Over the past three years, the number of requests for proposals sent to hotels has increased by about 300 percent, said Ashley Kissinger, global accounts director, Marriott Hotels International. And it’s not because there have been that many more meetings. The proliferation of e-RFP platforms has made is increasingly simple for planners to send requests to multiple hotels.
But more isn’t always better.
During a webinar called “RFPs for 2013: Best Practices for Better Responses,” Kissinger and host Mark Hubrich, co-founder and vice president of industry and client relations at SignUp4, a strategic meeting management software company, looked at how communication with hotels is changing and advised participants how to get the most out of their e-RFPs.
“It wasn’t too long ago that 80 percent of RFPs came in via the fax machine,” said Kissinger. Now, about 60 percent come through third-party online channels (SignUp4, Cvent, Starcite, etc.) while the rest come via e-mail. “Electronic RFPs now dominate, and they bring their own advantages and challenges.”
The advantages? They allow planners to distribute RFPs easily to suppliers.
The challenges? They allow planners to distribute RFPs easily to suppliers.
Too often, planners send out multiple RFPs—10 or more, sometimes much more—whereas in the past they would narrow it down, experts say. In this RFP explosion, hoteliers are inundated and can’t keep up with the volume.
“It takes an average of 20 to 30 minutes for a single sales person to respond to a single RFP,” says Kissinger, noting that many RFPs arrive incomplete and require even more resources. “This has changed our landscape drastically.” Most large chains have now established centralized sales offices, he says, that are focused on responding to RFPs.
Buyers are using the process to evaluate their costs and get the best deal, but sometimes they go overboard in the initial RFP, asking for too much information, like how will the meeting space be mapped out? Do hoteliers really need to tell you what ballroom you’ll be in if you haven’t decided what city you’ll be in? said Kissinger.
The Pumpkin Patch
Hoteliers, like planners, are analyzing every proposal that comes in to see if it’s the right fit. They are looking to get the best piece of business on the books for any given period. Most hotels are owned by private equity firms and ownership groups that expect bottom-line improvements every year. So, explained Kissinger, if a hotel was sold out every single night last year, filled its ballrooms, and sold lots of food and beverage, its only hope to get more revenue this year is to somehow get more business or to raise rates.
She explained it using the analogy of a pumpkin patch. “Imagine you have a pumpkin patch that produces 100 pumpkins each fall,” she said. “In year one, you sell them to a big box store for $3 each.” But in year two you need a new tractor so you try to make more money, maybe selling half to the big box store for $3 and half to a boutique store for $4. How will you make more in year three?
That’s why hoteliers won’t always take the first piece of business that comes in. “Hotels have become masters at doing the same thing buyers are doing on the other side—evaluating leads for how much total income they are bringing to the hotel overall and how much your business is blocking them from getting income from someone else,” she said. One of the biggest income blockers is a proposal that has a disproportionate meeting-space-to-guest-room ratio. That’s an immediate red flag.
Hoteliers will also look at profit margins. If two pieces of business generate the same amount of income, revenue managers will look at where the revenue is coming from and suggest the one with the higher profit margins. Guest rooms, for example, typically generate more profit than F&B.
Kissinger offered four tips that planners can use to improve their RFPs and stand out from the pack.
1. RFI instead of RFP. Consider sending out a Request for Information rather than an RFP. It requires a little less information from hoteliers, but includes the basics—dates, rates, and space. If you can be flexible on dates and rates, make that clear in the RFI and ask for ranges. It will save hoteliers time and allow planners to get the basic information they need to narrow down their list.
2. Analyze airlift first. For corporate meetings, airfare and guest rooms are the two largest spend categories. Start your narrowing down your hotel search by first looking at which destinations have the most lift and the cheapest fares, and are most convenient for attendees. Sales reps are more likely to spend time answering an RFP if the destination is narrowed down.
3. Educate meeting owners. Executives and department heads often direct where groups meet based on personal preferences. Let them know that going somewhere warm in February will cost more than an off-season destination, and that being flexible on patterns and dates can save a lot of money.
4. Divulge your budget. Planners are hesitant to divulge their budgets out of fear that hoteliers will set their rates accordingly. They think hoteliers will say to themselves, “I was going to quote them $159 a night, but now that I see the budget I will quote them $189 a night.” But it doesn’t work that way, Kissinger said.
What she has seen is hoteliers that come up with creative packages to work within planners’ budgets. If you want to meet in Chicago in the summer or Arizona in the winter, rates will be high, but hoteliers may be able to help you save money on food and beverage. “Some budgets don’t match some cities,” she said. “But if we know that upfront, we can steer you toward something that makes sense.”
She also suggested that planners keep a good history and tell hoteliers about every penny they spend because it will help revenue managers evaluate their business.