How to save money and relationships when meetings get canceled.
Now you see them, now you don't. The gold rush of tech events has slowed drastically this year as the prospectors on Wall Street reevaluate their positions.
How bad is it? Hotels in technology hubs such as San Francisco and New York have seen 20 percent or more of their group business vanish, and they trace much of that loss to tech company meetings. Giants such as Dell Computer Corp. and Compaq Computer Corp. — which both quietly ditched plans for splashy user conferences this year — aren't the only ones hurting; companies across the board are dropping or scaling back meetings to bolster their bottom lines. Kristin C. Dickinson, vice president and general manager of Portland, Ore.-based First Contact, says her clients have canceled or curtailed 10 percent to 15 percent of their plans this year, following back-to-back boom years. The firm manages about 5,000 events a year for predominantly high-tech clients.
For Lisa Middleton, director of marketing communications for Dublin, Ohio-based Sterling Commerce, the ax fell this past November. She was planning a corporate conference for 1,500 people in May, a meeting that had been booked more than a year before. “At that time, we felt confident the hotel would be able to resell the space because they had about six months,” Middleton says. But 60 days before the deleted meeting date, the hotel said that wasn't likely. Sterling is facing a $400,000 cancellation penalty.
Middleton says the huge penalty is an extreme case. Sterling had tried to work with the hotel to shift some of the rooms it had committed to another, smaller meeting, but the company couldn't schedule it before the end of the fiscal year. The experience taught Middleton some lessons about. “I just negotiated a for an incentive trip next April, and you can bet I'm paying much closer attention to cancellation penalties. And I'm trying to push the [cutoff] dates as far back as possible, even though hotels are reluctant to do that.”
What to Do First
There's no such thing as information overload when the game plan for an event takes an unexpected turn.
“The first thing we do is get all the information we can from the client. We ask them all the questions we feel we're going to be asked by the hotel,” says First Contact's Dickinson.
- Can the event be booked for another date?
- Could a local office use the space for something else?
- Is it a change of dates or a definite cancellation?
With thousands of meetings a year on the books, Dickinson looks to see if another client can fulfill the obligation. Armed with that information, she contacts the hotel. Similarly, a corporate meeting planner should try to leverage any partner or company business it can bring into the facility, Dickinson says. “It's reasonable for any hotel to waive at least half the cancellation fee if you can rebook the business within six months,” she advises. It's also possible to move a meeting to another hotel in the same chain and keep it in the family.
After getting wind of a possible meeting cancellation, Nicole Grani's first move is to consult the contract, closely followed by a talk with the legal and accounting departments. Grani, until recently manager of worldwide events for 3Com and now director of strategic marketing for Dublin, Calif.-based AV Images, has faced a number of meeting cancellations that demanded fast thinking. “You need to figure out how much you need to pay in order to save face and not make a big stink out of it,” she says.
Other contractors, such as electricians, telephone technicians, and speakers, need to be kept in the loop as well. And attendees must be handled delicately to avoid negative consequences. “If you can, be perfectly honest,” advises Grani. “Don't try to cover it up, because the truth will ultimately come out. And communicate in the simplest manner possible.”
A number of planners say partnering with hotels has helped them out of jams. “We have a really good relationship with a number of hotel chains,” says Joseph Spacarelli, director of global communication programs for Symbol Technologies, based in Holtsville, N.Y., who has had to postpone a number of meetings. “There's a commitment on both parts that we're in this together. If you go around and try to get the best one-sided deal, hotels are going to be a little reluctant to deal with you.”
Denise Wesalainen, corporate events manager for Walker Interactive Systems in San Francisco, agrees. “I really give those hotels that are fair and work with me closely repeat business, because it's all about building relationships. It's a lot harder going into a new hotel and having something fall apart, because they don't know you.”
Being able to offer some kind of bone can help to salvage an awkward situation. “I've been really fortunate so far in turning canceled meetings into postponed meetings,” Wesalainen says. After all, a later event is better than no event, right? Unfortunately, not every hotel rep is that forward-thinking. But those who decide to play hard ball may find some difficult times when the business cycle turns — and the experts say it's already cycling back in the meeting planner's favor.
“I always ask the hotel: ‘What can we work out?’ I had one that said, ‘Nothing — this is what it's going to cost you,’ and I'll never use them again,” recalls Dorcy Bowman Rose, executive director of Rendezvous Meetings and Events, an independent planning firm based in San Diego.
Even if properties are often willing to waive cancellation andpenalties to build relationships for future business, any event planner who has been around the block knows that it's better not to have to rely on a hotel's good will. The best defense is a good offense: Limit your liability.
First Contact, for example, can certainly expect its volume business to grease negotiations when a cancellation rolls in, but Dickinson doesn't rely on it. The company hedges its bets, adding contract clauses that allow the client to rebook an event within three months without a penalty.
The advice from Middleton, who had to cancel Sterling's large corporate conference: “Pay close attention to cancellation penalties as well as to any attrition penalties built into the contract. … If you have the leverage, negotiate for the first rooms sold out of inventory, not the last.”
“It's almost like managing a stock portfolio — you have to be able to move things around and adjust to market conditions.”
— Joseph Spacarelli, Symbol Technologies
Nicole Grani agrees that it can pay to be cautious up front. “If you have any suspicion that your company might be having difficulties, try to scale the contract to limit your liability for rooms, catering, and audiovisual services.”
Making conservative room block estimates and pushing for later cutoff dates will leave a planner a little breathing room. And it's important to keep on top of changing economic trends that might affect a meeting's attendance. Escalating airfares and a meeting's location, for example, could make a difference in head counts as economic news continues to send tech companies running for cover.
“You have to be in touch with your customer base and the people attending and what challenges they're facing,” Spacarelli advises.
Independent planner Bowman Rose has been working to shift some of the burden to fill rooms by balancing a smaller rooms commitment with additional food and beverage guarantees. Rose says some of her clients are trying to reschedule events, but many are simply biting the bullet and absorbing cancellation fees rather than sending fewer employees.
For every possible snafu, being able to roll with the punches is a big plus. “You have to make some real-time decisions,” Spacarelli says. “It's almost like managing a stock portfolio — you have to be able to move things around and adjust to market conditions.”
When the Show Must Go On
Meeting planners faced with budget cutbacks rather than outright cancellations might argue that they are in the more difficult position. How do you slash costs without affecting the soul of the meeting?
Faced with a shrinking meeting budget, Denise Wesalainen, corporate events manager for Walker Interactive Systems in San Francisco, started by examining Walker'spractices and found that she could bring certain tasks, such as registration, speaker coordination, and Web site design, back in-house. She also shopped around for brochure and theme design work, choosing an up-and-coming supplier that was willing to take on a project for half the normal fee. And instead of paying for keynote speakers, Walker tapped its partners for experts. The company wound up saving more than $150,000 on a three-day user meeting for 500 people, Wesalainen says.
Budget-minded planners also suggest using alternative communication methods to save on printing and postage. “You can put presentations and white papers on the Web,” says Kristin C. Dickinson, vice president and general manager of Portland, Ore.-based First Contact. “It's not a huge expense, but it definitely adds up.”
Food costs can be trimmed without a noticeable impact, Dickinson says. “You can do a plated lunch or dinner and save a quarter of the cost because you don't have to over-prepare,” she suggests. Evening events can be scaled back or kept on property to economize, and some meals can be eliminated.
Where should a planner draw the line? “What I wouldn't do is anything that would inhibit the networking capability or emotional aspects of the meeting,” says Joseph Spacarelli, director of global communication programs for Symbol Technologies, Holtsville, N.Y.
Content, he says, is sacred.
What's Your Attrition Position?
In recent years, hotels have taken a hard line on attrition clauses, but with occupancies in many cities off this year, some properties may be loosening up to get meeting business on the books. “If you're planning something for the short term, you're in the driver's seat,” says Robert Mandelbaum, director of research information services for PKF Consulting's Hospitality Research Group in Atlanta. “It can be safely said that the leverage is probably slanted toward the meeting planner's side for the first time in a long time.”
Demand, of course, is the key. Ask your hotel about its occupancy forecast, and “if it's low — say 60 [percent] to 70 percent — I question whether you should even agree to an attrition clause,” advises John S. Foster, CHME, an attorney with Foster, Jensen & Gulley in Atlanta. Michael Hough, an Avon, Conn.-based www.profitabletradeshow.com), says planners should avoid signing attrition clauses altogether and, given the current economic climate, try seeking another venue if a sales manager presses the issue.consultant and author of The Profitable Trade Show (
“Leverage is probably slanted toward the meeting planner's side for the first time in a long time.”
— Robert Mandelbaum, PKF Consulting
Hough suggests a number of ways to minimize attrition risk: Agree to a slightly higher room rate; use your clout as a good customer; have exhibitors book their own rooms directly; or when attendees are paying their way, increase room deposit and cancellation requirements, thus shifting more of the onus to registrants.
A more radical approach that some for-profit shows and associations are taking is not reserving a room block at all, Hough says. In some high-occupancy cities such as New York, where attrition clauses kick in at the 90 percent level, planners are opting to let attendees fend for themselves.
If an attrition clause is necessary, experts stress the need to keep rooms and food and beverage clauses separate, because banquet figures usually can be revised until relatively late in the game without a loss to the hotel. And a planner should push for review dates as close to the meeting as possible; Foster suggests 45 days in advance.
“Hotels are asking groups now for a final review date that might be a year in advance. They say, ‘What was last year's pickup? We'll look at that, then set a figure for next year,’ and that's it,” Foster says. Unfortunately, as some planners are finding out, that approach is flawed. “The industry tends to put a lot of emphasis on past attendance, which is all you have to go on. But the economy is a whole lot different than it was a year ago,” he adds.
If all else fails and a meeting attracts a radically smaller audience than anticipated, a reselling provision will help to mitigate damages. Sometimes that means insisting on the right to subcontract or resell the rooms to another group; sometimes it means policing the hotel's efforts to do the same.
Check Your Contract
Do you have …
the right to rebook a canceled event within three months without a penalty?
a clause that says first rooms sold out of inventory — not the last — will be counted toward your room block if you cancel?
cutoff dates that are favorable?
the right to subcontract or resell the rooms to another group?