Meeting Sites Resource's Robyn Mietkiewicz answers questions from the Meetings Budget & Cost-Savings Strategies webinar.
1. What's the best way to capture ancillary spend and use it effectively?
Let's start with what you control: the business center, AV production, and in some cases, spa and golf. At the conclusion of each meeting, capture all ancillary spend by category, and have this available for your next planning process. When you can break down all Master Account spend by category, you'll have great history to share with the hotel to showcase the overall value of your meeting. Another component is total attendee incidental charges, which can be captured in total and reported back to you from your attendees’ room folios. We're not asking for anyone's name, just total incidentals captured from your meeting. It's a good idea to outline in your contract how you want your Master Account broken out ahead of time.
Now, if spa, golf or activities are on their own, you can ask the hotel for a special discount offer or coupon that can be redeemed by attendees and tracked by the hotel.
2. Hosted receptions have become very expensive. Is there a way to better control costs and demonstrate savings?
Hosted bars can be costly since there is often a lot of waste, especially if people are not paying for their own beverages. A couple of ideas...portion control is important to assure cost efficiency, which should be communicated via BEOs and to the bartenders. Have portion controls for alcohol by the ounce, instead of free pour. I discussed passed hors d oeuvres or a combination of table-set hors d oeuvres. Some groups use drink tickets and are charged only on consumption. Of course, having a sponsor host the event is the best of all worlds. In all cases, it’s good to inventory bars before and after they close.
3. You referenced hotel contract performance clauses based on profit, not revenue. Can you provide more details and the specific benefits?
First, it's important to note that we all want to be good partners with our hoteliers and honor our contract obligations. We have found it effective to calculate performance damages based on profit, not revenue, since this is really in line with what the hotel would make when the meeting actualizes. When damages are based on total revenues, a hotel can make more money if the meeting cancels, since they have no expenses, particularly on things like food and beverage. As an example, hotels average 38 percent gross profit on food and beverage, so it's fair to guarantee the hotel that same amount in the event of non-performance.
4. Can you further explain how a hotel can cater an off-site event and have it go toward your food and beverage minimum?
Many hotels also cater off-site events at select venues so it's good to allow them to bid on your off-site events so the revenues can be assigned to your Master Account. Of course, also get bids from other area caterers so you can compare costs and negotiate savings.
5. Can you please give an example of vertical attrition?
In a hot seller's market, some hotels are putting vertical attrition in their contracts, which means you must guarantee your room block by night, not cumulative for the entire event. You are at risk doing this since you could pick up more than your total contracted rooms, but have one night that is low, and have to pay damages to the hotel. Cumulative attrition allows you to capture all room nights, including pre and post stays. PageBreak
6. Do you find that hotels push back when asked to make the cancellation clauses based on profit vs. revenue?
At our organization, we find this is acceptable to hotels about 50 percent of the time, the other 50 percent want to base damages on total revenues. We want to be good partners with the hotels, however, but feel the profit calculations are fair, since in the event of cancellation the hotel would receive revenues consistent to what the group would have generated should the meeting had fulfilled. Hotel general managers counter that if the group cancels, they miss out on revenue at their restaurants, lounges, outlets, etc., however, this is not revenue that was guaranteed in the countersigned contract, so it should not come into play.
7. Can you talk about force majeure with government shutdown?
This would most likely apply to government meetings, where attendees could not attend due to the government shutdown. The key question here is, would a government shutdown impact outside suppliers such as airlines, which would restrict the attendees’ ability to get to the destination? The force majeure clause really focuses on things that impact the meeting that are out of the control of both the planning organization and the hotel, which allows termination without damages.
8. Do you recommend that we, as the meeting planner ask the property if the rates would be adjusted if we had an alternate dates as opposed to waiting for the hotel to offer that information to us?
In each RFP, provide the hotels of interest with as many potential meeting dates that will work for you and pattern flexibility. It's not unusual to have three to four sets of dates with different room rates based on demand. And, sometimes, changing your peak night pattern by a day or two can create a savings of 10 percent to 15 percent (all hotels focus on pattern selling, by market).
9. If the room attrition clause in your contract doesn’t state that it is based on lost profit/revenue. If you incur attrition can you then ask for it to be based on lost profit?
Good question, however, it is essential to have performance damage language in the signed contract to make responsibilities perfectly clear. We suggest that in your hotel contract or addendum, calculate performance damages on profit not revenue and do the math. Industry averages for hotel chains and independents are 77% gross profit on sleeping rooms and 38% gross profit on F&B. Bottom line is that this must be addressed during the contract negotiations process.
10. Relative to rebooking: If you've cancelled, how can you get accurate room pick-up to know whether the hotel has or has not resold the rooms?
First, it's important to have a mitigated damages/resell clause in each contract so that in the event of non-performance, the hotel has an obligation to resell sleeping rooms and services to reduce, or better yet, eliminate damages due. Your hotel audit process includes having the hotel send you a printout of their occupancy by night over your specific meeting dates. Additionally, determine if there were any rooms out of service or under renovation and remove them from the equation. If there are still damages due, ideally you have a clause that assigns a portion of the damages toward a future meeting (rebook clause) and hopefully your contract cancellation damages are based on profit, not revenue.
