You've got a pile of meetings on your plate and suddenly you're faced with finding space for a management conference only three months out. Then you get a call from a site selection company representative. It's perfect timing. You give the rep the meeting details and she's off and running to chase down some bids for you. This arrangement is clearly going to save you time and effort. But what are you giving up in return? Some say nothing. Some say a little more cash (in the form of a higher room rate or fewer concessions), but it's worth it because you're in effect buying a service. Some say you're trading in your own buying power down the road. Some say you're giving up a complete choice of properties.
The problem is, you can't make any of these generalizations. For each case, you have to ask a lot of questions and weigh all the answers in order to calculate whether or not using a third party for a site search is in your best interest. Herewith, a guide to doing the math.
Green Pastures When downsizing was at its fiercest in the early 1990s, many meeting departments went by the wayside or shrank to shells of their former selves. At some companies, that left executives or their assistants planning meetings; at others, it left surviving meeting planners with dramatically increased workloads. Two hotel sales executives, Roger Helms and Bill Briscoe, saw this labor shortage as a business opportunity, and built a company on freeing meeting planners from one of their tasks--site selection. "When we first started in 1992," says HelmsBriscoe founder and CEO Roger Helms, "there were lead-generation companies that did nothing but rep hotels. Then there were companies like Conferon and Maritz that controlled the whole meeting. We saw this big, green pasture in the middle, where we would rep the client, not the hotel." The hotels, however, would pay for the service, in the form of commissions. "It's leased labor," says Helms. "It's the future."
It has certainly been fruitful for HelmsBriscoe, which has grown into a network of 144 entrepreneurs in 48 offices around the country. In 1998, those salespeople booked 7,500 meetings into 3,300 hotels, representing more than $200 million. Says COO Bill Briscoe: "Hotels are hearing from HelmsBriscoe every day."
Indeed they are--and from an increasing number of companies like them. Contributing to that increase are the high occupancy rates of recent years. Just finding space for meetings takes more legwork than it used to, and more planners need help doing it.
Business from "auxiliary accounts," as Hyatt calls third parties, was up eight percent in 1998, says Christie Hicks, assistant vice president, national accounts, in Chicago. On a panel at the recent Meeting Professionals International Professional Education Conference in Vancouver, David Scypinski, vice president, industry relations at Hilton Hotels Corp., said Hilton saw a 200 percent jump in commissions last year. At Marriott, the growing commission expense line prompted the formation of a task force to look at what the chain was getting for its money. The task force concluded that many third parties do bring in valuable business; likewise, Scypinski pointed out that while commissions were up dramatically, so was incremental business.
The Money Trail For meeting planners, the big question is how all those commissions are affecting their room rates. There is no simple answer. Obviously, the money has to come from somewhere. "There is no free lunch," says John Parke, vice president, national accounts, at Marriott International in Washington, D.C. "If hotels are paying a commission, the company is paying for the [site selection] service."
Savvy planners acknowledge that. "We don't think they work for free. We know they don't," says Rob Gingras, CMP, assistant director, conference management at CIGNA in Hartford. "When you're in a big crunch and you need some site research, a third party could be an asset. You may not get as low a rate as you could, but you know that. That's a service you're buying."
But many third parties trumpet the fact that they have written pledges from hotels that their involvement in a booking will not mean a higher rate for the planner--or, in more complicated language, that there will be no rate quoted that is lower than the third party's rate. Well, what does that prove? Not much. Unless you do a blind test, how would you really know whether or not you could get a better rate?
"We don't want to cost our clients money. We shouldn't have to. We're a channel of distribution," says Roger Helms. A hotel, that is, should look at paying HelmsBriscoe the way it looks at paying its own sales staff. "If we find a property that continually increases its prices when we're involved, we'll have a tendency not to bring business there."
Measuring the exact impact of commissions on rates is near to impossible. "There are too many human variables for it to be a perfectly scientific process," says Rodd Herron, the Omaha-based vice president, global sales programs, for Starwood Hotels & Resorts. Parke of Marriott tells the same story. "You'd like it to be a science," he says, "but there are a litany of variables." And Hyatt's Hicks chimes in: "We evaluate each meeting on its own merits, taking into consideration seasonality, food and beverage, whether it's coming direct or through a third party, whether it's short-term or long-term," she says. "Relationships count. Longevity and repeat business are factors. There are a million things."
But wouldn't properties always prefer to deal directly with the client and avoid paying a third party? "In a perfect world, that's true," says Parke. "But it's not a perfect world. If our sales force were deployed against all customers, this would not be a concern. But we're realists. We don't have zillions of salespeople."
And neither does anyone else. "They bring us additional revenue. We work with them like we do any client," says Starwood's Herron. "Our job is not to care what vehicle guests come to our hotels in; our job is to get them to come to our hotels."
And You Are...? Many meeting planners believe it's very important that they show up at a hotel in their own vehicles. "I want the relationship with the hotel," says Mark Kustwan, assistant vice president, conference planning, at MassMutual in Springfield, Mass. "Meeting planners can document millions of dollars they have saved their companies that can be directly related to the friendships they have made during their years in the business. Allowing an outside site selection firm to build these relationships with hoteliers limits your ability to make the impact in your job that you want and need to make."
Marriott's Parke acknowledges that a hotel's consideration may shift from the end user to the intermediary over the long term. "Many companies want to be recognized for their volume," he says. "But if they're asking a third party to represent them, the volume of the third party is what we end up paying attention to."
Bill Wulff, director, event services at MetLife in Manhattan, is aware of that, and believes he has come up with a way to get the best of both worlds. Wulff has launched "a bold experiment"--that is, working with Helms Briscoe for all of his site research. "It's been a radical departure for me to move to HelmsBriscoe from my national sales offices," he says. But he doesn't fear losing MetLife's clout with those national sales offices because he has required his Helms Briscoe sales reps to work with his national contacts.
"We will not sacrifice our relationships," he says. "MetLife is MetLife first. The control is here. But our job goes beyond just booking a property. Our job is to be communications consultants, to translate our clients' messages into three-dimensional terms." When Wulff conducted a labor analysis of his department and found that 40 percent of their time was spent on site searches, he believed there had to be a more effective use of that time.
A Thorough Search The clout question is different with independent hotels. Companies may represent significant, regular business to a chain, but may use a particular independent hotel once in a blue moon. In that case, third parties with strong relationships with independents could be valuable resources.
Some planners use third parties specifically for booking independent hotels, while using their national sales contacts for chain hotels. That's how clients often work with Julie Stovroff, regional vice president of sales, Hinton & Grusich, in Denver. H&G is a third party of a different type--a hotel representation company, which gets paid a monthly retainer fee from the hotels it represents but takes no commission on the business it books. For Randy Farmer, senior vice president, corporate communications, at Land America Financial Group in Richmond, Va., calling Stovroff helps him not just find hotels but negotiate with them. "I have other duties in addition to meeting planning," he says, "so I don't have time to research a large number of hotels." He doesn't use the national sales offices of the major chains, he says, because he doesn't hear from them. "I don't plan a lot of meetings now, so the chains seem to have lost interest. There's been no real aggressive action on their part."
And while he has only positive things to say about Stovroff and H&G, he's been less impressed with others. "I got a cold call from someone. She asked, 'Can I have some proposals sent to you?' But she didn't ask enough questions, and I got proposals from third-tier hotels I would never use. She was so anxious. She almost acted like she'd get paid just for getting the proposals." He's also surprised at the pluck of some reps: "I don't like hotel reps selling me a property they haven't been to," he says. "How do you know it's perfect for me when you've never even been there?"
Full Disclosure Whether or not your third-party rep has actually seen the properties being recommended is an important question. Another one: What bias does that salesperson have? With hotel representation companies, the answer is easy. They're selling the hotels in their portfolios, and any planner who works with them would have a catalog of those properties. With site selection companies, it's a little trickier.
HelmsBriscoe, for example, has "preferred hotel" agreements with about 200 independent hotels and the Promus/Doubletree, Hilton, Radisson, Canadian Pacific, Fairmont, Wyndham, Regal, Melia, Delta, and Crowne Plaza chains. Preferred hotels pay half of HelmsBriscoe's commission when theis signed and half after the program happens. Most also pay an annual marketing fee of $8 per room. Conceptually, Helms says, these hotels "have committed to having a stronger relationship with us. Instead of keeping us at arm's length, they've said, 'Come in, let us know more about your company.' It doesn't create any bias. We don't have to sell this one and not that one. It is a marketing alliance that gets them better exposure to our salespeople."
That means: direct links to their own Web sites from the Helms Briscoe intranet site, listings at HelmsBriscoe's "Hot Dates, Hot Rates" site, and a chance to exhibit at the company's annual meeting. Hotels want the relationship, Helms points out, because HelmsBriscoe is a big, if not the biggest, producer of group business for them.
At Hilton, which signed its deal with HelmsBriscoe just last October, leads from HelmsBriscoe were up 400 percent in the fourth quarter of 1998 over each of the previous three quarters. "We understand the value offor our customers," says Steve Armitage, vice president and managing director of sales at Hilton in Beverly Hills. "We want to do business the way they want to do business. That makes HelmsBriscoe an important partner." And despite HelmsBriscoe's burgeoning list of preferred properties, Armitage believes Hilton will continue to realize value in the partnership. "We understand there are multiple hotel groups involved, but if we're providing a high level of value and service, we'll be the choice." Hilton has named a national salesperson for the HelmsBriscoe account, as well as a lead HelmsBriscoe sales rep in its Dallas-based HiltonDirect sales operation.
(Even major chains that have not entered into a formal agreement with the site selection company nonetheless have salespeople dedicated to working with HelmsBriscoe representatives.)
The preferred hotel concept benefits planners, Helms says, because of a "deeper communication" between the hotels and HelmsBriscoe salespeople. That means more information about what hotel has a need and where the deals are.
But the question does arise about how comprehensive a selection a client is getting with plenty of potentially suitable properties outside a preferred roster.
"If a third party formed a relationship with our competition, that would not be something we would look favorably upon," says Marriott's Parke. "They should represent all properties equally."
Some planners see a way to sidestep the bias question by paying for the site-search service themselves. "Why don't they sell their services to us? Why don't I pay the retainer?" asks MassMutual's Mark Kustwan. Rob Gingras of CIGNA wants to know, too. "I would much rather pay them a fee," he says. "You can't be client-driven and be paid by the hotel. The third party's best interest is the third party."
Bad Apples There are other issues. Many planners have had informal conversations turn into leads they never authorized.
One planner tells of a third-party rep whom he rebuffed only to have her then try to make an appointment with one of his senior executives. Unable to get the executive, she got some meeting information from a secretary that she then put out to bid--for a meeting that had long since been contracted.
Another planner was assured by a salesperson from a hotel rep company that no commission was involved in a meeting the rep was booking. But when the planner asked the hotel for a better rate, the hotelier replied, "I could give it to you if I wasn't paying a commission."
These are the practices that leave planners with a bad feeling about third parties in general. "If I had the time [to do all the site searches], I wouldn't call any of them," says one. "I don't know what I'm paying for."
Some planners are being proactive about the issue. MassMutual's Kustwan sent a letter about third parties to the hotels and hotel chains he works with regularly. The letter states, in part: "Should you receive a request for information regarding MassMutual corporate conference needs by someone other than a member of my staff, the lead should be disregarded. (This does not apply to business generated by our subsidiaries or our general agencies.)"
Another planner who occasionally uses hotel representation companies is requiring them to write letters stating that they will rep the company's meeting business only to properties that do not pay a commission to them or to their firms.
A Call for Standards That questionable practices are widespread, that two major meeting planning associations drew big crowds to panel discussions on the topic at their most recent annual meetings, and that the amount of business booked through third parties is showing a sharp increase are all factors prompting some to call for third-party guidelines or even a certification program.
"I would love to see some standards," says Marriott's Parke, who moderated the third-party panel discussion at the Professional Convention Management Association Annual Meeting in January in Orlando. "That's what happens in other areas of the business world. Our industry should do better." There was a chance that Marriott's task force would recommend a dramatic policy change regarding rates and commissions. "We asked, 'Do we want to take a stand?' At this point, we decided not to make sweeping changes," Parke explains. "We don't want to alienate third parties. Many are very loyal customers. But we want to run the best business we can."
During the panel discussion at the MPI conference, Hilton's Scypinski was blunt: "We would love to see a three percent commission paid to someone who just throws a lead at us, does no other work, versus a [meeting planning firm] who does everything, who should be paid 10 percent. But in our competitive industry, it's very difficult to say, 'We'll only pay you three percent.' If we did it at Hilton but Hyatt and Marriott didn't, we could be at a large disadvantage."
For now, Parke believes the industry should demand adherence to certain standards. "If we're paying a commission, we ought to be able to hold those third parties to a high degree of professionalism," he says. "They ought to be experts on our products, have integrity, offer full disclosure, and not mislead their clients. We should create consistency."
Some meeting planners agree. "Some third parties will find you a hotel and that's what they do for their 10 percent. Others stay involved for the whole program. What's the industry standard there?" asks Rob Gingras of CIGNA.
Until there is one, it's buyer beware. "Planners need to decide what works for them," says Herron of Starwood. "They need to know all that's involved, keep asking questions, and try to understand how [third parties] make money."
That's the $64,000 question--and it might take some complicated math to get the answer.
Bruce Harris is president of Twinsburg, Ohio-based Conferon, Inc., a full-service meeting planning firm that booked $190 million in meetings last year (80 percent of its business is with associations). Harris was a panelist at the recent Meeting Professionals International Professional Education Conference in Vancouver, B.C., and suggested that meeting planners ask the following questions of third parties they work with:
* Have you received any fees, in advance, from any hotels whatsoever? Are you biased in any way? If you collect fees, what do the fees provide? If the company you're dealing with is an ethical organization, it will tell you what fees are involved, and what that means. If a third party takes money in advance, he becomes an agent of the hotel, not of the planner.
* What is the commission on this piece of business? Get a written agreement that includes how the company will be paid. Is everything you're getting spelled out in the contract with the hotel?
* If price is of major concern, make sure you have a document that says the rate will not be increased because of the service that firm is providing. Or, if you don't mind paying for that service by virtue of the room rate, you should make that clear as well.
* Ask for references--of both association/corporate clients and suppliers that the company has worked with.
HelmsBriscoe * Site selection company-- 200 preferred properties and about 10 preferred chains
* Founded: 1992
* Salespeople: 144
* Paid by: Hotels
* Payment Type: Commission; preferred properties pay half on signing of the contract and half after the meeting, plus an annual marketing fee
Krisam Group * Hotel rep firm--150 hotels/select DMCs
* Founded: 1975
* Salespeople: 20
* Paid by: Hotels
* Payment Type: Monthly retainer fee without commission; incentive fees for off-season or short-term business, or for beating a room-night target
Lynette Owens & Associates * Hotel rep firm--15 hotels
* Founded: 1989
* Salespeople: 3
* Paid by: Hotels
* Payment Type: Varies--retainer; retainer plus commission; or retainer plus year-end incentive fees based on production
Hinton & Grusich * Hotel rep firm--65 hotels/8 CVBs
* Founded: 1986
* Salespeople: 7
* Paid by: Hotels and CVBs
* Payment Type: Monthly retainer fee only
Insurance Meeting Network * Site selection company
* Salespeople: 2 (plus 3 assistants)
* Founded: 1996
* Paid by: Hotels
* Payment Type: Varies--retainer; retainer plus commission; or commission
David Green Associates * Hotel rep firm--82 hotels
* Founded: 1972
* Salespeople: 60 (including assistants)
* Paid by: Hotels
* Payment Type: Monthly retainer fees; plus incentive fees for filling need periods
A. Levan, Inc. Resort Choices * Hotel rep firm--13 hotels
* Founded: 1994
* Paid by: Hotels
* Payment Type: Varies--commission, retainer, or barter
Last year, the Airlines Reporting Corp. (ARC) launched a pilot program to accredit corporate travel departments. That means these departments can receive airline commissions directly without having to become full-fledged travel agencies doing a certain percentage of their business with the public. These travel departments can continue to outsource their reservations and ticketing to an outside travel agency. However, the payment relationship with that agency would change: Instead of being paid by keeping commissions, the agency would be paid a fee by the corporation for its services.
This is giving some meeting planners ideas. When they're told that third parties are getting the same room rates they'd get by going direct, an obvious question comes up. Why not skip the third party and take the commissions for their departments? All they need is a federal tax ID number and a little gumption. With that revenue, the department could hire additional planners, or perhaps even become a profit center. They're free to ask, says Rodd Herron, vice president, global sales programs, at Starwood, as long as any commission paid is disclosed in writing.
Roger Helms, CEO, HelmsBriscoe, wishes them luck. "Hotels are paying HelmsBriscoe because we have the biggest conference resource firm in the country. If Joe Schmo starts asking for 10 percent, the hotel isn't going to do that. Where's the value? Hotels are not paying us only for the piece of business. They're saying, 'You found, created, and nurtured the relationship with this client.' There's the value. The distribution cost is being assumed by HelmsBriscoe."
If that's true for independent properties and smaller chains, it might not be true for the big chains with the most well-developed national sales operations. Says one national salesperson, "I'd still rather pay the commission to the decision-maker--the professional meeting planner--be it a third party or a corporate planner."