Howard Feiertag
Faculty Member
Dept. of Hospitality & Tourism Management
Pamplin College of Business
Virginia Tech
howardf@vt.edu

Planners Will Still Have It Tough In Coming Years

Summer 2007

NO QUESTION ABOUT IT, it ain’t gonna get any better in the business of getting meeting space and better room rates in 2008 and beyond.

Here’s the story.

Yes, business has been great for the hotels these past three years. Room rates have been raising steadily and this year have gone up around 7-8% in the major markets. In spite of new hotel development, don’t expect seeing lower room rates anytime soon. Even with an increase of about 150,000 new rooms by the end of 2007, it doesn’t look like that is going to be much help to meeting planners. The 25 major markets are so jammed up with high demand for meetings there is no room for negotiating lower rates.

So, what to do?

You can bet sales managers are being instructed to make more profit for their owners because of increasingly heavier operating, energy and technology costs. Well, meeting planners, you’d better start boning up on your negotiating skills. Your best bet is knowledge of the destination and facility that you may want to use. You need to have an answer to: “When do they need the business?” All properties have “down” time and hotel sales managers are pleased to let you know when they need your business.

After all, they do need to sell rooms and space during their slow periods.

The next best thing you need to know is the history of your previous meetings. Be sure to have a written record covering the room block, the actual pick-up, early arrivals and late departures, and all master account charges. If your attendees are heavy users of hotel outlets (bars, dining room, recreation, spa, etc) be sure to find out how much they spend.

This knowledge can help convince a hotel sales manager of the value of your business.

Offering a large deposit also helps the hotel think favorably of your business. If you cannot do it with cash, get a bank letter of credit or a bond to cover the amount. Another thing that could help would be to offer to pay 90% of the master account upon check-out. Leave 10% for questions about the billing to be paid later. Many hotels don’t get around to billing until 30 days following a meeting, and then have to wait another 60 days to get paid. So, getting 90% of the charges of your master account right after the meeting can mean a great deal to the hotel’s general manager and controller.

Try it… it works well in negotiations.

Negotiating Meeting Space

Spring 2007

IT’S GETTING TOUGHER and tougher for meeting planners to get free hotel meeting space. Hotel owners and operators are pushing their sales personnel to maximize profits. After all, it is a sellers’ market. We can see it as occupancy and ADR for the first part of 2007 reflect record levels. Negotiating won’t get any easier in 2008 when the industry will see continuing rate increases.

With this said, of all your meeting negotiating areas, space is generally the area of best opportunity. More than anything, hotels are looking more to maximizing revenue in sleeping room and catering sales. If they can get additional revenue for their meeting space, then, of course, they will try.

So when rates are being quoted for rental of meeting rooms or exhibit space, you should not feel that you cannot get it for less or perhaps even for free.

GMs are responsible for the hotel’s profitability and realize that in order to get groups to buy blocks of sleeping rooms, meeting space may need to be provided. They expect that space can be a negotiable item when it comes to making good profits on the sleeping rooms.

Negotiating opportunities for meeting space depend on many factors. The biggest consideration will be how important your business is to the hotel. The overall profit profile of your meeting has a great deal to do with your ability to negotiate free or reduced space rental charges.

Knowing the exact history of your guest room pick-up and assuring the hotel that the rooms in your block will be guaranteed by you will give you a great deal of clout to go for no space rental charges at all. If you can’t or don’t want to take a chance on the guarantee, then negotiate a sliding scale of rooms rented vs. space rental charges.

In negotiating the cost of meeting space, you must be prepared with facts and figures of your group, and its prior meeting experiences. Successful hotel sales personnel will not give away any meeting space until they know the total revenue your group will generate.

• Consider these areas in your future negotiations:
• Do your attendees arrive early or extend their stays?
• Show heavy use of suites by suppliers or exhibitors.
• Book during the off season or when the hotel most needs your business.
• Large deposits or payment of 90% of the master account upon departure.
• Show opportunities for your future meetings.  

The Third-Party Planner Dilemma
Winter 2007

ONCE UPON A TIME, when a company or association meeting professional wanted to plan an event, a member of the organization’s staff made contact with a venue. Discussions were held, a site visit was made, and negotiations were underway, ending up with an agreement. Sometimes there wasn’t even a written contract, possibly only a shake of hands to secure the deal. The event was held, the bill was paid and everything was “hunky dory.” Relationships between the people who planned meetings and hotel sales folks were wonderful. Over the years, meeting staffers became more professional through membership in organizations such as MPI, SITE, PCMA, and especially CIC. It was still a one-on-one relationship for selecting venues and making deals and it worked well for both parties.

In recent years, we have seen the coming about of the independent, third party planner. Here we have individuals and companies who are in a position to handle site selection and negotiations for organizations seeking venues for their events. Some independent planners also provide other services in connection with meetings management. It sounds like a pretty good deal for many meeting professionals who want to outsource the selection and negotiation of a property to save them time and effort. Also, they do not pay for the service since a fee is paid to the independent from the venue that gets the event. Sounds pretty good! Because of the experience of the independent planner and their ability to negotiate well, it appears they should be able to do a better job of negotiating than a single meeting planner buyer.

Hotel sales personnel like this idea since there is a potential of additional business from these independents, provided they can build a relationship with them. So, it’s a pretty good deal, even if they have to pay them a 10% commission for bringing them the business.

Here are a few questions that should be considered: Could the venue be charging a higher room rate since a commission is paid to a third party? Had the meeting planner gone directly to the venue could there have been a lower rate negotiated or other better deals made? And, there is the question of disclosure. Should the contract with the ultimate buyer disclose that a commission would be paid to the third party? If there is no disclosure, could it be considered that the commission (or rebate) may be thought of as a bribe? Further, what about the question of ethics? Is the independent planner selecting or recommending only those venues that are willing to pay the commission? What if there a perfect site for the event which would be in the best interest of the meeting planner’s company, but the venue elects not to pay a commission? Would the independent recommend it anyway or just pass it by and seek another site which may pay the commission?

It seems that to keep things straight, ethical, and legal, the third party should work out arrangements with a venue to get the best net, non-commissionable rates for their clients, and collect a fee from the client company for services provided.

Your Hotel Sales Job May Be in Jeopardy
Fall 2006

A GOOD DEAL OF OUTSOURCING is going on all over the place, in many types of businesses, and even in our hotel industry. Some hotel owners or operators may even be thinking about outsourcing their sales effort.

Why not? With the continuing use of the Independent Planner, it’s already happening. Many Third Party Meeting Planners are former hotel sales people who decided to go independent. They contact a variety of organizations and offer to find suitable accommodations for their meetings. They do this at no charge to the sponsoring organization, but collect a commission (generally 10%) from the selected hotel.

This sounds like a pretty good deal for the hotel. Why not get a bunch of these independents to do just what they are doing now, and get them to go after group business for a property? From an owner’s standpoint this would make a lot of sense. By only paying 10% of the room revenue to these independents think of the cost savings by eliminating the full-time payroll and benefits.

There are currently an estimated 25,000 independent meeting planners and a number of Third Party, Independent Multi-Management companies. More and more are approaching hotels with RFPs (Request for Proposals) for their “clients,” and more and more hotel sales people are eager to work with them. After all, if these “planners” are bringing business to them, it does make it easier to do a sales job.

In the recent Future Watch 2006 (research conducted by MPI), outsourcing of meeting planning functions was examined. Suppliers indicated that an average of 25% of their 2005 meetings was booked through an intermediary with that percentage estimated to grow to 28% in 2006. Independent planners forecast a 19% increase in the number of clients they will have in 2006 vs. 2005. Third-party/multi-management companies forecast an increase in their number of clients to 33%, and the number of meetings per client to grow 15%.

So what does all this mean to a sales staffer at a hotel property? If a good percentage of our total group business could be booked through Independent Planners and the cost of booking would only be 10% of the room revenue, is it possible that the owner may not really need me at all? By working exclusively through independent sources, there may be no need for a sales staffer on the property’s payroll.

To protect the sales staff function, sales personnel need to do a better job of locating and booking business themselves. The idea is to keep a property completely sold out, so that when an RFP comes in, there is NO SPACE AVAILABLE.