Effective negotiating and cost-cutting strategies for a slumping economy
When car dealerships are saying, “make me an offer,” can hotels be far behind?
The economic crisis has created upheaval in the meetings industry, with hoteliers and planners struggling to cope with the fallout from meeting cancellations, downsized events, and increased attrition.
What's needed most, says Dan Calabrese, senior director, Northeast Global Sales Office, Northeast and Canada, Starwood Hotels & Resorts Worldwide Inc., New York, is an “open and honest dialogue” between planners and hotels. During several sessions about the economy at the Pharmaceutical Meeting Management Forum, panelists and participants took the opportunity to begin that dialogue.
“Cancellations are part of the business,” said panelist Kathy Lieberman, manager, U.S. pharmaceutical event management at GlaxoSmithKline, Philadelphia. Sometimes it's because the objectives of the meeting have changed to the extent that a live meeting is no longer necessary, and sometimes it's a financial consideration, she said.
In cases of cancellation, good relationships, as well as good contracts, are critical, said Lieberman. She explained that a few years ago her company had to cancel several meetings on short notice. “But for the next 18 months after that, we pushed meetings to those properties where we had canceled meetings.” Those hotels got back the business they lost, and even more in some cases, because of the relationships built, she said.
“It's hard when you get cancellations two or three weeks prior to the meeting, but it's part of the business,” said panelist Bonnie Weiss, director, pharmaceutical industry sales, Hyatt Hotels Corp., White Plains, N.Y. “Communication is key.” The sooner hoteliers know about a cancellation, the better their chances of reselling the space.
On the positive side, Julie Hills, senior director of pharmaceutical sales, Hilton Sales Worldwide, Hinsdale, Ill., says it's a myth that pharma meetings cancel a lot. “Since most are short-term meetings, they're rarely canceled. We need to teach our owners that pharmaceutical groups can be the solution, not the problem, in this economic climate.”
Even if they're not canceling large numbers of events, pharmaceutical companies are altering meeting plans in response to the economy and other factors. Panelist Karen VanderPloeg, senior manager, travel and meetings, Daiichi Sankyo, Parsippany, N.J., said the scope of her meetings has also changed within the past year, but she clarified that the changes were initiated as a cost-containment measure before the recession began. Instead of three national manager meetings, her company is holding one national and two at the regional level. The duration of the meeting was shortened, teambuilding events were cut, and the number of attendees reduced. In addition, by regionalizing her plan of action meetings for managers, allowing many employees to drive in rather than fly in, and introducing a number of other cost-savings ideas, Daiichi Sankyo cut overall meeting costs by 50 percent.
“My team plans internal and external meetings, some subject to Food and Drug Administration approval, and our cancellation is still small, less than 3 percent post-contract,” said VanderPloeg. Therefore, the most important thing a hotel can do for her is to put a value on concessions. “What is the package and its value?” she asked.
To start negotiations off on the right foot, create a detailed request for proposal, said panelist Judy Benaroche Johnson, CMP, president and CEO, Rx Worldwide Meetings Inc., Plano, Texas. “Make sure that you identify all of your needs upfront with the property and negotiate your must-haves.” She cautions planners, however, to book more conservative room blocks to reduce the potential for attrition.
On the supplier side, hotels should be proactive with planners when evaluating new meeting business and space needs, said Hills. Pharma meetings are often an ideal piece of business to a hotel because of their short-term booking patterns. “If we've got two association meetings holding space in April of '09, and a pharma company comes to us with a 60-day window, we will approach those two associations, which are potentially facing attrition, about giving back both rooms and space. If they can, and we can make it work for them and the pharma company, it's a win-win-win.”
From the hotel perspective, said Calabrese, “Forecasting is critical. We can't hold space forever; we need commitments from planners. In some cases, we are cluttering up availability. Planners might be sourcing 15 to 20 cities instead of three to five for a 150-person meeting. That's extensive labor for hotels.”
VanderPloeg pointed out that hotels need to be transparent as well, by sharing the risk they are willing to assume in regard to attrition, rebooking, and cancellation terms.
In this buyer's market, one hotelier observed that hoteliers are getting “beat up” on room rate. They are offering substantial discounts and are still being asked to go lower, he said. Another hotelier from the audience asked the planners on the panel why they couldn't give a hotel “a walk-away” rate? A benchmark? “History used to help us, but that's no longer valid in this market.”
“In all cases the agenda dictates the space needs. It's always driven by objective, not a bottom-line consideration,” said VanderPloeg. “But when hotels give us their best shot up front, they make it easier to consistently bring business back to their hotel.”
Another option for planners who are trying to save money, said Hills, is to look beyond hotels. “CVBs may also be a source for providing value and they may have city promotions to entice you to work with them.”
Ask about promotions, advised one hotelier in the audience, who said his property takes 3 percent off the final bill if it is paid within 30 days.
While planners are looking for lower costs and risk reduction, Hills warned against “no cancellation/no attrition policies” offers that are being floated by some hotels today. “Hotels have to maintain staffing levels,” she says. “This is a very dangerous pattern.” If room rates have fallen along with hotel profit levels, can a downgrade in service be far behind?
“We walk a fine line in terms of delivering service,” said Hills. “Pharma meetings are very labor-intensive and there are lots of last-minute changes. Hotel chains may have to cut room-service or bell-staff hours, or other items that don't directly impact the guest experience. So predicting the behavior of your attendees is critical to maintaining the service levels you desire. We are getting hit from all segments to renegotiate.”
In addition to communicating about cost and contract issues, meeting managers need to communicate their compliance needs, especially regarding the updated Pharmaceutical Research and Manufacturers of America's Code on Interactions with Healthcare Professionals, said speakers.
“We want to understand how each company is interpreting the PhRMA code. And if we aren't getting the business, tell us why,” said Calabrese. “Help us to understand why we lost it.”
Noting that some companies that are maintaining a database of hotels that are “pre-approved” for healthcare practitioner meetings, Hills suggests planners share their lists with suppliers. This would make for a more efficient process and reduce costs for site visits as well as build a rapport with a set of “favorite” hotels that could lead to further discounting, said Hills.