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Affordable Meetings Part 2 The Venue

Author: Sandi Cain
September 2007

Features

Savvy Negotiation and Fair Play are Key to Hotel Relationships
It’s probably an understatement to say that hoteliers and meeting planners define affordability in different ways. And in a sellers’ market, hotels hold the upper hand, while meeting planners struggle to control costs and justify meeting expenses.

In a recent survey by PKF Hospitality Research, 63 percent of planners said they were under pressure to control meeting budgets this year. In order to do that, about a third expected to reduce the number of off-site events; another third planned to reduce food and beverage costs, while a quarter planned cutbacks on audiovisual services. And 57 percent said hotel attrition clauses have affected their hotel choices.

Yet hotel rates are expected to increase by another 5–6 percent in 2008. As of April this year, the average daily rate nationwide was $102.94, up 5 percent from the same period in 2006, according to Hendersonville, Tenn.-based Smith Travel Research.

“Meeting budgets aren’t outpacing growth in room rates, especially in top marketplaces,” says Tim Brown, managing partner of Meeting Sites Resource in Newport Beach, Calif.
 
Nevertheless, “affordable meetings” needn’t be an oxymoron if you play your cards right. You don’t need to meet at No-tell Motel to reach that goal, but scheduling off-season dates or using second- or third-tier cities might help.

Reggie Sears, proprietor of Sears Enterprises in Sacramento, says he avoids high parking fees in urban markets by using neighborhoods outside of downtown, such as Mission Valley in San Diego, or the East Bay instead of downtown San Francisco. He also seeks out college campuses during the off-season and schools like Claremont in Pomona that have affordable conference centers.

There are scores of such tricks of the trade that mitigate costs. But the first rule of thumb to stay within budget is to do your homework before you choose a venue.

“Determining the purpose of the meeting should be the driving factor (in choosing a venue),” says Jerry McGee, president of Ambassadors Services Group in Newport Beach. The company provides registration, housing and marketing services to corporate, association and trade show groups.


BE PREPARED
Being prepared will go a long way toward creating a satisfactory contract. And remember, negotiating in a sellers’ market that is heavy on ROI (on both sides of the table) might require the talents of super-salesman Zig Ziglar, an acting ability worthy of an Academy Award and the patience of a saint.

While corporate, association, government, SMERF and incentive groups may have different meeting objectives and different budgetary restrictions (see sidebar), there are some things they all can do to be prepared before talking rates with a property. That begins with two things: know your client and know the property.

“Understand your leverage and the value of your meeting to the hotel,” Brown says. That might include the number of peak night hotel rooms, how much set-up and tear-down time is required, how many rooms you plan to book versus the meeting space you need and the amount of food and beverage spending you expect on a per-room basis.

“Supply and demand is what matters,” Brown says. Because hotels are turning away business today, they can be choosy. “That makes it more important than ever to know your leverage,” he says.

Next, ask questions about the property. “Always lead with questions about how the hotel/venue makes money,” says Joan Eisenstodt, chief strategist of Eisenstodt Associates in Washington, D.C. and moderator of MiForum, an online meetings forum. You might also ask about the kinds of business the management values most highly and what their experience is in dealing with your type of group. Ask for references to similar groups who have used the property and about any potential labor unrest. And be sure to explain your budget and the reasoning behind it.

“Some properties think high-level incentive meetings mean big bucks, but that’s not necessarily true,” says Kathryn Jurgensen, president of Premier Meetings in Irvine, Calif. Instead, executives may be the most sensitive to return on investment. “They’re living under a microscope now and (want to) lead by example,” she says.

When it comes to details, Brown says it’s wise to know all your space and equipment requirements before heading into a meeting. That includes minimum square footage, stage area, dance floor, displays/booths, minimum ceiling height requirements and any A/V needs.

Don’t expect hotels to take your word about past performance, either. Instead, take along post-meeting reports from other properties you’ve used, past registration lists, or even copies of expense reports that illustrate the amount your attendees spend. Some planners have attendees put extra charges on their room bills and pay for them at checkout to document per-person spending.

Next, put on your salesperson hat and tell the hotel how often your group comes to that city and what that might mean in additional business. And if your company policy (or your client’s) mandates attendees to book within the block, sharing that information will likely make you that hotel’s new best friend.


NEGOTIATING TIPS
McGee recommends telling a hotel everything about your group that might be relevant to the negotiation. “That enables them to come to the table with a well-thought-out recommendation,” he says. “They have a lot to offer if you let them.”

Negotiable items may include:
  • Discounts for booking multiple meetings.
  • Parking fees.
  • Food and beverage discounts.
  • Low-cost amenities like newspapers and coffee.
  • Add-on fees such as resort fees, automatic service gratuities or early check-out fees that are not always disclosed when rates are discussed. (Be sure to ask if these charges are subject to transient occupancy taxes.)
  • Extending rates to pre- or post-meeting stays and counting those nights toward the total room-block usage.


FLEXIBILITY HELPS
A willingness to be flexible on dates, the type of space you need, food and beverage menus and other items is likely to result in better rates for your group. A small meeting might also fill a niche at a hotel during a citywide convention.

Jerry Horan, senior vice president with ConferenceDirect in San Anselmo, Calif., represents both corporate and association business and says corporate planners sometimes have an advantage in date flexibility because they tend to book on short lead times.

One of Brown’s clients held two meetings in the same place in the same year, but got additional value-added items during the slower season. Hotels can suggest things they can add to sweeten the pot, based on season. They also can recommend free or low-cost special-event venues, decorations, lower-cost meal setups or the use of a theater instead of meeting rooms to help you stay within budget.


GOING GLOBAL
Some companies have begun to develop global contracts with a particular hotel group to cover all their meetings. John Foster, an Atlanta attorney and former hotel executive who now works on behalf of meeting planners, says such agreements work best for groups with a lot of small or short-term meetings, or for public companies that need documentation to justify their expenses.

But Brown cautions that you should make sure a global contract suits your needs, based on individual markets you plan to use. Getting the same rate at multiple properties isn’t always an “apples to apples” comparison, he says.


STICKING POINTS
It wouldn’t be called negotiation if both parties started out in agreement on every point. Meeting planners still point to cancellation, force majeure and attrition clauses as the most difficult things to negotiate.

From a legal standpoint, Foster says the details of such clauses are difficult to craft because there’s a difference of opinion on what should be covered. But do it wrong and it could cost you big bucks.

“Contracts have gotten so complex you almost have to be a lawyer (to get it right),” he says. “The implications of a one-word change can be major.” For example, it’s essential for planners to make sure the group isn’t responsible for acts for attendees outside of meeting functions. But some hotels balk at that. Another example is a cancellation clause that you think covers you if something happens (like a SARS outbreak) that makes it difficult for a group to perform up to contract standards, only to find out too late that it isn’t all-inclusive.

“People think lawyers make it complicated,” Foster says. “We don’t—it already is complicated; we just recognize the issues.” All of these issues impact the bottom line.

Some things that might help minimize financial consequences to your group include:
  • Ask for a sliding scale of penalty charges depending on when notice of cancellationis given.
  • Base financial damages on net profit lost by the property rather than gross revenue.
  • Ask to include credit for any portion of the contracted items that  are resold.
  • Try to create a mutual cancellation clause that spells out what happens if the venue cancels as well as what happens if the group cancels.
  • Be sure to clarify how room blocks and room nights will be counted to maximize your value to the property.
  • Be honest about the number of rooms you need. “If you hold firm on that, other things will fall into place,” says John Hendrie, a Massachusetts-based hospitality consultant who previously worked in the hotel industry.



SURPRISE! ADD-ON FEES
While planners are by and large a flexible lot who always have a “Plan B,” there are few things they find more annoying than the add-on fees becoming increasingly popular at mainstream hotels and resorts. A recent survey by PricewaterhouseCoopers estimated that these surcharges would bring in $1.75 billion to the hotel industry this year, three times the amount generated as recently as 2002.

Planners insist they wouldn’t mind as much if they only knew about the fees before check-out.

“If you’re going to charge it, disclose it,” Jurgensen says. In addition to resort fees and automatic banquet gratuities, she recently has been faced with automatic bell desk gratuities and late checkout fees that can reach $75 at some resorts.

Eisenstodt thinks hotels should just raise their rates and list all the items included in the base rate. “We all seem to be subsidizing all things in the hotels, from ‘free’ newspapers to mini-bar restocking,” she says.


ARE WE THERE YET?
Hoteliers and planners alike may think the other side tries to nickel-and-dime contracts into oblivion. Sometimes it’s true. And there’s no denying that the devil is in the details. But looking at the big picture is equally important.

“Planners represent a significant dollar amount of a (hotel’s) business,” former hotelier Hendrie says. “If they aren’t demanding, the event won’t be as successful as it could be.”

In the end, doing your homework, making sure your contract has no loopholes and negotiating in an honest and professional manner will help you stay within budget and create a successful event.

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.

 

TAKEAWAYS: TIPS FOR CHOOSING A VENUE

  • Consider airport hotels for pure business meetings to eliminate the need for car rentals.
  • Consider new hotels that may have promotional rates to build market recognition.
  • Know your group. If broadband availability is their No. 1 concern, ask about that first.
  • Consider parking rates and who operates the parking facility.  If the hotel contracts with another vendor, negotiating those rates may be more difficult.
  • Consider conference centers that offer all-inclusive rates.
  • Ask for references to other groups that have used the venue.
  • If you have a small meeting, see if you can fill a spot at a hotel during a citywide convention.
  • Use online resources like CVBHotRates.com or Eventective.com.

TAKEAWAYS: DIFFERENT STROKES FOR DIFFERENT FOLKS
Negotiation strategies may be the same across the board, but planners for different sectors still may have some different needs.
  • The association market often has less flexibility in dates or destinations and little control over attendance. It is sometimes the most budget-driven sector. Association planners may need a variety of hotels at different price points for their conventions—something hotel companies with a wide range of brands may be able to provide.

  • The corporate market tends to have short-term booking patterns—in part because they may look at their quarterly financial performance before scheduling a meeting. They also have more flexibility on dates. But executive-level groups still watch the budget. “They’re very conscious of how the meeting looks to the rest of the company,” says Kathryn Jurgensen, president of Premier Meetings in Irvine, Calif. “Every penny is being watched and they have to prove value for every dollar spent.” 

  • Government planners often face budget restrictions in mandated per diems. But they may have flexibility in scheduling. Duncan Farrell, general manager of the Society of Government Travel Planners, says these groups often begin and end meetings earlier in the day , so they might be able to arrange to use the hotel’s breakfast buffet for one meal, or eat and meet at the same time. “That saves the guarantee on food and saves on amount of space needed,” Farrell says.

  • SMERF markets are similar to associations when it comes to the need for a variety of price points, but may have more flexibility in dates due to the nature of their meetings.

  • Incentive groups sometimes are perceived as frivolous and free-spending. “We sometimes hear from a resort that they think (we) don’t have a budget just because of the level of the meeting,” Jurgensen says. But it’s not all fun and games. While fun may be an important part of an incentive trip, it likely is not the only objective. “Any time an organization is bringing people to a hotel for a travel program, there is an objective,” says Jerry McGee, president of Ambassadors Services Group in Newport Beach, Calif. It’s important for the property to understand the program and how it fits into the business, he says.

RESOURCES
These properties and organizations welcome your inquiries. 

INDUSTRY RESOURCES