California, Los Angeles, Long Beach and Anaheim have attendee marketing programs. A unique co-op partnership exists between Sacramento, Ft. Worth, Texas and Baltimore. In those markets, each CVB has one sales person who cross-sells the other markets and reaches out to groups that schedule conventions on geographic rotations. “The [payroll] costs are the same, and we have three sales people,” says Tom Noonan, president and CEO of the Baltimore Area Convention and Visitors Association. The arrangement also saves time for planners open to that rotation. Planners who book all three destinations get other value-added perks such as advertising from all three markets in the program.

DON’T

  • Don’t deal with someone who can’t make the final decision, says Jim Camp. “It’s a terrible weakness in any negotiation,” he says.
  • Don’t simply cancel a meeting because of the economy, says Gail Davis, who heads speaker bureau Gail Davis & Associates in Colleyville, Texas and is a former corporate planner. And it’s not just about monetary costs. “Now more than ever employees need inspiration and incentive,” she says. Cancellation can be demoralizing on more than one front and affect company loyalty.
  • Don’t sign any future contract with an attrition clause, says Kellen Co.’s Hope. Venues that insist on attrition simply lose Kellen business, he says.
  • Don’t do business with people or venues that don’t negotiate in good faith, Fitzpatrick says. One venue in Arizona that accepted his RFP and then cancelled because the group was too small no longer gets return calls from him.
  • Don’t sign any contract in haste.


MONEY-SAVING TIPS
By nature, negotiations involve give and take, and sometimes just tossing out ideas to see if they’ll fly. One idea might lead to another and then to a signed contract.

In dealing with hotels, Texas Credit Union League’s McBee suggests that planners “give hotels a chance to shine.” She goes in with a prioritized list of things that might be easy for a hotel to offer, such as free parking, VIP transportation, serving half muffins instead of whole ones at morning breaks, serving tea instead of more expensive soft drinks, or serving lunch dessert for an afternoon break. For food and beverage events, she’ll ask for fewer wait staff or bars to reduce costs, or team up with another group on a menu to reduce meal costs.

Contract negotiator Gordon asks how the proposed cost breaks down per person, per square foot of space to see if the cost can come down. He also may ask if staff numbers can be reduced, and cautions planners to never, ever pay tax on services like gratuities.

In working with speakers, Michael Jeffreys of Seminarsondvd.com says rates are more negotiable for short lead times than for distant bookings. “It’s like a hotel room,” he says. “If the date has passed and the speaker isn’t booked, you can’t sell it again.” He also advises nonprofits and charities to look for local speakers, who may donate their services if they don’t have to travel. “It’s a bonus to work in their own backyard,” Jeffreys says.

DEALING WITH THE BOSS
As a planner, you may have the most cost-effective program in the country, but unless you can sell it to your boss or your client’s CEO, you may be sent back to the drawing board.

For starters, you need to be able to explain the implications of cancelling a meeting when the CEO is convinced that’s the best course. If you know the damage potential in client relationships if you cancel, and the financial and nonfinancial impacts of not having the meeting, you’re far more likely to be able to come to an agreement with the CEO that is beneficial to the company and to its image. But you have to be ready to make that move proactively before it becomes a crisis. Fitzpatrick says planners need to make sure top executives understand the performance trigger points and cancellation penalties before those dates are reached.

Another way to sell the programs is to be able to demonstrate the ROI of each and every one. Patel says that’s a tactic she uses regularly. “I know what [business] was generated for each show we attend, and what it costs before presenting it to management,” she says.

IN THE LONG RUN
The bottom line to negotiations is that those who are willing to make reasonable concessions, are fair negotiators and are willing to work (on a fair deal) are the ones who will win in the long run. Now it’s just up to the meetings industry to convince the public that meetings do indeed mean business and are good for the economy. That in itself may be the ultimate in negotiating success.

“If the hotel and travel communities do a good job educating the population about the value of meetings, the question won’t be how can you afford to have a meeting, but how can you afford not to,” Jordan Clark says.

 

Sandi Cain, a regular contributor to Smart Meetings, is a freelance journalist who has covered the meetings, hospitality and tourism industries for more than a decade. She is a resident of Laguna Beach, Calif.

Illustration by Paul Zwolak.

 


Negotiating Outside The Box
Creativity seems to flourish in hard times, and this downturn appears to be no exception. Call it extreme negotiation if you will, but the ideas below might get your own creative juices flowing.

  • Christi Evans, global director of group sales for K Hotels in Beverly Hills, joined an association for administrative assistants in every market where the company represents a hotel. On the West Coast alone, K Hotels represents properties in Santa Monica, West Los Angeles, San Francisco, Anaheim and Seattle. Her goal: to increase local business by introducing administrative assistants from various local companies to their hotels, and letting them see what’s available in their own backyards for board meetings or other events. “People overlook the influence these [admins] have,” she says. That influence can help negotiate a deal for an event. In one case, the hotel ended up landing a board meeting—and the administrative assistant’s own wedding!
  • The fee is the stumbling block when some groups look for speakers. Michael Jeffreys of Michigan-based Seminarsondvd.com suggests that date flexibility can help you negotiate a lower fee. Perhaps the speaker can present the closing remarks instead of the keynote, or speak at a luncheon instead of a general session. Jeffreys says offering to sell the speaker’s books or videos, providing a free ad in the program or newsletter, or (where appropriate) bartering the fee for a company’s products also may help. Another tip from Jeffreys: “The closer you get to a potential date, the more likely the speaker will negotiate,” he says.
  • When considering speakers, keep the audience mood in mind, says Gail Davis, president of Colleyville, Texas-based Gail Davis & Associates. “Six months ago, people were asking for economists; now people want to be entertained [with] light-hearted or inspirational stories,” she says.
  • IACC-rated conference centers like The Inverness Hotel in Englewood, Colo. may be attractive to some company CEOs because of bundled pricing. “It makes the overall process easier and more efficient,” says Curtis T. Bova, vice president of national sales for Destination Hotels & Resorts. It also increases planning efficiency and allows planners to focus on the content, Bova says.
  • Planners faced with smaller budgets might consider possible savings available through destination management companies. “As local experts, we can save them both time and money” for planning and on-site operations, says Shawn Thomson, president of Rocky Mountain Connections in Aspen, Colo. Another plus, Thomson says, is that the DMC pre-screens suppliers to make sure they have any required insurance, safety procedures and equipment in place, eliminating the need for that research.


Overseas Negotiations
West Coast planners may find their companies and clients more involved with meetings in Asia as trade between the regions increases. That adds another layer to negotiating considerations, according to Remy Choo, vice president of Western USA, Canada & Central America, International Group, for the Singapore Tourism Board in Los Angeles.

“The biggest mistake is to assume that what works here works there,” he says. “Planners must be careful and sensitive to differences and have a good partner at the local level who can provide good advice.”
Some key things to be aware of are:

  • Cultural nuances, such as how you greet others and how you exchange business cards, particularly outside major cities. “If you make a bad impression, it could impact negotiations,” Choo says.
  • It is common to be asked for a deposit of 20 percent to 40 percent up front, but tips are not expected.
  • Hotel quality ratings, particularly in Singapore and Hong Kong, are more stringent than in the U.S., so a four-star hotel there may be equal to a five-star here.
  • There are sometimes hidden costs, so be certain every detail of an agreed-upon price is spelled out. Choo cites a case in which a speaker fee was set—until the speaker decided he wanted an extra fee to turn on the microphone.
  • Be sure to address the dietary requirements of the audience with the hotels to keep food and beverage costs in line. Different ethnicities have very different requirements, Choo says.