We sat down for a discussion with Therese Jardine, DES, instructor of MPI’s Contract & Negotiation Specialist Certificate course and CEO of Strategic Event Procurement, on trends and insights in the current and near-future business landscape.
In recent years, we’ve seen the event industry landscape move from a buyer’s market to a very strong seller’s market…and now in MPI’s Meetings Outlook survey, we’re beginning to see reports of a more balanced market. Are you seeing or hearing anything in those terms, or how the contracts/negotiations landscape looks like right now in general?
I hold a monthly community call people join to talk about what’s happening in the market and I’m still hearing from them that hotels are being pretty particular about not offering favorable attrition policies.
[They’re] not accepting lost profit instead of lost revenue, especially for food and beverage— which is crazy because if you have a $75,000 F&B minimum and you’re not going to meet it, but you have to pay the money anyway, then just buy more food or improve your food and beverage experience because otherwise you’re paying for nothing, right? And I’ve been hearing that people in my network aren’t able to negotiate on lost profit versus lost revenue, which I would call more of a seller’s market.
I’m also hearing about extra fees being added, above and beyond the service charge, just to hold an event. That’s why I kind of popped my eyes a little bit [when you mentioned a shift toward a balanced market], but it may also depend on the market.
I think as leisure softens and that revenue stream starts to dwindle, then hotels are going to start being a little more amenable to negotiations for group business.
This was brought up [recently] in my community call: Somebody said that because of the heavy leisure market, the outlets at hotels are being overburdened. So, if you think about a hotel’s revenue stream, they’ve got leisure, they’ve got business travel and then they’ve got groups and then the food and beverage day meetings that just happen as a fold-in. If a hotel, particularly in a resort area, is overbalanced toward leisure, then there aren’t any group meals being served.
Everybody’s going to the restaurants for breakfast, everybody’s going to the pool, everybody’s hitting the golf course. And so those outlets or extra services at the hotels are getting kind of squeezed because there’s not the group business using up some of those hotel rooms [and] ballroom space. I hadn’t thought of it, but as soon as they brought it up, it made total sense. Take that into account as you’re looking at what the overall market’s going to be like.
Is there anything that planners or suppliers should be doing differently regarding contracts and negotiations as a result of the current landscape?
A few things. And I bring this up when I teach the MPI Contract & Negotiation Specialist Certificate course. The first is, we’re born negotiators. We were all kids once. Remember “Just one more cookie,” “Just one more bedtime story,” “I promise I’ll get straight A’s if you let me have a puppy,” right? We came out of the womb negotiating. That’s an inherent skill in humanity.
No. 2: Everybody, calm down just a little bit—don’t feel like if you make a mistake it’s going to be the end of the world, because it won’t be.
Third (and I learned this at a session on negotiating), start out by asking your negotiating partner— don’t consider them an opponent, they’re your partner—”What’s most important to you?” I think a lot of times people get all tucked in [and] hold their cards close to their chest, otherwise [they feel] they’re going to fail. Understanding what the other person needs the most is probably going to get you over the finish line sooner.
And finally, we’re always going, “This is the optimum clause for attrition,” “This is the optimum clause for cancellation,” and a few of the other things. But if your group just generally doesn’t have risk for attrition, don’t sit there and arm wrestle for cumulative attrition versus per-night attrition. The whole point of negotiating is to reduce your risk, so if your risk in a particular space is already low, don’t waste your negotiating power or leverage on that. It feels like the right thing to do, but even though it’s a best practice, you might let that go. Give the hotel a win in their column, and then you might get more concessions for something else. And then celebrate.
Are you keeping your eyes on the horizon for any specific developments or potential wild cards regarding contracting or negotiations?
The [U.S. presidential] election— that’s the big variable, right? How the election goes is going to have a pretty significant impact on the economy. The labor market could become very constrained. I’m not an economist and I can’t quote you the numbers, but there’s an incredible amount of guest workers in [the U.S.]. The hospitality industry is reliant on guest workers and if that’s going to be constrained, then anybody who’s a hotelier or a restaurant operator or anything along those lines needs to be prepared…as do the rest of us, because airline services—everything—would be more and more constrained in terms of just having enough people to do the work.
Any presidential administration can have an impact on that, good or bad, depending on what the political winds are doing at any given time. I think that’s something that people need to be more aware of.
Read Next: Hot-Button Contract Concerns Facing Both Planners and Suppliers
