sure hoteliers will like what I say next: If you're a buyer and you like the current climate, lock in future-year contracts now and strongly consider multiyear deals."
Even the most savvy meeting negotiator won't be able to generate the kind of savings and cost containment that a comprehensive procurement program provides. Buyers need to move beyond one-off negotiation strategies to concentrate on strategic sourcing, lasting changes such as developing a network of preferred vendors, master contracts, and "dual-solution" providers, said Cindy Heston, manager of strategic sourcing for travel at Indianapolis-based health-care company WellPoint. These strategies will help generate savings even during a recession.
"Ultimately I want to get past the economic landscape and look toward a value-led partnership with my key meeting suppliers," Heston said. "By leveraging across the corporate enterprise, we should be entering into these partnerships on a more mature basis. WellPoint has had a lot of success in this area. The hotels and other key suppliers recognize this and value the long-term partnership, versus a quick-win view."
WellPoint renegotiated its system of preferred hotels for its transient program to include about 50 "dual-solution providers" of properties that are appropriate for meetings and events, Heston said. Organizations that similarly want to begin leveraging their meetings expenditures with their travel programs should begin with broad strokes.
"I say start with your major transient hotel cities; the odds are good that is where a lot of your meetings are being held," Heston said, adding that large charges placed on employees' corporate credit cards and procurement cards can indicate the hotel was used for a meeting.
Once you've identified what transient hotels are being used by employees for meetings, "combine these two opportunities into one solution for your company," Heston said. "Work with the hotels individually at first versus the chain approach. We found that a much more successful formula, and it really helped build out our business case. It does take a while, but it is worth the pain in the long run."
If your organization isn't moving toward a procurement-driven approach to sourcing meetings, it's making a mistake, Guth said. Internal stakeholders should understand the importance of competitively bidding out meetings in advance and keeping their options open in terms of dates and locations. Consider implementing a future meeting "pipeline" report, and using standard forms for requests for proposal and contract templates. "If you don't have those things," Guth said, "you'll be stepping over dollars to pick up pennies."
If there is any silver lining to the Great Recession, it's that there was a renewed focus on relationship building during the downturn. It is in both parties' interests to work toward a win-win result in negotiations, a point, Guth said, that was sometimes forgotten in the heyday of the seller's market four years ago.
"One thing that I'm hoping doesn't return to pre-recession levels is some of the customer attitudes demonstrated by certain hoteliers," he said. "There was a sense back then groups should have been grateful for even being able to do business with certain flags. For example, I remember hotels pushing for zero slippage, which drove planners to under-book their blocks. When hotels figured that out, they punished those planners by charging rack rate when the groups exceeded their blocks. It got vicious and nasty. Groups treated hotels well during the downturn, and I'm hoping that hoteliers remember that this time around and that civility prevails."
Caesars Entertainment is one hotelier that gets it, according to Allen. "If parties on each side of the negotiation understand what's important to the other, and work towards something that is mutually beneficial, that's when you forge real and lasting partnerships," she said. "I guess that's not a trend or something ënew,' but it's something that's become more important over the last several years." As a result, Allen said, Caesars Entertainment has reorganized its meetings business to put more sales managers in local markets to build personal relationships with customers.
Long-term partnerships can make a big difference to your bottom line, Ryan said. "Relationships are still the name of the game," she said. "The senior people in this industry need to teach the younger generation on how valuable these relationships are. I've had situations in which planners were going to run into an attrition penalty and the relationship and history with the hotel was taken into consideration when negotiating what the penalty was going to be."
CVB websites are ideal for gathering information about what is going on in the city over preferred meeting dates, said Cookie Walner, CMP, CMM, CAE, manager of events for the American Hardware Manufacturers Association. She finds the websites a powerful tool to find open availability for more flexible rates, and advises meeting organizers to try to fit smaller events around posted citywide meeting move-in, move-out dates. "It's no secret," Walner said. "Involve CVB representatives and national hotel sales [staff] from the very beginning. They are valuable partners during the negotiation process."
At the end of the day, both sides of the negotiating table want a good experience for attendees and a successful event. Keeping that in mind is the best approach to negotiations. "I know some planners that are really ruthless in their negotiations. I think you can still get the same result by having honest conversations," Pelletier said. "Everybody wants to win."
The "use-by" date of hotel rooms and F&B makes meetings procurement "one of the most complex commodities to contract," attorney Stephen Guth said. "Hotel rooms are like ripe fruit in the produce section at your grocery store, if a hotel room isn't sold for a particular night, it's gone rotten by the next day. The hotelier has forgone the revenue on that room forever and will never get that revenue back.
"Consequently, hoteliers want contractual assurances that shift financial risk to groups. The most obvious examples of that are liquidated damages for attrition or cancellation. On the other hand, groups want to limit their financial risk. It's a classic negotiating conflict of competing objectives."
Experienced meeting buyers understand this revenue model and are able to use it to their advantage. Even as the industry heads back into a seller's market, buyers are increasingly savvy about how to get the most bang for their buck, according to hospitality industry lawyer Greg Duff. Some pointers:
- Virtual friends can turn into real savings, said the American Hardware Manufacturers Association's Cookie Walner. "I use my LinkedIn community and Facebook friends," she said. "Their insight and suggestions are beneficial. I also search past issues of Convene from the PCMA website."
- Arm yourself with market research. "Especially when it comes to the increase in room rates year to year, projected and actual," Walner said. "I watch for reports on trends in target areas."
- Focus on upgrades and amenities such as waived resort fees and parking discounts, instead of those areas over which hotels have little control. Audiovisual services (which are often subcontracted to a third party) and food and beverage (which already operates on low profit margins) are typically areas that are difficult to discount, Duff said.
- Flexibility is key. If your organization can consider more than one location or date for its event, hotels and other vendors can give you optimal pricing, Duff said. Guth added: "The single best way to maximize cost savings is to get leads for your meeting well in advance and be willing to consider more than one location or date for your meeting. Once your stakeholder has fallen in love with a hotel and has to have the meeting at that hotel on a particular date, and the hotel figures that out, you're no longer negotiating. You're begging."
In addition to flexibility on dates and location, be open to hotel brands you may not have used in the past, Walner said. And cities with multiple convention centers, such as Chicago, Atlanta, and Boston, may provide additional options.
- Develop your own contract templates, Duff said. Buyers often negotiate a discount on services, but then sign a standard hotel contract that exposes their group to liabilities and penalties that dwarf whatever negligible discounts they achieved on rates. "I've heard some groups say that the size of their business doesn't support using their own contract," Duff said. "I don't agree. If you plan in advance and the hotel knows that using your contract template is an important part of winning your business, the hotel will use your template."
- Enter negotiations with a "wish list" of freebies, discounts, and upgrades that would be most valuable to your organization. High-level events may appreciate room upgrades, regional meetings may like free parking, and almost all attendees are looking for free Wi-Fi.
"Everyone has a laundry list of nice-to-have's," said Amy Allen, director of marketing for Caesars Entertainment. "But no supplier in the world can give you every single one of those things and have it be a mutually beneficial transaction. So be honest with your suppliers about which things are really important to you, and they'll make it happen. Our vice president of sales, Jordan Clark, has a great saying that really applies here: "We can't do everything, but we can do anything.'"