Recently Brian Rounsavill was presented with a tough, take-it-or-leave-itclause by a downtown hotel in a major East Coast city. No amount of discussion would change the hotelier's stance. At first, Rounsavill was perplexed, then chagrined. Eventually he walked away from the negotiations.
“In any transaction, there's inherent risk on the part of both parties,” says Rounsavill, director of meetings, exhibits, and online services for the 8,000-member Electrochemical Society, Pennington, N.J. “But it seems that now many hotels, particularly in the downtown market, have put all the risk on buyers.”
Rounsavill isn't the only planner feeling embattled these days. Planners are lamenting skyrocketing room rates, impossible attrition clauses, and not enough room blocks to be found in many cities — if they can even get a foot in the door in these markets to begin with.
A report from the New York City-based hotel consulting firm Pannell, Kerr, Forster indicates that, based on the first three quarters of 2000, hotels in 46 cities it surveys appeared to be enjoying their greatest gain in occupancy since 1995 and the greatest growth in average daily room rate since 1998. New York City topped the charts in 2000 with an occupancy of 84.9 percent and an average daily room rate of $250. Significantly, of the major U.S. lodging markets, convention hotels have seen the greatest gain in average daily room rate, just ahead of full-service hotels.
“I expect hotel prices in first-tier cities will continue going up because, first of all, many are islands unto themselves,” concludes Rollie Shellenberger of Runzheimer International, a travel management consulting firm in Rochester, Wis. There's not enough real estate available for more convention hotels in many downtown areas, he says.
Compounding matters for budget-conscious planners, business travel costs — including airfare, lodging, meals, and car rental — are projected to increase a record 7 percent this year, according to the Runzheimer Reports on Travel Management. But Shellenberger notes that the double whammy of increased costs and an economic contraction could mean a decline in meeting attendance later this year.
An economic downturn may curtail attendance, but it could help planners in negotiations with hoteliers. Robert Mandelbaum, director of research for Atlanta-based Hospitality Research Group of PKF Consulting, believes a pinched economy means hoteliers will be less aggressive in enforcing various clauses.
“Hotel managers generally tend to overreact to economic conditions anyway,” he maintains. “That may especially be the case with the less-experienced hoteliers who haven't worked in anything but an up market.”
Clearly, finding hotel space at a reasonable cost in some downtown areas is a daunting task. Following are some strategies that planners are employing.
Talk with the local hotel manager to discuss room availability and possible rate adjustments. If that's not getting anywhere, take up the issue with the hotel chain's national sales representative. If you strike out there, don't hesitate to phone the city's CVB. Don't be shy about putting pressure on a hotel, especially if you're bringing a large number of people to a city.
Let Them Know You're Shopping
Charles Melear, of Fort Collins, Colo., serves as the conference planner for the United Church of Christ. His responsibilities include planning 10 one-week, 1,500-attendee conventions a year. Melear says he always lets properties know that he's shopping for the best combination of facilities and rates. “You have to negotiate hard with them,” he says.
Melear gives hotels accurate historic information about his meetings up front, but he doesn't give away all his information at once. His hole card is the ceiling price of what he can afford to pay, and he typically doesn't bring that up until later in the negotiating process.
Ultimately, though, Melear knows the agreement has to make sense for both his groups and the properties. “If it's not profitable for them, they're not going to give you their hotel.”
Seek the Off-Peak
Ask a high-demand major-city convention hotel about room availability during its shoulder season.
Nancy Hinshaw, administrative assistant to the area provost for the Texas Annual Conference of the United Methodist Church in Houston, says the group's annual four-day meeting has been held around Memorial Day for the past 20 years. It typically attracts close to 2,000 attendees and books 500 rooms. She's cultivated a strong relationship with the Hyatt Regency in downtown Houston, which is eager to host the group at Memorial Day, which is a slow period.
“We get tremendous rates and wonderful service,” says Hinshaw.
Consider Other Markets
When the allure of first-tier cities is offset by stratospheric room rates, consider nearby suburbs. Shellenberger says planners may get significantly better deals by, for example, booking hotels in Rosemont, a Chicago suburb, or in Fairfax and Alexandria, Va., both suburbs of Washington, D.C.
Moreover, some second-tier cities have never been more attractive. In Memphis, a glut of limited-service hotels has helped to reduce occupancy from 67 percent in 1999 to an estimated 64 percent in 2000. The good news is that several full-service hotels are boosting their inventory in conjunction with the $95 million Cook Convention Center expansion, which is scheduled to open in February 2002.
Portland, Ore., has seen its occupancy decline from 70 percent in 1999 to an estimated 66.7 percent last year, due in large part to the opening of several full-service hotels in anticipation of a 250,000-square-foot expansion of the city's convention center, says Deborah Wakefield, director of communications for the city's CVB.
Other attractive markets include Minneapolis, Charlotte (N.C.), Phoenix, and Denver, all of which had estimated occupancies of less than 70 percent in 2000. Canadian cities such as Toronto, Montréal, and Vancouver also are appealing, given the favorable exchange rate for Americans as well as big-city attractions and a hotel market with a bit more flex than many American metro areas.
“Toronto has plenty of entertainment, it's virtually crime-free, and it is much more attractively priced than Buffalo [N.Y.],” according to Runzheimer's Shellenberger.
While many first-tier hotels are taking a harder line on attrition and cancellation-fee enforcement, they still need to work with groups. Say an attrition fee kicks in at a meeting held at a national chain in a first-tier city. Ask about applying attrition dollars to a future meeting you are holding with the chain. Or, ask about having the food and beverage cancellation fee waived if attrition dollars reach a certain amount.
Elder Ruth Adair, pastor of Planning and Progress Ministry with the Triedstone Full Gospel Baptist Church in Chicago, recognizes that sometimes it's difficult for hotels to budge on room rates. When that's the case, she negotiates for extra meeting rooms and breaks on food and beverage.
Leverage Your History
Loyalty still counts, even during these fiercely competitive times. Stress your group's history of using a hotel through the years — which may help you cut a deal, particularly during an economic slowdown.
Present as much documented information as possible on your use patterns, including overflow hotels. It will reinforce your credibility and perhaps persuade a fence-sitting hotelier.
Hinshaw, of the United Methodist Church in Houston, maintains that if you have history with a hotel, they're not going to be as quick to raise rates for your organization. “They want to keep you,” she says.
Do Your Homework
The more you know about the downtown market, the better off you are in negotiations. So consider checking a targeted city's calendar of events to see if there's a citywide convention on the dates you're interested in. If so, you may have difficulty securing rooms, and you probably will lose negotiating leverage.
Before checking in with a downtown hotel, consult with the city CVB about the facility's occupancy and room use patterns. Confer with planners who have booked the city.
If you really like a certain first-tier venue but don't have the clout to command a larger room block or reduced rates, consider pairing with another organization. As for finding a complementary group, Rounsavill suggests contacting a city's CVB for assistance. “I can conceive of going with another group and presenting the combined business to a hotel,” he says. “I could see where that might result in a price break on rooms.”
Seek Multi-Year Deals
Consider signing awith a hotel for two or more years in a row. Some groups get more attractive deals by inking a pact with a hotel chain enabling members to meet in the same city for several consecutive or alternating years.
Negotiate at Quarter's End
Wily planners have discovered that major-city hoteliers sometimes are more flexible on room rates near the end of a company's fiscal quarter. Reason: They want to book business so that they meet a quarterly — or annual — revenue target.
Pursue Creative Cost-Cutting
It appears more planners are negotiating for attrition not on lost revenues but lost profits. The savings possibilities are obvious: Instead of giving up, say, $140 per room, planners would be out a much smaller percentage of that amount. Make sure to check the contract carefully for hidden charges as well as for savings opportunities.
“I told one hotelier that since our databases could talk to each other, the hotel wouldn't have to pay its reservation people to do data entry again,” says Amy Phillips, director of meetings for the 35,000-member, Alexandria, Va.-based American Academy of Physician Assistants.
“That's a point of, possibly knocking a couple of dollars off the room rate, because it'll save money and eliminate mistakes.”
Go Straight to the Top
Finally, Adair says she likes to deal with the person in charge of a hotel's sales team. That way, she can negotiate directly with the person making the decisions instead of having her demands filtered through a lower-ranking sales representative.
“Go straight to the top,” Adair says. “Who can present your situation better than you?”