Hotels have had the edge in negotiations lately, but their reign may be short-lived.
“Demand in the hotel industry stopped growing in 2006, and as people in the industry are catching on, hotels are becoming more variable in negotiations than they were,” says Bjorn Hanson, a lodging and hospitality analyst for PricewaterhouseCoopers.
Despite a drop in occupancy rates during the first six months of 2007, however, rates for hotel rooms continue to climb. Convention center hotels and other properties with considerable meeting space have seen the least decline in demand, so planners will still have to be creative negotiating rates, at least for another year. According to projections from both Smith Travel Research and PricewaterhouseCoopers, room rates are expected to rise another 5.2 to 5.7 percent in 2008.
“The only good thing we can say is that rates aren’t going to increase as much as last year,” Hanson says.
Planners also need to be concerned about a lot more than room rates. “Relatively recently, we’ve seen an addition to the hotel industry: the revenue manager,” Hanson says. “One of the revenue manager’s jobs is to see that every part of the hotel is generating as much revenue as possible.
“Before, you would only pay a meeting room charge for rooms you actually held meetings in,” he explains. “Now, more and more, hotels are charging for usage of rooms where food and beverage are served. They used to charge you $125 for a bottle of alcohol, but that included the bartending fee and the glassware. Now, you’re paying $125 a bottle, plus $125 for the bartender, plus tip and tax, and a service charge. It’s good for hotels to centralize accounting, but now you’re finding some hotels charging an accounting fee to consolidate the group’s charges. And the accounting fee can range from $50 to several thousands of dollars. So, meeting planners need to be attentive and … look at rates that are higher than in the past or new charges that were never there before.”
This nickel-and-dime approach to billing may fuel planner resistance, especially since the people planners deal with at hotels are the same people who cautioned them against trying to squeeze every dime out of hotels when that industry was in a slump. “The fact that hotel companies are pursuing dynamic pricing so aggressively makes corporate travel buyers extremely skeptical about it,” Hanson says. As more new properties come online and demand continues to fall, it is doubtful hotels will maintain the leverage to push the new pricing structure.
So, the market is shifting. But while hotels still call the shots, Hanson has several points of advice for planners looking to get the most for their money:
- Begin negotiations well armed with information about the expenditures associated with your convention. Do you spend lots of money on F&B? Do the attendees spend money in gift shops or tend to spend a certain amount before and after the conference? Have that kind of information available and ready to use. And I mean data about what happened at the last three meetings or events.
- Have really good data on the number of room nights booked. If you can come in and say that you had a block of 3,000 rooms and booked 3,300 … you want to show that you’re not going to have lots of cancellations or a shrinking room block.
- Be prepared to negotiate everything. Ask for free access to the fitness center for attendees, or ask that they not be charged fees for sending faxes or packages. See if you can arrange a complimentary breakfast. Negotiate the big points, and then ask for other little things.
- Be flexible about when and where your meeting or convention can be held. Instead of saying that it has to be a certain week, tell them your meeting can be any time in a four-to-six-week period and ask what time will allow you to get the best rate.
- You should put out bids to several hotels. Out of 10 proposals, eight might be surprisingly awful, but two may be surprisingly good. They may have had a meeting that had been there forever drop out and need to fill the space.