What can you say about the challenge of booking rooms for a citywide convention in today's era of diminishing hotel blocks and dwindling overflow availability? If you're like Kati Quigley, CMP, director of conferences and education with the Treasury Management Association in Bethesda, Md., two words sum it up: "It's frustrating."
Heruses almost 5,000 rooms on peak night, "and to be spread out in 18 hotels is crazy," she says. Unfortunately, it's a craziness that many association planners face when trying to book a citywide today.
The reason? The infamous seller's market of the past couple of years, where there's been little new hotel development of full-service hotels, a strong economy, and very high demand for inventory. Many downtown hotels also have been cutting back on their citywide commitments in favor of the more lucrative last-minute transient and corporate business.
When these factors are coupled with associations' trying to negotiatelong-term for citywide blocks, complications arise. And understandably so. Many hotels are experiencing 75 to 80 percent occupancies for several years running, and they tend to be reluctant to give as much as they did three or four years ago in terms of size of room blocks, competitive rates, and other concessions. Planners are finding this to be true even in cities that don't rely heavily on transient demand.
"When you're living in a great economy with a great marketplace, you tend to think it's going to stay that way, and so you negotiate the future on today's terms," says Michael Gamble, senior vice president, sales and marketing with the Philadelphia Convention and Visitors Bureau. But Gamble believes that, more likely than not, the market will turn back to favor buyers, and with the amount of new inventory now being added, the picture in 2003 will be much different than it is today. (See sidebar at left.) Still, he says, hotels are quoting rates for future conventions with 7 to 10 percent annual increases, based on what they've experienced lately. "That's just not fair," says Gamble, "and yet they've been able to do that the last couple of years, so the mind-set lingers on."
There's no doubt about it: Keeping a nice, tight package is hard to do these days. "The biggest challenges we face are balancing our hotel guest room block against our attendance; and getting reasonableclauses that don't just hold the association's feet to the fire, but also include what the hotel is willing to give back," says Lisa Sykes, CMP, director, meeting services, with the American Dietetic Association, Chicago. "The hotels still think the transient person's extra $50 makes them more valuable than my steady business, so we end up at 11 different hotels, or 18, or even 24, which was what happened to us in Boston.
"Because the pendulum still swings toward the supplier, not the buyer, there's bound to be someone standing right behind you who wants the space and is willing to pay extra to get it," she explains.
History Can Help According to Quigley, one of the best things a planner can do is to show history. And history doesn't just mean what comes out in the final wash, but also includes tracking pickups for overflow, the pace of booking, and things like room service, and food and beverage. "As long as it's a strong history, the hotels will be willing to commit more rooms, knowing that the group will come through in the end," she says.
The reality is that the better information the hoteliers in a city have, the better able everyone is to negotiate. Unfortunately, planners often find themselves caught in a Catch-22 when it comes to providing their group's history. As Philadelphia CVB's Gamble says, "When we are evaluating a piece of business, we ask a customer for lots of information so that we can make sure they fit our parameters. Yet when they leave our city and ask us for that same kind of information back, we're not able to give it to them. It's ridiculous.
"We as cities need to get better at providing good, accurate post-convention reporting so that it will give association planners more leverage when they're negotiating. Because it also will allow the hotel community and the bureau to better evaluate the piece of business. It's just a win-win all the way around," Gamble asserts.
Philadelphia is in the process of incorporating the systems used by the cities of St. Louis and San Diego, which do some of the best post-convention reporting in the country today, Gamble says. "We're almost three-quarters of the way there in installing their methods in Philadelphia," he explains, adding that he hopes other cities will follow suit and that ultimately the information will be incorporated into a database at the International Association of Convention and Visitor Bureaus (IACVB).
"The information needs to be comparable city-to-city, because the history of every group changes depending on where they are," says Mark Tunney, CMP, director of marketing with Hyatt Regency Chicago. For example, groups tend to get higher attendance in Las Vegas, he says, because of the lower room rates, and some groups going to San Francisco may not make their block because many attendees want to stay at the boutique hotels for which the city is famous.
Moreover, the root of the problem is not about attendees' booking patterns. While the information may all be on the hotel's computers, it can be hard to get at times. "Fourteen of the 20 hotels participating in a convention will get back to you with the information in a week," Gamble notes, "but those remaining six are enough to make you crazy." He's working on that problem by assigning one person at the Philadelphia bureau who is responsible for the post-con reporting.
"She's going to develop relationships with people on property who also are responsible for that area, so they can figure out what works best," says Gamble. "All too often it gets put on the back burner, and sometimes can be forgotten in the rush to go on to the next meeting. We think this will help to fine-tune the process."
It's All in the Attitude "The experience you have largely depends on the attitude of the city toward large conventions," says Sykes. "For example, Kansas City is a convention city, while cities like Boston and Chicago have a different mentality because their business doesn't rely so heavily on citywide conventions." She says that while large metropolitan cities that don't need the convention business to survive also can work out well, "they do tend to work differently with the planner than more convention-oriented cities do."
This can often mean considering smaller metropolitan areas, rather than relying solely on first-tier locales. "You still need to deal with the transient issues," she says, "but because they're catering to the convention business, they'll be more amenable to giving you different services that you need."
Another potential ally is the city that is undergoing huge inventory increases. "If you can't find the room block you need, why not go to another city, like Indianapolis or Minneapolis? There's new inventory being added all over the country, so the competition is still there," remarks Hyatt Regency Chicago's Tunney. "If the bureau asks a 2,000-room hotel what it can commit and it comes back with only 300 rooms, you have to ask, 'Is it because you don't have the rooms, or that you don't want the business?'"
One city in flux is Philadelphia, which is going to increase its inventory by 60 percent within the next 18 months. "We're a little anxious about that," Gamble admits. "We have a lot of new hotels to fill, so we are trying to offset some of that new supply by laying a base of business booking association and trade shows." To do this, the bureau is making sure that its hotel partners are clear on what the needs are: high room blocks and fair rates.
"We have to be smart when negotiating with these customers so we don't leave them with a bad taste in their mouths," he says. While the new hotels springing up may not be affected by potential oversupply in any one city, Gamble says that some of the older hotels and those that are not as close to the convention center may find it a little tougher to fill rooms.
But looking to cities with lots of hotel growth also can backfire, warns Tunney. Even though attendance may be up, associations still might find themselves having to pay an attrition clause in cities with new inventory. "Attendees might say 'I know we're headquartered at the Hyatt, or wherever, but I heard there's a new Sheraton. I like their advertising, so maybe I'll stay there this time.' But if there's no room block at Sheraton, this impacts the headquarters hotel." That affects the association, which is stuck with the attrition bill.
Come Back for More "Multiyear bookings? We love 'em!" says Gamble. Association planners often find that booking multiyear deals can help alleviate booking problems with citywide meetings, particularly when negotiating for space in the convention center. "It can make a big difference if you can commit for two years," says Quigley. The only rub: If you decide after the conference not to return despite the multiyear booking, your price will go up for that meeting. Quigley finds that not to be a big problem though, "because there are certain cities that we like to go back to regularly."
Booking far out also can be a good idea, because then you're first in line. However, Gamble points out, "The ironic thing is that when you start adding a bunch of new supply across the country, there probably will be some good short-term available dates."
While this won't necessarily be helpful to large, smaller meetings may be able to benefit from the open inventory in the first few years of the 21st century. Gamble encourages planners to book early and to sign overflow contracts as soon as possible to lock up the hotels.
"The hotels will be a little more likely to give you a fair deal," he says, "as long as you don't hold their space tentative for too long."
Attention Planners: Information Is Power Sykes of the American Dietetic Association suggests planners talk with colleagues to find out everything they can about the cities where they're bringing meetings. But don't limit your research to just this.
"You have to keep abreast of everything that's happening in the industry, including what's happening with the hotel chains: Everyone's merging. And not just the hotels--AV companies, decorators, they're all becoming one big, happy family," she says.
"Know your bottom line, but most of all know your history backward and forward so you can negotiate fairly. Find a common ground. That's the best way we can negotiate fairly and get the results we need."
As Philadelphia's Gamble remarks: "Housing is a very hot topic. Every city and every meeting planner has to deal with it. We're not there yet, but it's one of those things we hope we can get right, soon."
Is the Hotel Market Softening? Robin Amster We've reached $400 a night room rates in New York City and we're sick of it," says Maureen Karon, manager of meetings for Office Inc. in Manhattan. She echoes the frustration of meeting executives everywhere who have struggled with the hotel industry's strong seller's market over the past few years. But is relief finally in sight?
Experts say that it is--in some markets. Hotel occupancy rates for year-end 1998 have declined slightly and a slight softening is expected to continue in 1999. San Francisco-based PKF Consulting says its 1997 national year-end occupancy rate of 73.9 percent for major U.S. cities fell to 72.6 percent in 1998, and will go to an estimated 72.3 percent in 1999. Smith Travel Research of Hendersonville, Tenn., which measures hotels nationwide (not just in major cities), expects an occupancy rate drop from 64.5 percent in 1997 to 63.9 percent in 1998 and 63.1 percent in 1999.
But unlike the hotel industry's across-the-board decline of the late 1980's, any softening this time around will be a market-by-market affair. "I've been able to reign in runaway prices for some meetings because space is not as tight this year as last year," says Karon. "I've found good value in cities like Tampa and Salt Lake City."
According to PKF, the greatest occupancy declines in 1999 are expected in Philadelphia, down by three percent; Colorado Springs, by 2.2 percent; Dallas/Fort Worth, by two percent; Austin, by 1.8 percent; and Orlando, Nashville, and Salt Lake City, each down by 1.5 percent. Some markets--including Boston, San Diego, San Antonio, Portland, and Waikiki, will experience occupancy gains of about one percent.
Orlando, one of PKF's occupancy losers for 1999, remains a "strong, aggressive market," says William Peeper, president of the Orlando/Orange County Convention & Visitors Bureau. "We're not getting any early warning signals to indicate a major slowdown." Good deals for meetings are "up for grabs depending on the type of property and the time of year," he adds. Boston, although it remains one of the country's strongest hotel markets, may be an easier target for meetings in 1999, notes Leslie Hogan, senior vice president of sales and marketing for the Greater Boston Convention & Visitors Bureau. There will be 889 new hotel rooms opened by the end of 1998 and another 905 by the end of 1999, she says. In addition, Boston hoteliers have seen a decline in high-paying transient hotels guests and are looking for more group business to fill the gap.
"Most of the softening we're projecting in certain markets is the result of new supply," says Robert Mandelbaum, director of research for PKF. This can put pressure on hotels to lower prices, but planners shouldn't expect bargains. "In the past, discounting was a knee-jerk reaction to new competition," he says. "Today, hoteliers are holding rates."
Seller's Market: Not All Bad? Hyatt's Mark Tunney "I always wince when I hear people say, 'I can't wait until we get back to a buyer's market,'" says Mark Tunney, CMP, director of marketing, Hyatt Regency Chicago. "What they don't always remember is that, in the strong buyer's market of '91 to '92, hotels may have been offering great deals, but the economy in was in a recession, and we were all hurting. Associations weren't getting attendance because people couldn't afford to go." This impacted the hotels, the convention centers, and the city as a whole, he says.
The recent seller's market--while it does mean rates are higher and overflow blocks are tougher to secure--has its roots in a stronger economy, he says. "Because the economy's good, association memberships are growing, their convention attendance is growing, the number of breakouts, general sessions, banquets--everything increases."
According to Tunney, what's needed isn't a flip-flop back to a buyer's market, but more of a balance between supply and demand. Ideally, this could be achieved by having the hotel work more closely with the planner, not just to learn the usual meeting data, but to understand each convention's goals and marketing plan. Then the hotel would have the information it needs to truly complement the meeting. "In a true partnership between planners and hotels, that kind of communication could open up new ideas for marketing the program so attendance would grow and attrition, hopefully, would not be as big an issue," Tunney says.
"We've always been a convention hotel, and we always will be," he says. "It may be corny, but we believe in 'Dance with the guy who brought you.'"