Does slitting your throat count?" Pam Jensen, CMP, division director, educational programs, American Asso-ciation of Blood Banks, answers with a wry laugh when asked how she copes with the seller's market. With humor and creativity, planners are fighting back-sharpening their negotiating skills and developing tactics forsmall meetings. It's a matter of survival-the seller's market shows no signs of softening.
"Until the year 2000, planners' choices look pretty much the same as right now," says Robert Mandelbaum, director of research with PKF Consulting, an international hospitality consulting and real estate firm. PKF projects that in 1997 hotels will achieve the strongest combination of growth in occupancy, revenues, and profits since the 1940s. Expect average occupancy to climb from this year's 73.2 percent to 73.7 percent.
Although Smith Travel Research, Inc. predicts lower occupancy figures, experts are in agreement that the full-service market is booming. Hotels continue to plan rate increases ranging from about two to eight percent, with Hilton Hotels Corporation announcing a whopping 15 percent increase. Average daily room rates are growing at twice the pace of inflation, and in 1997 the projected average room rate in major cities will surpass the $100 mark for the first time-reaching $102.28.
Will strong pricing renew interest in the development of full service hotels? "The economics are such that deals that were not considered feasible a few years ago are now considered feasible," says John A. Fox, senior vice president of PKF in New York. The shift is certainly not "a ground swell," he adds, and is not going to ease planners' problems in the near future.
"We don't think there will be oversupply," says Mandelbaum. "Short of the economy collapsing and travel being curtailed, hoteliers have got the leverage in price negotiations."
Balance of Power Planners say that the seller's market has drastically affected their relationships with hoteliers. "I don't have the clout. Even though we represent a number of associations, [hotels] treat you as one piece of business," says Kay V. Granath, CMP, director of meetings and conventions for the Association Management Center in Glenview, IL. "That's a hot button for a lot of planners."
When booking small meetings, Granath says, planners cannot necessarily bank on their long-term relationships with chain hotels, particularly those with managementand franchises, rather than those owned by hotel companies. [Hyatt owns no hotels in North America, and Marriott owns one, according to the "Brand Report" in Lodging Hospitality, an industry publication. Hilton and Sheraton, on the other hand, own one-third and one-fifth of their properties, respectively.]
"We go through our regional offices exclusively and we expect them to go to bat for us at a smaller property or franchise," Granath says. "They do the best they can, but the answer comes back that the owners of this property want x-percent of profit. They don't care how many rooms we book at the chain. It kinds of invalidates the use of the chain."
Roger Dow, vice president, general sales manager for Marriott Lodging, agrees that planners have lost leverage. "Owners want to see a return on investment," he says. "No longer can a planner cancel a piece of business at one Marriott and say he'll give it to a Marriott in another city, because the owners are different."
Some planners find that their relationships with national sales reps remain beneficial. "They have an overall picture of all our business," says Annette Hoel, assistant director for meetings and conventions, American Academy of Family Physicians, Kansas City, MO. "It helps slip in that little meeting for 12 people."
If you establish a straightforward relationship with national sales reps, planners say, they will explain why your meeting is hard to place and what you can do to make it more attractive.
A case in point was described by Michael K. Hausman, CHSE, CMP, director, national sales, Renaissance Hotels International, during a seminar at the 7th Annual HSMAI Affordable Meetings Exposition and Conference in Washington, DC. When Hausman received a request from a planner who wanted four breakouts on 24-hour hold for a 15-person meeting, he told her, "You've got a problem-24-hour-hold is deadly."
Hotels use meeting space to bring in business. By refusing to allow the hotel to use the break-outs during her meeting's off-hours, the planner was impeding the hotel's ability to generate additional revenue. But Hausman, the national representative, was the first person who explained that to her. He advises, "Tell [hoteliers] you want an honest answer."
Squeezed Out of Venues But the honest answer is often 'No.' "The biggest problem is availability. I don't have three for four choices anymore," says Granath, echoing the frustration of many planners.
The squeeze on availability complicates planners' relationships with boards and organizing committees. "[A board member or] will say, 'Gee, I live in this city and it has this wonderful Hilton. Why can't we go there?'" says Granath. "We have to be very diplomatic, and explain, either they don't have space available or we're not a good fit. We have to spend a lot more time researching and defending what we do."
Fred Shea, vice president of sales operations, Hyatt Hotels, observes the same problems from his vantage point. "A lot of boards don't understand why a meeting works in one hotel and doesn't work in another," Shea says. "Planners have to talk to boards and teach them why their meeting is undesirable for a lot of hotels."
Planners who book most meetings in their local area are in a much stronger negotiating position. Norman Shostak, EdM, director of management and fiscal affairs, department of continuing education, Harvard Medical School, books 180 out of 190 yearly meetings in Boston, which adds up to about 60,000 room nights. Even so, he says relationships with larger hotels are getting tougher; however, the more moderate sized properties remain eager for his business.
Jeff Rasco, CMP, marketing director foreducational resources at the University of Texas M.D. Anderson Cancer Center, books most of his meetings in Houston and capitalizes on those ties when he takes meetings elsewhere, asking local hoteliers to put in a good word with their counterparts in other cities.
Alternative Sites Planners are employing a variety of new tactics to handle the market. One strategy is finding alternatives to the major, downtown hotels. It's not a simple choice. Jensen faced a difficult decision when her organizing committee confirmed a date for a small conference in San Francisco without consulting her. The lowest rate she found downtown was $140, a rate she knew her people wouldn't pay. She ended up booking an airport hotel. "I know we'll get complaints," she says. "But how many people would have attended at $140?"
Susan Bitter Smith, CAE, American Society of Association Executives (ASAE) board chair, and executive director of the Arizona Telecommunications Association, has taken her business to smaller chains, such as Loews, Doubletree, and Westin, as well as local, nonchain facilities.
Even the "C" word has cropped up. "We're taking a hard look at conference centers," says Ann J. Boehme, director of conferences with Falk Communications in New York City. While a few years ago Boehme found their packages prohibitive, she has altered her perspective. "Now, it's not so important to shave off [costs]," Boehme says. "It is more important to get service when you need it, and booking when you need it."
The Ties That Bind Networking is another crucial strategy in today's market, planners stress. They suggest joining organizations, such as Meetings Professionals International (MPI), Professional Convention Management Association (PCMA), and ASAE. When destination-shopping, Rasco says, "The first thing I do is pick up the MPI directory and call members in the cities we are considering. There's an implied understanding they'll be a little bit more fair." He also describes MPINet, an online service for members, as "a tremendous tool."
Rasco recommends calling planners as well as suppliers for advice. "You can get very honest opinions from other planners," he says. Within limits, of course. "I understand there is professional courtesy," says Shostak, "but I have to be careful not to shoot myself in the foot."
Planners emphasize that understanding the hoteliers' perspective, and treating them as partners rather than adversaries, is one of the most important elements in conducting successful negotiations.
Insight into the hotelier's point of view can help you better sell your meeting, says Elizabeth Paine, CMP, senior conference coordinator at George Washington University Medical Center in Washington, DC. "You have to ask yourself, what will benefit them?" she advises. "If you can find that key, they will take your meeting." She recommends taking courses, such as those offered by ASAE, where planners stay in a hotel and observe first-hand how the various departments work. "It gives a planner a different perspective," she says.
Be honest and ethical in your relationships with hoteliers, planners stress over and over. "Planners have to be real in their promises," Shostak says. Those who "pull wool over [hoteliers'] eyes, or let their egos get in the way may benefit during one event, but in the long term there's no way a meeting or organization would benefit from that."
Selling Your Meeting Hotels are accepting business that will fulfill their "market mix model," explains Angelo Giammanco, director of sales and marketing, Brunswick Hilton and Towers, in East Brunswick, NJ. A model meeting combines sleeping rooms with on-site meal functions and meeting space proportionate to the number of sleeping rooms.
"The planner with a good handle on meeting detail and the value of the program gets to have the meeting," Giammanco says.
Understanding hotel profit centers can give you a bargaining edge. "Most planners start at the wrong end-where hotels make the least profit," explained Kelly M. Moneyhan, CHSE, national sales manager, Tampa/Hillsborough Convention and Visitors Association, speaking at Affordable Meetings. Hotels make about 70 percent profit on room rates, and 14 to 30 percent on meal functions. But, said Moneyhan, "Planners accept the room rate and then beat up the sales manager on catering." Planners may take that tack due to tax considerations, but in this tight market you should consider other factors when developing your negotiating strategy.
Bargaining Chips With rates increasing and space at a premium, date flexibility may be a planner's only bargaining chip. "I try to get the organizing committee to pick a two-month window," says Jensen. "If we say, this is the weekend we must have, we have no negotiating position-and [the salespeople] know it."
Organizing multiple meetings also makes your business more attractive. But your approach is still crucial. Rasco describes his attitude as "almost apologetic" when approaching major properties. "Some planners try to push their way around, and say, I will book 15 meetings in this hotel this year. If you don't find this space this time, you can forget this business," Rasco says. "I think that's stupid, to put it bluntly."
Negotiations While placing small meetings may be more difficult than it was, contract negotiations are easier. Although known for its tough contracts, ITT Sheraton has a special contract for small meetings which doesn't include cancellation penalties, says Beverly W. Kinkade, CHSE, CMP, vice president, director of association sales. The short-form contract was developed, Kinkade says, "because [our customers] said that the turnaround on small business is so acute, they didn't want to be bogged down with cancellation clauses that they had to pass by lawyers." If salespeople on property need assurance, she adds, they can charge groups performance fees or deposits. Overall, though, hotels are assessing more stringent penalties, for everything from early departures to food and beverage (See box, page 37). Planners are responding by bringing their own contracts and addenda to the table. Boehme says, "The person who writes the contract usually has the upper hand."
Small Meetings-Big Value Although the seller's market shows no signs of abating, planners are sensing a shift in hotels' attitudes toward small meetings. "Over the last few years, hotels have changed focus and finally acknowledged that small business is as much a part of their business as large conventions," says Paine. "They need that bread-and-butter business to fill up their holes."
"Small business offsets the loss when big groups don't pick up rooms," points out Dave Scypinski, director of meeting and convention marketing, Hilton Hotels Corporation. Marriott, Westin, and Hyatt offer small meetings services. This June, ITT Sheraton launched the small meeting group sales department, as a demonstration of its commitment to the small meetings market. "I'm not saying I won't turn down [small meetings]," Kinkade says, "but I want to give them a chance."
Bitter Smith says the Sheraton program is "a terrific sign of progress and an indication of a trend." She plans to use her ASAE tenure to encourage that trend. She advises planners to aggressively promote the viability of small meetings. "We tend to say nobody wants to talk to us because we are small. Large associations may come in one year, and hotels never see them again. Small meetings and small associations are loyal," Bitter Smith asserts. "We are consistent. We can be significant. We need to communicate that message loudly to our hospitality industry friends."
Early departure fees will be a trend, says Michael K. Hausman, CHSE, CMP, director, national sales, Renaissance Hotels International. Planners understand that hotels may not fill rooms vacated at the last minute. Ann J. Boehme, director of conferences, Falk Communications, New York, anticipates that some attendees will be "short stays," and deducts that percentage from her room block. If attendees pay early departure fees, deduct them from your attrition penalty, advises Christine P. Pruitt, department head, meetings and expositions, American Chemical Society, Washington, DC.