Bottom Line: Negotiating in a Tough Environment

Strong seller’s market requires planner creativity, flexibility

The latest hotel industry performance figures are rather astounding. Smith Travel Research (STR) reports that May 2015 saw overall hotel room occupancy in the United States rise to a record 67.5 percent, which also brought annualized occupancy to an all-time high of over 65 percent. Average daily rate (ADR) rose 5 percent over May 2014, while revenue per available room (RevPAR) rose a whopping 5.9 percent over May 2014—and RevPAR has gone up every month for more than five years now.

For meeting planners in particular, the situation is truly unfavorable. The top-25 U.S. cities for travel, which of course are major meeting destinations, handled 35 percent of the 104 million room nights booked in May 2015. “The largest markets had a great start to the summer, with occupancy over 76 percent and ADR that’s $30 higher than the U.S. average,” says STR Senior Vice President Jan Freitag.

Not only does this make it very difficult to place meetings in these cities at an acceptable cost, but it’s also causing a spillover effect into alternative destinations. “Second- and third-tier cities are being more aggressive because they know the compression in the biggest cities is pushing opportunities to them,” says Cory Fransway, director of strategic account management for Experient. “Suppliers in these smaller destinations are being savvy—during peak times they’re not necessarily taking the first group possibilities that come their way.”


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For those who think the strong seller’s market can’t last much longer, consider this: Growth in hotel-room supply was just 1 percent in 2014 and will be only slightly above that in 2015, noted Chris Nassetta, Hilton Worldwide CEO, at the NYU Hospitality Investment Conference in early June. “It’s the simple laws of economics at work,” he says. “While supply is inching up a little bit, [growth] is at historically low levels.” Yikes.

How to Play Ball in Today’s Arena

Planners who handle enough meetings to have a relationship with a national sales rep at a major hotel chain can leverage that relationship to place meetings across the chain’s properties while staying close to each event’s budget parameters. But for planners who don’t have quite enough business to command such a relationship, another possibility is to work with a third-party planning firm.

“Because we support hundreds of customers, we have many pre-negotiated terms and benefits that come as part of our contracts with the various chains,” Fransway says. “We understand each hotel revenue manager’s objectives for total spend per attendee, and we know what each one has been willing to do for other meetings with a similar profile. And in this market climate, hoteliers are more apt to seriously consider an RFP from a firm they do a lot of business with.”

There are, however, other strategies that planners can employ on their own to place meetings under terms that fit their needs and budget. Jeff Bell, director of key accounts for Horizon Meetings in Austin, Texas, says that “right now you have to sell your meeting as the best piece of business for a property to take. So be ready to offer up as much information as possible in the bidding process such that your meeting stands out from other leads.”

Make Your RFP Stand Out

Specifically, an RFP should:

Contain not only the group’s housing, meeting space and F&B needs, but also previous meetings’ historical data in those areas, to establish credibility.

Include budgeted amounts for each area. Planners are often reluctant to lose negotiation leverage by giving out such figures up front, but “you’re speeding up the sales process, which properties like,” Fransway says. “F&B departments in particular like the challenge of maximizing the attendee experience at a given budget number.”

Note your meeting’s areas of flexibility. “Rethink every element of your event (number of days you meet, F&B minimum on property, move-in and move-out times) to see if it has to be done the way you’ve done it before,” Bell says. “If you offer the ability to adjust some things, it improves chances of securing a deal in a destination you want.”

The one area that brings the group the most clout is meeting date flexibility. Being able to shift even one week on either side of your preferred dates gives a property maximum incentive to find a way to accommodate your group. “Ask the salesperson, ‘Which week and which pattern in that week would work best for your property at that time of year?’” Fransway says. “You just might fill a hole and get a good deal.”

Lastly, consider alternate meeting setups in potential destinations. For instance, many second- and third-tier cities—and even Washington, D.C.—have packages for smaller groups to use meeting space in the convention center. This widens the range of hotels a planner can negotiate with.

“In every market, things are constantly evolving,” Fransway says. “Keep your eyes open in the cities where you want to meet, and take advantage of opportunities.”

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