More associations meet downtown than anywhere else, but the ongoing hotel seller's market calls for planners to tap some creative tactics when booking downtown.
Recently Brian Rounsavill was presented with a tough, take-it-or-leave-it attrition clause by a downtown hotel in a major East Coast city. No amount of discussion was going to change the hotelier's stance. At first, Rounsavill was perplexed, then chagrined. Eventually he walked away from the negotiations.
"In any transaction, there's inherent risk on the part of both parties," says Rounsavill, director of meetings, exhibits, and online services for the 8,000-member Electrochemical Society, Pennington, N.J. "But it seems that now many hotels, particularly in the downtown market, have put all the risk on buyers."
Rounsavill isn't the only planner feeling embattled these days. Industry meetings are filled with planners lamenting skyrocketing room rates, impossible attrition clauses, and not enough room blocks to be found in many cities - if they can even get a foot in the door in these markets to begin with, that is.
Year-end figures for 2000 were not available at press time, but the December report from the New York City-based hotel consulting firm Pannell, Kerr, Forster indicated that, based on the first three quarters of 2000, hotels in the 46 cities it surveys appeared to be enjoying their greatest gain in occupancy since 1995 and the greatest growth in average daily room rate since 1998. New York City topped the charts in 2000 with an occupancy of 84.9 percent and an average daily room rate of a whopping $250. Significantly, of the major U.S. lodging markets, convention hotels have seen the greatest gain in average daily room rate, just ahead of full-service hotels in 2000. (See related charts on page 36.) Meanwhile, PKF projects the average daily room rate for 2001 to rise to $125.
What's Ahead "I expect hotel prices in first-tier cities will continue going up because, first of all, many are islands unto themselves," concludes Rollie Shellenberger of Runzheimer International, a travel management consulting firm in Rochester, Wis. There's not enough real estate available for more convention hotels in many downtown areas, he says.
Compounding matters for budget-conscious planners, business travel costs - including airfare, lodging, meals, and car rental - are projected to increase a record 7 percent this year, according to the Runzheimer Reports on Travel Management. But Shellenberger notes that the double whammy of increased costs and an economic contraction could well mean a decline in association meeting attendance later this year. Indeed, Jody Zeman, director of meetings and conventions for Denver-based Association of periOperative Registered Nurses, says some of her 41,000 members are already planning to skip meetings because of unaffordable room prices.
An economic downturn may curtail attendance, but it could actually help planners in negotiations with hoteliers. Robert Mandelbaum, director of research for Atlanta-based Hospitality Research Group of PKF Consulting, believes a pinched economy means hoteliers will be less aggressive in enforcing various clauses.
"Hotel managers generally tend to overreact to economic conditions anyway," he maintains. "That may especially be the case with the less-experienced hoteliers who haven't worked in anything but an up market."
Clearly, planners have their work cut out in finding hotel space at a reasonable cost in many downtown areas. Following are some of the strategies planners are deploying to cope with the rising occupancies and room rates.
3 Seek the Off-Peak Ask a high-demand major-city convention hotel about room availability during its shoulder season. Rounsavill says he's been able to reap considerable savings for his Electrochemical Society members by booking a Washington, D.C., convention in March instead of May. Ditto for booking a San Francisco meeting over Labor Day instead of October.
"Nobody wants to book a meeting over Labor Day, but we've been able to sell that to our members because many are from different countries, and they don't celebrate that day," Rounsavill explains. "Plus, some of our U.S. members don't mind combining the meeting with an end-of-summer vacation."
3 Consider Other Markets When the allure of first-tier cities is offset by stratospheric room rates, consider suburbs near the first-tier cities. Shellenberger says planners may get significantly better deals by, for example, booking hotels in Rosemont, a Chicago suburb, or in Fairfax and Alexandria, Va., both suburbs of Washington, D.C.
Moreover, some second-tier cities have never been more attractive. In Memphis, a glut of limited-service hotels has helped reduce occupancy from 67 percent in 1999 to an estimated 64 percent in 2000. The good news is that several full-service hotels are boosting their inventory in conjunction with the $95 million Cook Convention Center expansion, which is scheduled to open February 2002.
Portland, Ore., has seen its occupancy decline from 70 percent in 1999 to an estimated 66.7 percent last year, due in large part to the opening of several full-service hotels in anticipation of a 250,000-square-foot expansion of the city's convention center, says Deborah Wakefield, director of communications for the city's CVB.
Other attractive markets include Minneapolis, Charlotte (N.C.), Phoe-nix, and Denver, all of which had estimated occupancies under 70 percent in 2000. Canadian cities such as Toronto, Montreal, and Vancouver are also appealing, given a favorable exchange rate for Americans as well as big-city attractions and a hotel market with a bit more flex in it than that in many American metro areas.
"Toronto has plenty of entertainment, it's virtually crime-free, and it is much more attractively priced than Buffalo [New York]," according to Runzheimer's Shellenberger.
3 Apply Pressure Initially, Amy Phillips, director of meetings for the 35,000-member, Alexandria, Va.-based American Academy of Physician Assistants, talks with the local hotel manager to discuss room availability and possible rate adjustments.
If that's not getting anywhere, she takes up the issue with the hotel chain's national sales representative. If she strikes out there, she doesn't hesitate to phone the city's CVB. "We're not shy about asking the bureau to put some pressure on a hotel, since our annual meeting is bringing 9,000 people to a city."
3 Be Creative While many first-tier hotels are taking a harder line on attrition and cancellation fee enforcement, they still need to work with groups. So, say an attrition fee kicks in at a meeting held at a national chain in a first-tier city. Ask about applying attrition dollars to a future meeting you are holding with the chain. Or, ask about having the food and beverage cancellation fee waived if attrition dollars reach a certain amount.
3 Leverage Your History Loyalty still counts, even during these fiercely competitive times. Stress your group's history of using a hotel through the years - a factor that may help you cut a deal, particularly during an economic slowdown.
Present as much documented information as possible on your use patterns, including overflow hotels. It will reinforce your credibility and perhaps persuade a fence-sitting hotelier.
3 Do Your Homework The more you know about the downtown market, the better off you are in negotiations. So consider doing things like checking a targeted city's calendar of events to see if there's a citywide convention occurring on the dates you're interested in. If so, you may have difficulty securing rooms and you will probably lose negotiating leverage with a hotel booking lots of convention traffic.
Before checking in with a downtown hotel, consult with the city CVB about the facility's occupancy and room use patterns. Confer with planners who have booked the city.
3 Take a Walk Major city hotels aren't the only ones who can play hardball. Go into negotiations with an open mind, but be prepared to walk away and explore other lodging alternatives. "I've walked away more than a few times, but even more so in the last few years," remarks Phillips. "If I think there's a possibility there's going to be an attrition penalty, I'll consider walking away because that's not in the best interest of my association."
3 Team Up If you really like a certain first-tier venue but don't have the clout to command a larger room block or reduced rates, consider pairing with another association. As for finding a complementary association, Rounsavill suggests first contacting a city CVB for assistance. "I can conceive of going with another group and presenting the combined business to a hotel," he says. "I could see where that might result in a price break on rooms."
3 Seek Multi-Year Deals Consider signing a contract with a hotel for several years in a row. Some groups are able to get more attractive deals by inking a pact with a hotel chain enabling members to meet in the same city for several consecutive or alternating years.
3 Negotiate at Quarter's End Wily planners have discovered that sometimes major-city hoteliers are more apt to be flexible on room rates near the end of a company's fiscal quarter. Reason: They want to book business so they meet a quarterly - or an annual - revenue target.
3 Take It Out on the Exhibitors If you're booking rooms for association members and exhibitors staying in the same hotel, consider separating them in discussions with hoteliers over attrition.
Jody Zeman of the Association of periOperative Registered Nurses points out that exhibitor attendees aren't nearly as likely to follow through on pledges to attend meetings, yet those no-shows have counted against her group's attrition. So exhibitors requesting 10 or more hotel rooms now contract directly with the hotel. That way, if they don't show, the hotelier can apply its attrition penalty to the exhibitor and not Zeman's association.
"I encountered no problems when I first presented this idea to a hotel manager in New Orleans," Zeman says. "A hotelier in Dallas last year said it was too much work, but he eventually agreed to it."
3 Pursue Innovative Cost-Cutting It appears more planners are negotiating for attrition not on lost revenues but lost profits. The savings possibilities are obvious: Instead of giving up, say, $140 per room, planners would be out a much smaller percentage of that amount. Make sure to check the contract carefully for hidden charges, as well as for savings opportunities.
"I told one hotelier that since our databases could talk to each other, the hotel wouldn't have to pay its reservation people to do data entry again," Phillips says. "That's a point of negotiation, possibly knocking a couple of dollars off the room rate, because it'll save money and eliminate mistakes."
3 Be Honest It might be tempting to exaggerate your business, but don't do it. "If you don't perform up to expectations, that hotel won't want you back, and you'll have a harder time getting in other hotels, because you won't have a good history," Rounsavill says. "It's the attendees who will eventually lose because they'll end up paying higher rates or going to cities they don't want to."