Needless to say, the rate of change both in the meetings industry and society as a whole is growing exponentially. Can you imagine, say, five years ago digging in your heels to haggle over Internet bandwidth charges? Or having to be really, really up to speed on the inner workings of hotel revenue management and profit centers?
The ante has been upped, so meeting planners need to up their game to meet the challenge.
“The biggest thing for planners is scrutiny over meetings, over the value and accountability, by senior management,” says Tim Brown, CEO of Meeting Sites Resource, a global strategic meeting management solutions organization. “Strategic Meetings Management [SMM] was launched in 2004 but really didn’t get traction until the recession. No it’s here to say. So how do planners get their arms around this, because it’s very meaningful, and their jobs are at stake.”
Big Issues
Two major issues shaping the negotiation environment are the move to a seller’s market and technology issues such as bandwidth requirements and costs.
“2011 was big bounce-back year for the hoteliers and ’12 was strong, but not quite as strong, so the bar’s going up,” Brown says.
And a new battleground surrounds Internet bandwidth, with attendees coming to meetings strapped with multiple mobile devices that chew up the wired and Wi-Fi capabilities of properties, which often must contract with third parties and shell out money to keep up-to-date. PageBreak
“Basically everybody wants it for free,” Brown says. “They can give it to you for free, but it’s not going to probably be what you want. It can be free, but free probably won’t work for you. Planners are very frustrated because this is more of an operations issue and not a contract issue, so now you need to get it into your contracts, because you might have multiple providers with different fee structures, and set-up and tear-down fees, and other fees that the hotel controls are doesn’t control. We’ve seen planners come in with 500 computers--it’s complicated.”
Brown says that planners may be able to obtain some leverage after doing a basic assessment of their meeting’s tech needs.
“Is the hotel getting discounts from suppliers? Can they get a discount?” Brown asks. “The leverage of your meeting will give you leverage to negotiate things of importance, including technology.”
Everyone knows the meetings landscape is shifting, and the skillset requirements of planners is increasing in tandem.
“It’s really forcing the planners to shift from logistics to strategic,” Brown says. “Logistics are still critically important, but it’s not enough in today’s environment. So planners need to set their sights a little higher than they are now, based on this changing environment.”
We asked Brown to provide us with a Q&A—playing both inquisitor and responder--on some topical issues affecting meeting planner-facility negotiations.
His contribution follows:PageBreak
Strategic Hotel and Contract Negotiations
Q. Our industry is undergoing significant change. What are the current issues and trends that impact meeting planner and hotel communications and negotiations?
A. Several things come to mind. First, meeting demand has greatly increased in both 2011 and again in 2102, which has spiked hotel occupancy, average daily rate and RevPAR (revenue per available room). Add greatly reduced new hotel room inventory to the equation and we remain in a strong seller’s market. Additionally, the intense focus on the Strategic Meetings Management (SMM) initiative by corporate and association planning teams has placed an emphasis on demonstrating measurable meeting value and ROI, so clearly, "the art of the deal" is changing.
Q. Obviously, this has an impact on the negotiations process, so how do meeting planners successfully navigate around this changing marketplace?
A. In a seller’s market, hoteliers can be choosy, so today, it is essential for planners to carefully evaluate each meeting, assess their leverage and have a negotiations plan. Hotels in the upscale brands are turning down two - three meetings for every one they accept and contract.
Q. Can you provide a few tips that planners can use to assure improved communications and negotiations results?
A. Yes, there are several steps that planners can take to enhance hotel communications and outcomes, including:
- Utilize a strategic RFP process. In addition to sleeping rooms and suites, by category/night, and meeting and event agenda, identify minimum square foot/ceiling height, for all space; set-up/tear-down times; production and technology need; and three years of meeting history and any special requirements. Incomplete RFPs generally receive an automatic "no availability" response.
- Assess your leverage for each meeting. From each RFP, calculate total sleeping room revenues (hotels’ biggest profit center, at 77 percent on average); F&B contribution (second-biggest profit center, at 38 percent on average); rooms to space ratio (heaviest day space needs as percentage of total hotel space); and ancillary spend on AV/production, business center, golf, spa, etc.
- Create a custom hotel contract process (ready for signature). This allows all hotel contact content and terms to be presented at one time and properly-evaluated by the hotel for review and counteroffers. Your custom contract should include all contract components; value-added concessions; hotel fees and surcharges (eliminate or reduce); performance clauses (based on profit, not revenue); and company liability language.
- Track all meeting history and spend. Contracted rooms vs. per night pick-up; F&B revenues; hotel services spend; and total volume by individual hotel and chain. Review performance and total revenue contributions during the negotiation process for added meeting value.PageBreak
Q. Many planners utilize hotel contract addendums. What are the issues and challenges associated with this process?
A. Yes, hotel addendums are popular; however, they generally do not address all the responsibilities and performance accountability. Typically, addendums include select performance clauses, concessions and legal department liability language. Additionally, planner addendums are added to the hotel’s contract and have conflicting language of performance and liability damages. If an addendum is issued that exact language should be incorporated into the hotel’s contract and if it is attached with different performance language, there is a conflict as to what standards should apply in the event of non-performance. In most cases, an arbitrator would side with the hotel’s master contract. The intent of an addendum is for changes in the contract content to be modified after the contract is countersigned, not at the same time. A custom contract process expedites the review and negotiations of all contract content and mutual performance.
Q. On the topic of negotiations, what are some of the key components that planners must focus on today?
A. As planners are conducting the critical meeting needs-assessment process with managers and stakeholders, they must flag select meeting components that can impact both the quality and cost of their meeting. As an example, technology support is not only complicated, but a potential budget buster. For major technology needs, multiple suppliers often must work in tandem, and understanding each role and associated costs is important. There are many potential fees that must be evaluated and negotiated, including hardware needs; set-up/tear-down; Internet; bandwidth; access fees; and technology support costs. Of course, all these tech components are negotiable and specific services and agreed pricing should be addressed in the contract.
Another growing focus is the trend for ancillary hotel fees. Although meeting demand and attendance is up, meeting budgets remain flat, thus hotels are incorporating a multitude of fees and surcharges, which topped $1 billion in the U.S. in 2012. All hotel fees are negotiable and the goal is to reduce or eliminate them, based on the value of your meeting.
Q. What do you see as the biggest challenges for meeting planners in this current environment?
A. With Strategic Meetings management (SMM), there are increased expectations by senior management for improved planner productivity, added meeting value, contract risk reduction and ROI. Planners must create specific metrics to define and measure success and share results with managers and meeting stakeholders. An easy first step is creating a cost savings and contract risk reduction/cost containment report for each meeting. Many other value components can be captured and reported, both from the countersigned contract and during overall meeting management process.
For a complimentary copy of Tim Brown’s "Hotel Contract Top 10 Tips,” contact him at tbrown@meetingsites.net
Tim Brown is CEO at Meeting Sites Resource. MSR is a global strategic meeting management solutions organization with a 20-year track record of meeting excellence. This includes global hotel sourcing and custom contract negotiations, professional meeting support services, Strategic Meetings Management (SMM) consulting and advanced meeting technology.
Tim serves on various hotel and CVB advisory boards, contributes articles to industry trade publications and speaks at many industry events. MSR also designs custom strategic education for planning and procurement teams. MSR is a recognition recipient of MPI’s Golden Paragon Award, its highest recognition for meetings excellence.
