“I’ve never seen an environment quite like this,” says Dave O’Connor, president, Meeting Connections, a Brasstown, N.C.–based meeting management and site selection company. “This year into next year, it’s quite extraordinary,” says O’Connor, a former hotelier who specializes in contract negotiations. With the hotel industry struggling in this recession, pretty much anything is negotiable, especially for short-term meetings.
“You have more flexibility if you’re talking about a meeting held between now and the end of the year,” says association attorney James Goldberg, Goldberg & Associates, Washington. But don’t expect it to last.
“After 9/11, hotels were essentially giving away the store. If you showed up in early 2002 and said you wanted to book a meeting in 2006, hotels gave you low rates, all kinds of concessions. But when the market started turning around in 2004, 2005, and 2006, they were stuck with these deals they had cut three and four years earlier,” says Goldberg. “This time around they are not doing that.” Hoteliers are optimistic that things will be back to normal by 2011, 2012, and beyond, so they are reluctant to give discounts or incentives. “They don’t want to get behind the eight ball again,” says Goldberg.
But between now and then, it’s a different story.
Negotiating Better Rates
O’Connor has even been able to negotiate away just about anything for short-term bookings, including attrition. Attrition penalties for newly booked meetings are almost nonexistent right now, says O’Connor. “It’s not hard to get that out of a contract at most hotels. They are more likely to work with us on attrition than they are on rate.” If they are not eliminating attrition clauses altogether, they are certainly providing more leeway.
He has also been able to sign contracts with no cancellation fees if the meeting is canceled more than 90 days out. It came up in March when a hotel wanted to book his group for February 2010. “Next February? That’s like eight years from now,” he joked. With so much availability in the market—and so little visibility beyond the next quarter—he told the salesperson he wouldn’t book that far out without a stipulation of no cancellation fee beyond 90 days out. He got it.
Lowering rates is the last thing hoteliers want to negotiate, but that doesn’t mean it’s not possible. “You have to make the business case for it,” he says. This past February an association client of O’Connor’s was on pace six weeks out to pick up only 40 percent of its rooms for a conference in Scottsdale, Ariz. After digging a little deeper, he discovered the problem. It was an association in the financial services industry and many members from the banking side were mandated by company policy to spend no more than $200 per night on a hotel room. The rate at the conference hotel was $250.
O’Connor explained the situation and within a day, the hotel came back with an offer to lower the rate to $199. As a result, the group managed to meet its room block requirements. That kind of cooperation by the hotel really builds loyalty, says O’Connor. “Next time we go back to Scottsdale, that hotel is going to be top of mind,” he says.
Before any meeting, O’Connor recommends a quick scan of the area to see what rates the surrounding hotels are offering. If your group booked a rate of $300 a night back in 2005, but the room rates at comparable surrounding hotels are $189 a night, then attendees are going to find the better rate. In that case, it might benefit both parties to negotiate a better deal to drive them back to the headquarters hotel.
Review Your Room Blocks
“Anything is possible, but you have to offer the hotel something,” says Goldberg. He tells of a government group was meeting earlier this year at a hotel at the government conference rate, which is 20 percent higher than the flat government rate. But the rooms weren’t being picked up because the hotel was also offering the lower flat government rate. The hotel was essentially competing with the group. The group said that’s fine if you want to offer the flat government rate, but in turn, it asked the hotel to eliminate the attrition penalty. The hotel agreed.
In this environment, Goldberg cautions planners with upcoming meetings to review their existing room blocks. “I’ve had two situations recently where clients have been faced with a major attrition liability. I looked at the contracts in the context of their last two meetings, and in both cases the room block was wildly optimistic,” he says. In those cases, planners need to try to reduce their exposure by negotiating a lower room block—maybe offer a future meeting in return for cutting the size of the block. “Try to take steps now before something bad happens in September, October, November, or even into 2010,” he says.
Hotels are also willing to negotiate away the “nickel and dime” charges—Internet fees, resort fees, etc.—in this buyer’s market, but O’Connor cautions planners not to go overboard, especially if the hotel is working with you in other ways. Don’t come in with a list of 20 concessions on an RFP; rather, focus on the concessions the group really needs—the “irritants”—and try to get them out of the contract. “Be totally honest and transparent. Tell them what you really need—what’s important to the group.”
Another piece of advice: Don’t just accept the first offer. “The first offer is definitely not going to be the best offer. They will come back and talk and you may be able to carve something else out that is much more important to your group than [a concession] that the hotel is offering.”
Finally, O’Connor reminds planners not to get too greedy, because what goes around comes around. “It’s a tough time to be in a hotel sales office, and just as we remember hotels who took advantage when things were in their favor—and those hotels are now the last ones we call—they will remember the planners that worked with them.
“Hotels have got to make money,” adds O’Connor. “We’ve got to have a strong hotel industry. We’re not just trying to get the lowest of everything we can. It has to make business sense.”