Hoteliers are willing to negotiate anything—but don't expect it to last.
“I've never seen an environment quite like this,” says Dave O'Connor, president, Meeting Connections, a Brasstown, N.C.–based meeting-management and site-selection company. With the hotel industry struggling, O’Connor finds that pretty much anything is negotiable, especially for short-term meetings.
Attorney James Goldberg of Goldberg & Associates in Washington agrees—to a point. “You have more flexibility if you're talking about a meeting held between now and the end of the year,” says Goldberg, also a Corporate Meetings & Incentives columnist. But he doesn’t expect it to last. “After 9/11, hotels were essentially giving away the store. If you showed up in early 2002 and said that you wanted to book a meeting in 2006, hotels gave you low rates and all kinds of concessions. But when the market started turning around in 2004, 2005, and 2006, they were stuck with these deals they had cut,” he says. Hoteliers are optimistic that things will be back to normal by 2011, 2012, and beyond, so they are reluctant to give discounts or incentives. “They don't want to get behind the eight ball again.”
But between now and then, it's a different story.
Anything Goes
O'Connor, a former hotelier who specializes in contract negotiations, has been able to negotiate away just about anything for short-term bookings, including attrition. “It's not hard to get that out of a contract at most hotels. They are more likely to work with us on attrition than they are on rate.”
He has also been able to sign contracts with no fees for cancellation more than 90 days out. The issue came up in March when a hotel wanted to book his group for February 2010. “February? That's like eight years from now,” he jokes. With so much availability in the market—and so little visibility beyond the next quarter—he had the leverage to get the no–cancellation fee clause into the contract.
Lowering rates is the last thing that hoteliers want to do, but that doesn't mean it's impossible. “You have to make the business case for it,” O’Connor says. This past February, one of his financial services clients was on pace six weeks out to pick up only 40 percent of its rooms for a conference in Scottsdale, Ariz. After digging a little deeper, he discovered the problem: Many meeting attendees from the banking industry were mandated by company policy to spend no more than $200 per night on a hotel room. The rate at the conference hotel was $250.
O'Connor explained the situation and within a day, the hotel came back with an offer to lower the rate to $199. The group managed to meet its room-block requirements. That kind of cooperation by the hotel really builds loyalty, says O'Connor. “Next time we go back to Scottsdale, that hotel is going to be top of mind,” he says.
Review Your Blocks
“Anything is possible, but you have to offer the hotel something,” says Goldberg. He tells of two situations recently where clients have been faced with major attrition liability. “I looked at the contracts in the context of their last two meetings, and in both cases the room block was wildly optimistic.” He advises planners to reduce their exposure by negotiating a lower room block—maybe offer a future meeting in return for cutting the block. “Try to take steps now before something bad happens,” he says.
Hotels are also willing to negotiate away “nickel and dime” charges—Internet fees, resort fees, and the like—in this buyer's market, but O'Connor cautions planners not to come in with a list of 20 concessions on an RFP; rather, focus on the concessions the group really needs—the “irritants”—and try to get them out of the contract. “Be totally honest and transparent. Tell them what you really need—what's important to the group.”
And don’t accept the hotel’s first offer. “The first offer is definitely not going to be the best offer. They will come back and talk, and you may be able to carve something else out that is much more important to your group than [another concession] that the hotel is offering.”
Finally, O'Connor reminds planners not to get greedy, because what goes around comes around. “It's a tough time to be in a hotel sales office, and just as we remember hotels that took advantage when things were in their favor—and those hotels are now the last ones we call—hotels will remember the planners who worked with them.”—Dave Kovaleski
27 Principles of Negotiating with a Meeting Facility