Some say site selection companies save time and money--others say they add hidden costs to hotel room rates.
Laurie Mirman launched one of the first site selection firms 14 years ago.
Rain streamed down the windshield of her '65 Mustang as Laurie Mirman drove home after getting the bad news: She had just been laid off from her job at a resort in San Diego where she had worked for the past year in the sales department.
"I was just crying my eyes out," she remembers. "I was crushed. Not to mention panicked."
After two months of unsuccessful job hunting, Mirman took a leap into entrepreneurship and launched Site Services, a new kind of service company that helped organizations find locations for their meetings. Flash forward 14 years: Today Site Services, based in Irvine, Calif., handles more than 400 meetings a year; and Mirman has just opened satellite offices in Washington, D.C., and Chicago.
Site Services was one of the first such firms, but there are many more these days, thanks to increased demand. Downsizing in associations and corporations, and a tough seller's market, have pushed more and more planners to outsource destination research and.
Site selection firms say they bring more clout to the negotiating table because of the volume of their business, and they also say they save planners the time involved in destination research. What makes these services particularly appealing to planners is that they don't have to fork out fees--the companies are paid a commission by the hotels, usually 10 percent of the total guest room revenue.
But as the use and number of site selection companies has increased, so have complaints that some of these firms are not ethical or expert in the meeting industry. There is confusion over what exactly a site selection company is and how it differs from other third parties (see "What's in a Name?", page 35). At industry conferences, hoteliers and planners complain about firms that jump in at the eleventh hour of a negotiation and demand a commission, or even tell hotels that they are representing an association--when the association knows nothing about it. As a result, a cloud hovers over site selection firms, as it does over other types of third parties.
How can a planner distinguish between firms that offer value, saving associations time and money, and those that are just interested in making a fast buck?
Take Site Services, for example. Using software customized for her company, Mirman creates a database of customers that includes a comprehensive history of their meetings and of their organizations. When working with an association client (80 percent of Site Services' clients are associations), Mirman and her eight-person staff prepare a report comparing potential destinations, including a detailed profile of each hotel. Clients also receive an extensive post-conference report.
It is precisely that kind of research that can save planners weeks of legwork. "One of the things that impressed me is Site Services always comes back with a menu of options, not just one hotel," says Terrence Leppellere, vice president of member services, Building Officials and Code Administrators, in Country Club Hills, Ill. "When I think of the staff time that I would have to invest in doing that, it is scary."
Leppellere brought in Site Services in 1993 on the recommendation of another association. He had just taken over responsibility for conference planning, and he knew he needed help. When he saw the first contract that president Laurie Mirman negotiated for him, he was won over. Not only were the room rates excellent, but he was impressed with the concessions and amenities she had wrangled from the hotel. (Mirman negotiates 20 clauses into, covering everything from food and beverage to comp rooms.)
"I'm not as skilled [at negotiations] as Site Services," he says. "If I can get that service, and it doesn't cost me a nickel, why do it myself?"
Nothing's Free That's the question many association planners are asking these days. But we all know nothing is free, and some planners are leery of site selection firms, speculating that hotels will simply raise the rates to accommodate the commission. The answer is not clear-cut.
Hoteliers point out that it is naive for planners to think commissions won't affect rates. "People have to make up their money somehow. If you need to pay someone to provide a service, it will have an overall effect on the piece of business," says Christie Hicks, assistant vice president, national sales, Hyatt Hotels and Resorts. But how much of an effect, she says, depends on the particular transaction. If the hotel has a hole to fill, the rate may not be inflated.
Even if the rates are raised, site selection execs say their clout and experience is such that the rates are still lower than planners would get on their own. For example, Doug Wheeler, president of Conference Locators International, a site selection company in La Jolla, Calif., and a 19-year industry veteran, states right in his brochure that he typically negotiates rates 10 to 30 percent lower than the client's requested rates.
Members pay for site selection and contract negotiation, no matter who does it, points out Leppellere. "You've got to look at business reality," he says. If he didn't use Site Services, and instead hired more people, well, that's not free, either. "It's a whole lot cheaper for attendees to pay a slightly higher room rate than to pay a higher registration fee to cover staff," he points out. "Frankly, I think that [attendees] are getting a bargain."
It's also a fairer system, he adds. If he upped his conference budget, the entire membership would have to pay. "Only seven or eight percent of our members go to conferences. Why should the entire membership have to pay a higher membership fee, or higher product costs [to cover conference budgets]?" he asks. "This is the most equitable way to do it."
Playing Favorites? Planners also fear that bringing in a third party may damage their relations with hoteliers. While hoteliers have in the past perceived third parties as interlopers, that perception is changing, observes Mirman.
"If someone brings you something you don't have, you are happy to pay for it," concurs Hicks. So happy, in fact, that a venue may offer firms more than the standard 10 percent commission to bring in much-needed business. Hotels in Anchorage have offered Brian Stevens, president and CEO of ConferenceDirect in Los Angeles, a 15 percent commission for booking meetings during their off-peak season.
"Somewhat resignedly, we recognize that this is a major distribution system for our business," says Beverly Kinkade, CHSE, CMP, vice president, industry relations, Starwood Hotels & Resorts. "As responsible citizens we need to learn how to work [together] more effectively." Even David Scypinski, vice president, industry relations, Hilton Hotels Corp., who is known for his vehement opposition to housing vendors that charge commissions, says he is more accepting of site selection firms, which at least provide a tangible service to hotels.
Hilton actually welcomes third parties that bring in a substantial volume of business; so much so, that this year Hilton established a partnership with Helms/Briscoe. Founded in 1992, Helms/Briscoe has become a heavy-hitter in the site selection world, handling more than 7,800 meetings in 1998--a 70 percent growth rate annually. (Eighty percent of Helms/Briscoe's business is corporate and 20 percent association.) Headquartered in Scottsdale, Ariz., Helms/Briscoe has 48 U.S. offices and is opening six European offices in March. Instead of Hilton paying the whole 10 percent commission after the meeting, Hilton pays half when the meeting is contracted.
Hilton is one of many chains that have entered into a "performance agreement" with Helms/Briscoe. Other site selection firms are setting up similar arrangements. About 200 hotels have signed on as preferred providers with ConferenceDirect, paying five percent of the commission up front.
Some hotel chains also pay Helms/Briscoe a "fee," enabling them to have more exposure to Helms/Briscoe's sales associates.
These arrangements beg the question: Don't site selection companies play favorites, steering business toward their hotel partners or to destinations offering more incentives?
"If it's good for the client, nothing makes us happier than putting clients in partner hotels," says Roger Helms, president and CEO of Helms/Briscoe. But, he stresses, "We are 100 percent client-driven. Our goal is to have long-term relationships with clients. We want them for 50 years, not just one, so we put them in properties that best meet their specific needs."
As for Hilton's perspective: "There is always the hope that they will advantage us," says Scypinski, "but realistically, it's the customer who is going to [decide]. If everything [among several hotel choices] is equal, I think we have an advantage--but how often does that happen?"
Site Services has no formal relationships with chains, but sometimes facilities offer the company enticements such as gift certificates, says Heidi Neal, senior sales executive with Site Services, and a 20-year hotel industry veteran. "If two hotels were both perfect and one offered something more than the other, then you will sway toward that property," she acknowledges. But Site Services has a 96 percent retention rate, she underscores, and "you don't get that by jerking up rates or pushing clients toward certain properties."
But Who's the Client? Regardless of whether the hotel has a formal agreement with a site selection firm, the fact remains that the hotel, not the association, is paying the third party. So, who is the client for the site selection company? The hotel, say some industry players.
"When clients ask me, 'Why do you charge a fee versus a commission? I can get these people [site selection companies] for free,' I say, 'You get what you pay for. If you don't pay anything, [the third party] is working in the best interest of the hotel. I work for you,'" says James R. Daggett, CAE, CMP, JRDaggett & Associates, Ltd., a meeting management firm in Chicago.
Higher room rates are in the best interest of the third party, he points out. Just do the math: The higher the room rate, the higher the commission. "I see that as a potential conflict of interest," Daggett says.
Brian E. Rounsavill, CAE, director of meetings, exhibits, and online services for the Electrochemical Society, Inc., Pennington, N.J., learned that lesson the hard way when he decided to use an outside company to help find space, negotiate rates, and handle housing for the group's first venture overseas--a 1997 Paris convention.
"During the negotiation process, the third party would say, 'This is a really good rate,' and we'd tell them they could do better. They worked only as hard as we pushed because they knew that the lower the rate, the lower the commission," he says. Not only that, the company tried to use privileges it negotiated on behalf of the association, such as comp rooms and airline tickets, for its own on-site staff. For his next Paris meeting, Rounsavill says he is negotiating directly with the hotels and is getting better rates.
Even though he has nothing but glowing praise for Laurie Mirman, Steve Hines, executive director, American College of Prosthodontists, has recently decided to go solo. When the Chicago-based group started using Site Services in 1994, it had no paid staff. But now that it has a full-time executive director and a full-time director of meetings and education, Hines thinks he may be able to negotiate better deals on his own. While Site Services staff definitely have clout, they are negotiating only his annual meeting. "When I negotiate the annual sessions, I may also have in mind a CE course," he says.
He also doesn't buy the theory that hotels don't mind third parties. "Common sense tells you that you have a little more negotiating room if you don't have a third party. The hotel [staff] don't say anything, but they send you a signal." When a third party has to go back and forth between the association and the hotel, it is time-consuming and can create miscommunication, he adds.
Weighing Choices Hines suggests association execs must examine closely their staff's expertise and decide whether site selection and negotiation are valuable uses of their time. Leppellere has given that question careful thought and believes without a doubt that he is much better off using Site Services. But are there drawbacks to his decision?
"I'd like to say there's a downside," he says, "but I can't think of any."
Protecting Your Partnerships Here are three tips for working with site selection firms. For more tips, visit our Web site at www.meetingsnet.com.
* When considering a site selection company, ask for references--of both association clients and suppliers that the company has worked with.
* A reputable third party shouldits fee structure, but if it doesn't, ask how the company gets paid and exactly what services it provides. Do staff sometimes accept commissions higher than 10 percent? Does the company have partnerships with any hotels or chains and what are the terms of those agreements? Do some hotels pay a marketing fee as well as commissions? There's nothing wrong with these arrangements, but you should know about them so you can evaluate the firm's suggestions of partner hotels appropriately."
* Some of the less ethical site selection companies have assessed hotel commissions "in perpetuity." In other words, you book a meeting once through the firm, but it demands a commission for every meeting you hold at that hotel in the future! Make sure that the company is charging a commission only for meetings you book through them.
What's in a Name? Asincreases, the lines distinguishing different types of third parties are blurring, creating confusion among planners. Here are some helpful definitions: * Site selection firm: Hired by the association, but charges hotels a commission, usually 10 percent of guest room revenue. The company may have partnerships, formal or informal, with certain hotels or chains. Services offered include destination research and contract negotiation. Some site selection companies also offer more meeting management services, either on a commission or fee basis.
* Hotel rep firm: Hotels, mostly independents, sign on as members with the rep firm, paying a retainer. They may also pay the firm an "incentive" of, say, five percent of the total guest room revenue if a meeting is booked. Hotel rep firms assist planners with site selection (and sometimes contract negotiation) but will book only member hotels.
* Meeting management firm: Provides a full range of services, from site selection to on-site management. The fee structure varies, from flat fee to commission, or a combination.