Preferred-vendor contracts are a favorite tool for controlling the costs of
small meetings in a seller¹s market.
The economy may be tanking, but the prolonged hotel seller's market persists. Corporations are in budget-cutting mode, and the pressure is on meeting-planning departments to cut costs. On the hunt to find savings and create efficiencies, small-meetings spend is seen as a promising frontier, but also an unwieldy challenge, even for those with strategic meeting management programs.
Small meetings are a hot topic in the industry right now, says Melissa Logar, CMP, senior meeting manager, Meetings and Events Services, Pricewaterhouse-Coopers in Lantana, Texas. “When we attended NBTA [the National Business Travel Association annual meeting] in Boston last year, everyone was talking about it. How do you capture those small meetings within the other parts of your organization and bring them into your department?”
For Karen Knox, CMP, CMM, manager, meetings management, BlueCross BlueShield of North Carolina, a mandate helps. “We have a corporatewide mandate to monitor and capture as much small-meetings spend as possible,” she says. “The challenge is understanding that while these meetings may be very small — as few as five people going off-site to talk about the reorganization of some process or another — there is value in handling them strategically.”
Knox, who works out of the Durham headquarters of BCBSNC, helps to plan 400 meetings, about 35 percent of which she classifies as “small.” In complying with her company's mandate, she says that she is making every effort to capture the entire meeting spend.
“We're crystal clear about history and spend, and where that spend has been going,” she says. “We can be very clear about our value to the vendors by showing them it's worth doing business with us. My company is in an aggressive cost-cutting mode, and we're very focused on consolidating our meetings spend with our preferred vendors.”
Rick Wakida, corporate travel manager for Gilead Sciences, a biopharmaceutical company based in Foster City, Calif., agrees that using preferred vendoris a good strategy for dealing with the pricing pressures in a seller's market.
“We should be able to leverage all of our corporate travel spend so that we can get better rates, and groups — whether they are small or large — are natural areas to try to leverage,” Wakida says. “We try to use our preferred hotels for individual business travel as possibilities for small meetings. And we expect a little more leeway from a supplier with whom we've developed a relationship, as opposed to going to a property where we have no relationship.”
But there are limits. By definition, small meetings mean smaller budgets, says Wakida, and “certain concessions you look for with larger groups are just not going to be practical when it comes to smaller meetings, so you tend to focus more on location and venues.”
Pre-Negotiate the Risk Factors
In PwC's case, the question for Melissa Logar's team was whether bringing small meetings into the Meetings and Events Services department would be a value-added proposition for PwC's local offices. In the end, the answer was “not really,” says Logar. Although the dollar amount at stake was substantial, doing so would have meant expanding MES to a size that was financially prohibitive.
Instead, MES decided to pre-negotiate small meetings contracts with preferred vendors. Room rates, discounts on food and beverage, and audiovisual fees are settled upon when vendors agree to come onboard with what MES calls its own small-meetings solution.
“We end up with athat's more a confirmation of issues like room blocks, cutoff dates, and meeting space. Everything else is agreed upon in advance,” says Logar. “There are no 12-page hotel contracts with seven-page PwC addendums.” So, MES has a small meeting solution that, Logar says, leverages buying power, mitigates risk, and allows PwC to track small-meeting and event spend in its local markets.
Chewing on a Whale
“From the perspective of the supplier, small meetings remain hard to figure out,” says David Scypinski, senior vice president, industry relations, Starwood Hotels & Resorts. “It's like chewing on a whale — it's such a huge topic.”
The challenge that small meetings present for hoteliers, particularly from large properties, says Scypinski, is finding the space. And with small meeting demand skyrocketing and lead times getting significantly shorter, that challenge has become exponentially more difficult.
Scypinski says the process is just like using a funnel. “You can't process these [booking requests] fast enough,” he says. “It's all about speed — someone comes in with their request in the morning, and they want an answer by the afternoon.”
Technology is the “big enabler,” says Scypinski. Starwood and most of the other hotel chains have been developing internal technological solutions that can interface with the small-meeting applications provided by meeting technology companies such as Philadelphia-based StarCite. In the past couple of years, StarCite has made a big push in the small meetings area with its Small Meetings Solution, an online booking tool that gives corporate customers the option of loading negotiated rates and contract terms into the system.
With agreements in place with a number of Fortune 500 companies, StarCite has negotiated partnerships with companies including Hilton and Hyatt. These deals make sense, says David O'Donohoe, StarCite's vice president, supplier markets, because “these companies have significantly expanded their offerings when it comes to small meetings. It all dovetails nicely with the needs of our corporate clients.”
Logar says that PwC would love to get its own small meetings solution completely up and running by taking advantage of the meeting-management technology solutions that are being offered. The problem that she has run into, though, is that the technology companies charge transaction fees to the hotels, “which is not going to work, because I've already done the negotiating — I don't want the hotel to have to pay a commission or fee after I've negotiated a discount.”
So PwC is implementing its home-grown program manually, Logar says. So far, it has been rolled out in key markets such as Boston, Chicago, and Atlanta, with more to come.
The Small-Meetings Contract
While the parameters of a contract should be the same no matter what kind of meeting is being negotiated, some clauses require more attention with small meetings.
“If you're talking about something like a 20-person sales meeting, I would always recommend against over-lawyering a contract,” says James M. Goldberg, principal in the Washington, D.C., law firm of Goldberg & Associates.
But that rule has its exceptions, depending on the kind of event. For example, Goldberg points to a recent court case in which a New Jersey casino was ordered to pay restitution to a company after it guaranteed 60 sleeping rooms for an event but failed to supply almost half of them. (See story, page 16.) “In this case, a company was entertaining customers,” says Goldberg. “Given the nature of the event, you might want to build more protection into the contract.”
Mary Kay Hokanson, a meeting planner with Allianz Life Insurance Co. of North America, Minneapolis, has one particular clause she is very careful to include in small-meeting contracts. “We always require that no other financial services institution is holding a meeting at the hotel at the same time that we are,” she says. “Our agents sell a number of different products, and we don't want to give them any opportunity to be exposed to our competitors.”
Unfortunately, inserting such a clause is no guarantee that accidents won't happen. Hokanson recently managed a board meeting at a Florida hotel for 20 people. When she booked it, she was told that another financial services company would be there at the same time, but she decided it would not be a problem because the company was not a competitor. When she arrived, she discovered that the company had set up a huge exhibit right outside her meeting room, which had displays from all of her company's competitors. “I called my salesperson and said, ‘They have to be moved. I can't have my board walking through all our competitors!’”