Planners of large meetings traditionally have found it easier to negotiate space at a hotel than those who plan small meetings. Does this mean that small-meeting planners should resign themselves to paying more for less? Absolutely not. Once you know a few key negotiating facts, you too will be able to secure a lower per-person cost.
Learn Hotel Profit Margins - Guest rooms Why do you suppose the first question you are asked when you approach a hotel to book a meeting is always, "How many guest room nights will you need?" That is because a hotel makes its highest profit on its guest rooms - usually between 50 percent and 70 percent profit. This is one of the reasons a convention with hundreds of attendees has more negotiating clout with hotels than a meeting for 50. Room rent is the hotel's largest profit area, and everything else is subordinate to it. While it is possible to book a meeting in a hotel without reserving guest rooms, it isn't advantageous to the hotel. Meeting space exists to sell guest rooms.
So when the hotel asks how many room nights you will need, your answer will determine the amount of meeting space the hotel will reserve for you. Simply put, the hotel will trade its least profitable commodity (the meeting space) for its most profitable commodity (the guest rooms). Book a reasonable percentage of the total guest rooms in the hotel each night, and your meeting space will be easier to secure.
There doesn't seem to be an industry standard on the number of guest rooms a group will need to take in order to book a certain amount of meeting space. Each hotel is guided by an internal formula, and there are no hard-and-fast rules governing negotiations. One longtime hotel sales manager volunteered that the property's internal ratio is one guest room night equal to meeting space for two attendees classroom-style (figure about 10 square feet per attendee). Another hotel requires 10 guest room nights for meeting space equaling about 800 square feet.
The formula or ratio will be different depending on the hotel's location; how much of its business is from meetings, as opposed to leisure travel and other functions; the season; the day of the week; and how many guest rooms it has (including suites). If you are staying at the hotel but holding your meeting and food-and-beverage events elsewhere, you still can qualify for a discounted rate (rather than the rack rate, which is the maximum posted room night cost) if more than 10 guest rooms are booked per night. Fewer than that, and the rate depends on the meeting planner's negotiating skills.
- Food and beverage After the guest room ratio is computed (assuming you still qualify), your F&B needs are considered. While food functions provide only 15 percent to 25 percent profit because of higher labor costs, F&B is still a good revenue producer for hotels. The more catering you need, the more value your meeting will have to the hotel.
- Audiovisual and other expenditures AV equipment can provide up to 30 percent profit, depending on whether the hotel owns the equipment. Your AV requirements and the expected personal spending of your attendees in the hotel gift shop, restaurants, etc., are factored in to figure your meeting's overall value.
Making It Work for You Because guest room rentals are so important to the hotels, if your small meeting doesn't use a lot of guest rooms, can you still get meeting space? Sure; you just may have to work a little harder at it. Lyn Matthews, CHME, CMP, who was director offor Embassy Suites Resort in Scottsdale, Ariz., before opening her own consulting firm, Matthew Enterprises Inc., says that one thing you can do is to build a relationship with a hotel through repeat bookings.
"The more you can return to the hotel, the better your overall negotiations will be," she says. "Build your relationship with repeat business and come to the negotiating table with the dollar value of your business, including catered meals and breaks, for a year of meetings rather than one meeting at a time," says Matthews.
If your meetings can be booked during the hotel's traditionally slow periods, she says, you'll at least be able to negotiate better guest room rates. Just be sure that you "shop" your meetings to other facilities every year before you renegotiate your meetings at the same hotel.
Once you know the breakdown of hotel profit areas, you can evaluate what you and your meeting can bring to the negotiating table. It helps if you compute this figure for a year's worth of meetings or more. If your meeting's overall value to a hotel is higher than that of another meeting, your small meeting could be considered first.
Chris Giardina, sales director of the Georgetown University Conference Center (a Marriott property) in Washington, D.C., says another thing you can do is to check the season when your small meeting is to be held. The problem could be that you are trying to book your small meeting during the busy season or on the busiest day of the week. The local convention and visitors bureau can give you that information. If you can be flexible, change your date. If you can't, then check the guest room nights you need against the number of guest rooms at the hotel you want.
Perhaps you need to find a hotel with fewer total guest rooms to qualify under the hotel's meeting space formulas. In my years of experience booking smaller meetings, I've found it's best to find a hotel with no more than 225 rooms. A group booking a small meeting with few guest rooms at a hotel with more than 225 guest rooms will use a smaller percentage of the total hotel room block - and is, therefore, less desirable at larger hotels.
If you are extremely flexible, hotels will book your small meeting four to six weeks before your meeting date to take advantage of the few paid guest rooms you are able to provide. Even then, you might have to increase your catering needs to include a reception or a sit-down lunch to qualify for the meeting space. If you book more than four to six weeks out, unless it's during the hotel's traditionally slow periods, you will find it difficult.
Ask the hotel if it has a standard meeting package. Conference centers in particular often will sell, on a per-person basis, a package that includes meeting space, all F&B (exclusive of special functions), most AV equipment (including the expensive video/monitor combinations and screens), and the service charge (taxes are extra). In some ways, the package virtually eliminates theprocess, but it does leave room to ask for other things you might want, such as free use of flowers.
"There is a planning ease," says Giardina, whose Georgetown University Conference Center has instituted a meetings package program. "The costs are reduced for the hotel, but there is a higher quality and a wider variety of food overall." While package rates per person generally are not negotiable, you still can try to negotiate some items, such as additional service personnel and early check-in.
You know what it costs you for your small meeting, but did you ever wonder what it costs the hotel to host it?
The following chart breaks down the per-person costs of a standard meeting for a large hotel. The computation includes meeting space, F&B for lunch and two breaks, AV, and gratuities, and does not change regardless of the number of attendees. Taxes and guest rooms are not included.
Costs (Percentage of Total Cost) * Labor: 31.6 percent
* Food: 19 percent
* Benefits: 8.2 percent
* Management Fee: 5 percent
* Cost of Sales: 4.5 percent
* Security/Accounting/Admin.: 4 percent
* Laundry: 2.6 percent
* Human Resources/Engineering: 2.5 percent
* China, Glass, Linen: 2 percent
* Plants/Decoration: 1.6 percent
* Uniforms: 1 percent
* Profit: 18 percent
There are two rules to keep in mind: "Everything is negotiable" and "everything that was negotiated can be renegotiated." You can negotiate for ... overbooking policies * staff rates * speakers * group commissions * use of grounds * offices * attractions/events * printing/supplies * storage * room service * temporary help * brochures * room rate * reservation cards * parking * cancellation fees * meeting room fees * staffing * gifts * flowers/centerpieces * beverages * decorating * cleaning * securityv credit arrangements * audiovisual equipment * payments * reserving a specific meeting room * a cut-off date for room reservations of less than four weeks * complimentary ground transportation * recreational facilities at resorts, universities, etc. * bulk food buying for food and beverage functions or coffee breaks sold by gallon * site to sponsor food and beverage functions, receptions, welcome parties * service standards for registration, bartenders, bellman, waiters, etc. * arrival/departure patterns, including late arrival guarantees, late check-out without penalty * prepayment limited to one meeting room day and/or final balance due one week after final bill is received to allow for internal review.
In other words-anything and everything!