3 ways meeting planners can negotiate to keep costs under control
There’s no getting around it: For 2018 and likely for 2019, as well, the sellers’ market will remain in full force. According to industry analyst STR, revenue per available room (RevPAR) for hotels has risen for 30 consecutive quarters, due to a combination of rising occupancy rates and rising average daily rate (ADR). And even though the number of new guest rooms rose by more than 1.5 percent in 2017 and will do so again in 2018—well above the historical average—demand from transient business travelers, leisure travelers and groups alike is so strong that occupancy rates likely won’t decline, but simply flatten out at just above 70 percent nationwide.
The result: higher prices for guest rooms, food and beverage, and other ancillary services for meetings and events in the foreseeable future. Andre Fournier, executive vice president of sales, marketing and revenue for Two Roads Hospitality, says that the 68 properties across its Thompson, Joie de Vivre and Destination hotel brands will enjoy 2018 revenue growth of at least 5 percent, just like in 2017.
In a recent survey of more than 300 of its group clients, Two Roads found that 45 percent will have more money to spend on 2018 meetings, compared to just 37 percent who said that for 2017. But while these groups are adjusting to the pricing landscape, the other 55 percent are working with budgets that are either flat or lower than in 2017.
For meeting groups and properties to come to reasonable terms in the present business climate, here are three negotiating tactics suggested by veteran planners.
1. What’s wrong with the old-school approach?
Walt Galanty, president of AIM Meetings and Events in Alexandria, Virginia, has been a planner for 40 years. “I know that technology has made many parts of our jobs easier, but electronic RFPs have become transactional to hotel salespeople, which doesn’t help planners,” he says. So, rather than using templated e-RFP programs, he suggests that planners send an RFP in a personalized email to certain properties in a city. This will start a conversation about placing a meeting that has a tight budget.
“Do some destination research to find a property you might not have used before. Then email your RFP and ask them, ‘Do you have a hole at some point in that month? I’ll see if I can help you by moving my dates or pattern to fill it.’ A follow-up phone call would be good, too. This is how you start a relationship where a hotel rep gets creative to make things work for both of you.”
2. Consider your options, then make the property follow up
“We’re getting many groups to book farther out, or getting them to agree to a multiyear agreement for that meeting to stay within our portfolio,” Fournier says. “We’re seeing a lot of meetings with 250 to 750 rooms on peak night agreeing to rotate among our properties for three years, or return to a property twice within three years. Either way, it means that the group is buying the future at today’s prices.”
One way to further hedge against rising prices is to insert a contract clause stating that shortly after each anniversary date of the contract signing, the property must inform the planner of the annual percentage increase on the group’s base rate. “The hotel must revisit the contract each year in order to make an annual base-rate increase of, for instance, up to 4 percent,” Galanty says. If the property forgets about it until a few months out, then the increase is zero percent for that year.
3. Make the property sing in the key of $ for its supper
Forget the guest-room rate—food and beverage costs have gone up at an even steeper pace each of the past two years, with no signs of slowing. Christine Moore, contracts manager for more than 20 years with Dallas-based meeting planning agency Fan Fares, keeps food and beverage costs under control for her corporate clients by offering the property a per-person total for each day’s meals and breaks. So, for instance, a day with three meals and continuous breaks could be $180 per person.
“Then I ask to have the culinary team give me lots of possible choices and serving sizes for each meal and break,” she says. This allows her, for example, to still use short rib or steak at a meal as a 6-ounce serving rather than 8 ounces, and to choose a good variety of items for each break. “We also get it in the contract that our price is inclusive of tax and service charge,” she adds.
Galanty often chooses to have receptions with heavy hors d’oeuvres rather than sit-down meals. He also guarantees 20 percent fewer attendees for receptions, assuming that many folks will make a brief appearance at the reception and not consume much. “Some people arrive late while others leave early to go to dinner, and the hotel never counts heads anyway,” he says. “Worst case is that I run out of food in the last 30 minutes, but nobody cares at that point.”
One other Galanty tactic: “If I use a property with a free hot breakfast, I ask them to set up a station near my meeting space, and I will pay an additional fee per-person for that. Because $13 a head for set-up is better than paying $30 for a full breakfast elsewhere.”
Rob Carey is a business journalist and principal of Meetings & Hospitality Insight, a content marketing firm for the group-business market.