On Hotel Rates and Negotiating Trends
Betsy Bair, editorial director, MeetingsNet: Smith Travel Research statistics show us that the demand by individual and leisure travelers is what's driving hotel rates so high, particularly in upper segments of the hotel industry. What does that mean for meeting planners?
Jan Freitag, vice president of global development, Smith Travel Research: We just sent out a press release that said, “Fine through '09,” meaning rates will go up through then, although we will see the impact of new supply in secondary and tertiary markets beginning in 2008. The question is what will happen in the top 25 markets (see lower right), and we don't see [rate increases slowing down there] because new supply is so minimal.
Karen Hamilton, CMP, vice president of client services, Minding Your Business, A Strategic Meeting & Event Agency, Chicago: Those top 25 markets are really bears. But we are finding that while hotels' rates continue to be steep, the hotels haven't cut off some of the concessions that are near and dear to our hearts.
We're trying different things, like building in food and beverage rebates for exceeding our minimum. And hotels sometimes are responsive; they're still getting the nice room rate that's going to make the director of sales happy. Also look at the other services around the property. Can you guarantee you'll use their in-house AV? Can you guarantee you'll have a certain number of golf tee times or spa appointments? What about ancillary groups and hospitality suites? You have to sell your meeting.
Joyce Paschall, vice president, The Center for Association Growth, Chi-cago: For an association's convention, we typically plan quite a few years out, and that can be good and bad. The good news is that often the property really wants something on the books, for 2012, 2013, 2014, so you're not fighting with that plum piece of corporate biz that they're hoping for short-term. But I'm also finding that the associations I manage right now seem to get it. The leaders understand that you can't go into Las Vegas for $49 a night like you used to. They seem to know you can't get a rate in New York City that they're comfortable with. So it doesn't feel like as much of a battle on the back end for me, trying to defend to the association leaders why can't we go to this town this time of year and under these circumstances. So maybe there's a little better knowledge out there in the business world. I just have to bank on the length of the planning cycle for association conventions to benefit me.
Scott Flexman, vice president of sales and marketing, Fontainebleau Miami Beach: We're in one of those top 25 markets, and rates are pretty significant right now. The key is flexibility. If you can come in on Sunday and check out on Wednesday instead of Monday through Thursday, it can save you $30 to $40 per night in some cases. The best pieces of business we work with right now are the ones that say, “We can meet anytime in March and here's what we need.”
We also take a good look at the total spend. If a planner says, “We'll use a ton of spa,” well, what is a ton of spa? But if you say, “I'll guarantee you 250 50-minute treatments,” all of a sudden we have some meat to the.
Bair: What about multiyear and multimeeting?
Flexman: We love 'em. The first time you come in we get to know you, the second time we really start to understand you. From a staffing standpoint, we know your people like to drink, or go to the spa or the clubs. So we're willing to do more on pricing.
Bair: Let's talk about procurement. It's still all the big buzz.
Hamilton: Their job in procurement is to minimize risk and maximize cost-avoidance. They're purchasing everything from napkins to computer servers, and it's strictly dollars and cents. But those of us who have been in this industry for awhile are looking for relationships and the long haul, and we also can appreciate our industry's nuances.
Bair: Have you ever lost a hold on meeting space because of procurement's involvement?
Hamilton: Oh, absolutely. The process can take too long and at some point you've got to make a decision. The hotel has been holding and holding — and right now we're seeing less availability, and so, less willingness to hold.
Flexman: There are two different kinds of procurement departments. One is where the meeting planner says to procurement, “This is the property I want, and here's what they're offering,” and they take a look at it. The other kind says to the meeting planner, “Here are three properties we've selected; you choose what you feel is best.”
When purchasing gets involved, from our standpoint it gets a bit difficult. To be candid, if we [are a finalist for a big group contract], we try to get a contract to you right away so you can get it to procurement and we can see what they're saying. If they say the group won't payor cancellation, we'd rather stop wasting time right at the beginning.
Paschall: I have to hope that as this continues to evolve, ultimately it will be good for meeting planners. Maybe we'll get the bean counters to understand that a meeting is not a paper clip, and elevate meeting planning as a true profession and a body of knowledge within the corporation that isn't easily outsourced.
Bair: The biggest success stories we've heard are from corporate planners who take the procurement people on site with them to a meeting and show them what they do. That's when they can begin to work better together.
On E-RFPs and Sourcing
Bair: What about the flood of electronic RFPs into the hotel market, because it's now so easy to send requests to multiple hotels?
Flexman: The challenge for us is that there are a lot more shoppers out there. In Miami Beach I've lost business to Green Bay. There was never a chance they were going to come to Miami Beach anyway, so those leads waste our time.
Audience comment: I don't want to send my RFP to a faceless hotel where no one knows me. If they don't know you and the revenue is not there, they're not going to call you.
Hamilton: A group like Krisam or the hotel chains' national sales offices can be great advocates when you're looking for space for a meeting that's not ideal.
Audience comment: I get so frustrated going back to a hotel the next year and finding they did a “market realignment” — divided up business by some different mix of geography, group size, or whatever. Your old rep may still be at the property but you're not his account anymore. You have to build a whole new relationship.
Paschall: I'm sure there are all kinds of things that make running that sales office more difficult than we think it is, but I would suggest hotels take a really hard look at that. In the long run they might be better off keeping some of those relationships in place.
Sponsored by Krisam Group, a top independent national sales office for distinctive and unique hotels, and the leading advocate and service provider for meeting planners. www.krisam.com.
Top U.S. Hotel Markets*
|Anaheim-Santa Ana, Calif. |
Los Angeles-Long Beach, Calif.
Minneapolis-St. Paul, Minn.
|Norfolk-Virginia Beach, Va. |
San Francisco-San Mateo, Calif.
Tampa-St. Petersburg, Fla.
|*STR excludes Las Vegas in their reports.|
Hotel Trends at a Glance
Top takeaways from a presentation by Smith Travel Research
- Rates continue to rise
Up almost 6% this year after 7% growth in 2006
- Deals can be found outside top 25 markets
Gap in revenue per available room ( ) compared to rest of country reaches historic high at $30.60
- Luxury chains' rates spike on high demand
Climb 8.5% this year, more than half a point ahead of last year's growth
- Transient rates set pace for group rates
Up 8% (to $179) last year at luxury/upper upscale hotels, compared to 6% gain (to $158) for groups
- Three-digit barrier in average daily rate to break this year
For first time, average rate for all U.S. hotels expected to surpass $100 in 2007
The full STR presentation is available at www.krisamgroup.com.