After many associations got whacked by attrition penalties during the recession, thanks to a combination of lower convention attendance and online hotel discounts drawing attendees outside room blocks, planners began protecting their organizations against attrition by reducing the size of those blocks. But now that the industry is recovering (in some destinations more strongly than in others), do the conditions that drove attendees outside the block still apply? Does the attrition threat loom as large? That’s the room-block dilemma.
One planner who took no chances with attrition is Jean Marc Demers, former deputy executive director, Canadian Institute of Mining, Metallurgy, and Petroleum, who regularly booked a block of no more than 25 percent of his 7,000-attendee base. “Why should I take the risk? I’m not in the business of managing hotel rooms, I’m in the business of delivering events,” he told an audience at the Professional Convention Management Association Convening Leaders event in January. What matters ultimately, he said, is that the association is bringing thousands of room nights to the city. He encourages attendees to book early and hasn’t had many complaints. The meeting moves between major cities in Canada—Toronto, Vancouver, and Montréal. The strategy may not fly in all cities, said Demers, now an association management consultant, so he booked those destinations that would work with him. “I could clearly provide the economic value of my event toward a destination irrespective of how many rooms I had under contract,” he says. If a destination would not offer discounted or complimentary meeting space, he looked elsewhere.
Demers’ strategy is more extreme than most, but many planners have cut the size of their room blocks. “Everybody’s gotten more conservative,” says Phelps Hope, CMP, vice president, meetings and expositions, Kellen Meetings, Atlanta. “We all got burned during the global financial crisis in 2009 and 2010.” Lu Anne Bankert, senior director, programs and meetings, Association of Community Cancer Centers, Rockville, Md., has reduced her block by about 10 percent each year since the recession, including this year. Elisa Perodin concurs. “We’re trying to protect our clients because it’s so unpredictable,” says Perodin, CMP, vice president, events, at Coulter Nonprofit Management, McLean, Va. “You don’t know what’s going to happen in the next year or two.” Perodin and others say they would rather scramble to find rooms than be stuck with attrition. “That would be a pleasant problem to have if our attendance was up.”
Bill Drohan, president, Drohan Management Group, Reston, Va., an association management company, is not only pushing the size of the room block down for some clients, he is trying to reduce room blocks for those already on the books. “Hotels have been fine with taking the rooms back [if] they have time to resell them and actually get the full rate as opposed to the negotiated rate,” he says. However, for new business, if the block is too small, the hotel requires guaranteed food-and-beverage minimums or it will charge for meeting space, he notes, so it’s a trade-off.
Drohan sees several factors driving this trend. In many major convention cities, limited service hotels are popping up around convention centers, giving attendees lower-priced options. “We have been losing a lot of business from our room blocks to these limited service hotels,” he says. Online travel booking sites like Priceline and Expedia are also siphoning off the block as more attendees use the Internet to search for the lowest rates, often at the last minute. This was a huge concern during the recession, as these sites were offering significant discounts below the negotiated group rate. Now, the group rate is probably better, but the concern is that attendees have become accustomed to last-minute deals and are therefore waiting longer to register.
Also, many corporations and government employees have negotiated rates with particular brands and require attendees to stay there. And hotel loyalty programs are a factor as well, as attendees choose chains where they can accumulate points. It all creates quite a pull on attendees.
But there is risk in underbooking, particularly as room rates rise and occupancy increases, says Perry Juliano, director, event services, at SmithBucklin, Chicago. In some first-tier cities it can be hard to find anything under $300 per night. Or, adds Liz Freyn, vice president of meeting and convention services, The Sherwood Group, a Deerfield, Ill.–based association manager, all the rooms are gone right after the cutoff date because compression is so tight. This is particularly true in destinations with lots of leisure visitors. Consequently, the strategy of reducing blocks can backfire if attendees can’t find affordable rooms within the city. It also means that the association has to pay for additional transportation services if attendees end up farther away from the convention center. Given the circumstances, Juliano is now blocking more rooms. “That’s a good sign,” he says. “We don’t want to put our clients at any financial risk, but we do build a slippage clause into our contract that protects them from attrition.”
For Tim Moses, CMP, director, meetings and conventions, the American Academy of Dermatology, Schaumburg, Ill., the blocking strategy depends on the city. “Typically, we err on the conservative side, especially when attrition is a concern,” he says. However, the association was very aggressive in blocking as many hotel rooms as possible for its 2012 convention in San Diego, where occupancy rates have rebounded.
“Ultimately, it’s a question of value” for attendees and exhibitors, says Steven Hacker, president, International Association of Exhibitions and Events, Dallas. It’s up to association planners to communicate the value of robust room blocks and booking inside the block.
Here are some tips from leading association experts on why room blocks matter for attendees, exhibitors, and meeting organizers.