You'd think it would tough to get people to a 7 a.m meeting on a Sunday in August to talk about room rates. But our high-level group of roundtable participants, who met during the American Society of Association Executives' annual meeting this summer, didn't seem to mind. They were eager to discuss one of the most pressing issues facing the industry: attendees booking outside the contracted room block, causing hugeheadaches for associations, loss of revenue for hotels, and an identity crisis for CVBs.
The issue is complex, and the discussion ranged far and wide — from practical solutions to hidden causes. Some participants felt strongly that the onus for booking inside the block should be on attendees, who should be given incentives for doing so. Another camp argued that “you've got to ride the horse in the direction it's going.” Attendees are consumers, and consumers are shopping travel rates.
One point of consensus: The status quo approach to blocking rooms is obsolete. “I think we're in a revolution and we may not recognize it,” remarked Christie Hicks, Starwood's vice-president of global sales. “We've got to re-tool our practices.” Independent planner Joan Eisenstodt put it even more dramatically. “Our industry is a dinosaur. The Internet has been here a long time, and this kind of stuff has been happening all along, but we've only just begun to talk about it as an industry. We've got to change that.”
Well, what is to be done?
The Audit and The Incentive
The first thing a planner should do, Eisenstodt pointed out, is insist on an audit clause in the meeting, whereby the association gets credit for any rooms booked by attendees staying at the contracted group of hotels — including those booked through a Web reservation site or any other method outside the official channel. The guest list at the hotel(s) is run against the registration list for the meeting. Bingo. The association gets credit for all its attendees at those properties.
But there are problems with even this seemingly simple approach. “We've run into a lot of pushback from hotels,” said Barbara Dunlavey, director of meetings and exhibits, American School Food Service Association. “They often don't like doing it.” Further, it doesn't solve the problem of attendees who take rooms at hotels that the association hasn't contracted with — something that always happened in the past but never to the detrimental degree that's occurring since the economic slowdown and the proliferation of Web sites brokering cheap hotel rooms.
OK, so what about creating some incentives to get attendees to stay in the contracted hotels at the contracted rates? Gary Schirmacher, vice-president/Western Region, Conferon Inc., suggested that the association offer an incentive by creating a two-tiered registration rate, the lower one for people who book at the official hotels at the official rates. “The onus should be on the members,” he stated. “They need to realize that if the association doesn't meet its room commitment, there are severe financial penalties for the association.”
But the suggestion didn't sit well with other planners. “I like the concept, but my board would never go for that,” said Julia Richardson, assistant executive director for conventions and meetings, Association for Career and Technical Education. “They go nuts whenever we raise the registration fee, because a few dollars more is a lot for teachers.” Its tough enough to administer the group's already complicated registration fee structure, she added. “And on top of that, we've just gotten into online registration.”
Barbara Dunlavey called it “terribly naïve to expect that attendees are going to be responsible for the association's need for a rate and the hotel's need for revenue generation. They're just not. I think there needs to be a much more collaborative set of solutions.”
Larry Luteran, vice-president, industry relations, Hilton Hotels Corp., countered that “it's not about pricing. It's got to be about value….The reality is that the organization that they belong to provides the networking opportunities, the certifications, and all the things that make members want to come to the meeting. And it's naïve of us to ask them not to consider the big picture. They have a vested interest in the health of the organization.”
Planners did think that some sorts of incentives might work, like vouchers for a free or discounted service at the contracted hotels, such as the health club or spa services. Hilton's Luteran agreed, adding, “We can package things as added value, whatever that might be for your particular attendees.” He suggested a popular idea with the planners present: a mandatory meeting a year out from the convention at which the hotel and the association develop strategies to market the meeting.
But Christine Shimasaki, vice-president sales/convention center, San Diego CVB, jumped to the heart of the debate: The Internet has changed the way the public buys travel, and what are we going to do about it? “The bottom line isn't about making the attendee do anything. Consumers want choices and we have to go with what they want, even if it means blowing up our current processes.”
Thinking Really Outside the Block
Room pickup data that CVBs get has never been that accurate, and with so many attendees booking outside the block the problem has reached critical proportions. More and more planners are reporting that their pickup numbers this year are way out of whack with their registration numbers and their historical pickup. That makes it difficult to get the convention center space many need for their future meetings, since many cities have minimum pickup requirements.
Shimasaki proposed earlier this year, at the International Association of Convention and Visitor Bureaus' annual meeting in Vancouver, B.C., that CVBs use a group's registration data to get a more accurate reading of a group's true pickup. Called the Attendee Origin Audit, her formula would calculate peak room-night pickup based on total registration, less those attendees who are local, divided by a double occupancy rate based on the meeting's history. (See AM August, page 49, “Internet Booking Blues.”)
“This is an option I am proposing to the CVB community. Room blocking would still be a practice that we all need to do, especially for very large conventions. But in most cases, the conventions are not taking every room in the city, and maybe you don't need to block so aggressively if you are able to value your convention in a different way,” Shimasaki said. “By allowing delegates to take advantage of all the available distribution channels, you'll be encouraging them to attend the meeting. That's what it's all about.”
Booking conservatively is a tact that Carol Crossland, vice-president of membership, meetings, exhibitions, National Arborist Association, already uses. “I'd rather beg for a hotel room than have to pay for one we didn't use,” she said. Crossland's annualdraws 1,000 to 3,000 people, but she books 500 rooms. She uses second-tier cities where she is able to get her meeting space at the convention center.
The idea of underblocking stirred a lot of animated conversation. For the two bureau representatives at the table, the sentiment was: “Cities shouldn't care where attendees stay. We're in the business of creating economic impact,” as Shimasaki said. Bill Peeper, executive director and CEO, Orlando/Orange County CVB, added: “I'm in the business of helping hotels make money, but if a meeting uses 3,000 hotel rooms in the city, I frankly don't care where they sleep.” Peeper's bureau is working on a new approach to housing dilemmas. (See sidebar, page 26.)
Of course, when you need a property's meeting space, you'll need to book a certain percentage of its sleeping rooms. You can also factor in your food and beverage expenditures, Shimasaki added. “Planners will have to decide what their beststrategy is, but they'll negotiate these things upfront versus having to go back and be faced with attrition charges.”
Fred Shea, vice-president, sales operations, Hyatt Hotels Corp., brought up another perspective: “Remember that the things we are talking about don't affect every meeting. If you have a large meeting, you are going to book accordingly, and you may book less overflow. Most meetings are in-house, under the control of one hotel and the planner. So for most meetings, we need to work together to make sure that, at the end of the day, we get the maximum number of attendees. And we have to understand upfront that there are going to be some floating rates. It's amazing that in the '90s people agreed that after the cutoff date, they'd pay a higher rate. That was a breakthrough. Now we are saying, ‘Sorry, we're going to charge you less for booking late,’ and you're mad at us.”
Everybody cracked up, because it's true — but not that simple, of course.
Not So Simple
As Conferon's Gary Schirmacher pointed out: Planners are stuck withthat were made years ago, and these contracts have tough performance clauses for meetings happening now — when attendees often get a cheaper rate at the same hotel.
“I support the hotels having to put out lower rates short-term. But planners get the brunt of it,” he said. “We get the e-mail from the attendee who brags to a thousand other members that he got a cheaper rate. We get the upset boss in our office. We call the hotel and say, ‘Hey, do you know there's an $85 rate out there at your place?’ And they say, ‘Oh my God. I didn't know that! We are going to sell out.’ We need hotels to get control of all the wholesale rooms that they've put out there. There are so many online portals selling these rooms. Hotels need to put the lowest rate on their Web site, so planners can link to it [on a registration page], and then if 10 people get that rate, fine. At least we won't look like we didn't know about it.”
Hotels have lost control of their online room inventory. (See sidebar, this page.) And they are scrambling to address the situation, as Christie Hicks, vice-president, global sales, Starwood Hotels and Resorts Worldwide, pointed out. “I think we're the only hotel company at this table that came out with the best-rate guarantee on our own Web site. And it's painful, because the minute someone finds a lower rate online — and it does happen, but not often — we are embarrassed. But it has gotten better over time.
“I think the answer to this problem is to let you know that we are going to have some rooms available at a lower rate at our site, so you can advertise it to your people. But those rates have a lot of fences around them — 14 day advance purchase, you can't cancel, and you can't change it. If it's worth it to your attendee to get that rate, then let them book it. You get credit, and you don't get attrition. But those rates are going to go up or down as we go forward, depending on demand.
“I look at the different model in this way: There are no more cutoff dates. Rates change until the day of arrival and we'll take your reservations until the day of arrival. But this requires organizations to communicate pretty consistently with attendees [about fluctuating rate changes]. Then nobody will look stupid because we are all doing this together.”
Hyatt's Fred Shea agreed. “Those Internet rates should be on our Web pages and they should be transparent. You shouldn't get a better rate through a third-party supplier. This is an evolution and this will clean itself up as hotel companies move to get the Internet and wholesale back on our own Web sites, so we can work with you upfront as opposed to the tail end….Believe me, I don't want to follow the airline model. One just declared bankruptcy and three are on the line. Their model is different, and you buy airline seats very differently than you buy hotel rooms.”
Ann Marie Wittner, director of administration, American Osteopathic Association, said she has not experienced a big problem with attendees booking outside the block. “But this discussion is making me worried that some day we will be contracting hotel rooms with a discount Web reservation site.…I don't want to lose the relationships that I have built in this industry.”
Conferon's Schirmacher said: “We know attendees are consumers and are going to book what they want to book, but when suddenly there is a bill for $7,000 on the master for attrition and you have to explain it to your boss, it creates a lot of fear for planners. We've got to get to where planners don't have that fear anymore, where everybody has some level of comfort.”
Richardson said that her group lately is experiencing more cooperation from hotels. “We went on Expedia and found one of our hotels [for an upcoming meeting] was offering a lower rate. We called the hotel, and they lowered our rate.”
The group concluded that upfront collaboration and communication is critical. But Eisenstodt urged more of the group: “What often happens after a great conversation like this is that we go back to doing what we've been doing and nothing changes. Unless we push this issue, get others involved, there isn't going to be a revolution in how we do business.”
Who's Who: Roundtable Panel
Carol Crossland, CMP, vice-president of membership, meetings, exhibitions, National Arborist Association, Manchester, N.H.
Barbara Dunlavey, CMP, director of meetings and exhibits, American School Food Service Association, Alexandria, Va.
Joan L. Eisenstodt, president, Eisenstodt Associates, LLC, Washington, D.C.
Christie Hicks, vice-president, global sales, Starwood Hotels and Resorts Worldwide, White Plains, N.Y.
Larry Luteran, vice-president, industry relations, Hilton Hotels Corp., Washington, D.C.
William Peeper, executive director/CEO, Orlando/Orange County CVB, Orlando, Fla.
Julia Richardson, assistant executive director for conventions and meetings, Association for Career and Technical Education, Alexandria, Va.
Gary Schirmacher, CMP, vice-president/Western Region, Conferon Inc., Denver
Fred Shea, vice-president, sales operations, Hyatt Hotels Corp., Chicago
Christine Shimasaki, CMP, vice-president sales/convention center, San Diego CVB
Ann Marie Wittner, CMP, director of administration, American Osteopathic Association, Chicago
Have Hotels Created Their Own FRANKENSTEIN?
Dumping hotel rooms onto a discount Web site seemed like a good way to fill beds that otherwise would go empty. That was until recently, when so many people, including delegates, started using these sites to buy travel. Online discounters “are completely disrupting the pricing integrity of hotels,” says Henry Harteveldt, an analyst with Forrester Research, in an article in the Atlantic Journal-Constitution. The article goes on to say:
“Sites like Expedia charge hotels commission the way an off-line travel agency would. This reduces the hotel companies' margins but keeps the hotels in control of the prices. Other sites, such as Hotels.com, reserve a block of rooms at a certain price, then mark up the rooms as much as they can based on demand. This removes the hotel from pricing control. Expedia has added a wholesale model like hotel.com…. ‘The properties have lost control of their pricing abilities because they have become addicted to third-party sites, like a drug,’ says Harteveldt.”
Meanwhile, Orbitz recently announced Orbitz for Business, which allows corporations to integrate negotiated rates and preferred carriers and hotels onto the Orbitz online display, and to generate booking reports. A meeting-focused product may not be far behind, says Orbitz's David Cerino, general manager of corporate travel. Following suit, Expedia says it will launch a corporate travel technology by year's end. How much of a threat are these sites to traditional way of doing business?
“They are clearly getting into corporate travel and meetings. Their customer is now our customer,” said Christie Hicks, vice-president, global sales, Starwood Hotels. “Their technology is better than any hotel's. And Expedia will spend $130 million this year on marketing. Frankly, they scare us. Yet we all sleep with them because to some degree we have to — not as much as at first. But believe me, they are coming after your attendees.”
A New Role for CVBs
Bill Peeper may look like a conservative guy, but over the years, he's pushed some innovative solutions to thorny industry problems. Now he's at the cutting edge again.
“We're going into the rooms-packaging business,” the CEO/executive director of the Orlando/Orange County CVB announced. His bureau, in cooperation with area hotels, has just launched a Web site, www.orlandoinfo.com, which allows leisure travelers to shop and book real-time hotel reservations (and air, golf packages, etc.) in the Orlando area. Phase II plans will allow planners access to the same service via customized Web pages that the bureau can create for an in-house meeting group, or provide through the group's own Web page. (Visit www.orlandomeetinginfo.com/sample.) “This will have tremendous impact on room blocks,” Peeper said.
He believes convention bureaus have a much bigger role to play in marketing than they have in the past. “Bureaus could offer online reservation services like Expedia and Orbitz,” he said. “We can save the hotel industry a ton of money if the hotels would work with bureaus at putting these programs together. Bureaus could probably get a lower room rate posted, because hotels are not going to have to pay the Expedias of the world the significant amount of money they have to pay them to provide this service. And lower room rates would be attractive to meeting planners.”
It's all part of the evolving role of CVBs, said Peeper. “It's to the hotels' advantage to partner, push, or kick bureaus in the butt, to get them onboard with these new technologies. Because there's no end in sight to how the Internet is going to change things.”