Seller’s Market: The Art of the Deal is Changing

There is no hiding from the fact that meeting demand is up—way up—and hoteliers are enjoying this red-hot seller’s market. How hot, you ask? In 2019, the hotel industry will have its biggest year ever, including hotel occupancy, average daily rate and RevPAR (revenue per available room). Clearly, this is changing the way that planners plan and execute meetings and how hoteliers sell and deliver service.

New Marketplace Realities

Greatly increased meeting demand and limited new hotel room supply, particularly in the Four-Star and Four-Diamond category, fuels the hotelier advantage. Additionally, since corporate and association meeting budgets are not keeping pace with projected hotel revenues, we are seeing unprecedented hotel fees and surcharges being introduced—all of which are negotiable, of course. On the planner side, there are increased expectations from senior management for improved productivity, cost savings and ROI, and the focus on strategic meetings management (SMM) standards has placed a priority on meeting value reporting.

Think Like a Hotel Revenue Manager

Today, hoteliers can be choosy, and the reality is that hotels are turning down three meetings for every one that they go to contract with. Negotiation success today requires a specific game plan for each meeting, which starts with a strategic RFP process. All hotels have a hotel revenue manager whose total focus is projecting and maximizing individual and group revenues daily by profit center.

The Issue

Given the lack of availability and high room rates, planners are doing high-level searches with limited information in the RFP and sending to numerous properties to determine if there is availability so they can advise stakeholders which destinations might be an option. The problem is the hotelier declines their RFP due to “no rooms or space available” without an explanation as to what that means because revenue management says there is not enough information in the RFP to be able to bid.

The planner accepts there is no availability and does not ask why no rooms or meeting space is available (citywide, rooms-to-space ratio, pattern, compression in hotel, definite business on the books, etc.) and proceeds to advise their stakeholder that there is no availability. Door closed.

The hotelier contacts the planner and acknowledges that the planner is doing a high-level search. The hotelier advises that there looks to be availability and rates are in the mid-$200s. Once the planner has additional RFP information, the hotelier requests that the planner circle back around, and the hotelier would be happy to provide a detailed proposal. Door left open.

The planner will circle back to the hotelier that advises and provides direction as to how to get to “yes” on their RFP and learn along the way as well how the hotel evaluates their business, providing a learning experience for both sides by communicating and creating a win-win for both sides.

THE SOLUTION

Planners

How hotels value your business and the variables that influence pricing and availability to get to “yes” on your RFP:

• Transient demand
• Arrival/departure pattern—flexibility
• Rooms-to-space ratio
• Group food and beverage spend
• Sleeping room spend
• Seasonality—demand over your dates
• History
• Lead time
• Value of total account business
• Repeat business potential
• Multiyear contracts
• Incremental/ancillary revenue
• Risk (contract clauses)
• Other groups contracted over same dates

Assess your leverage by understanding average industry profit margins and how your RFP contributes:

• Rooms: 77%
• Group F&B: 38%
• F&B outlets: 19%
• Recreation/spa: 15%
• Retail/miscellaneous departments: 15%

Hoteliers

How you administer the revenue management process to change your level of involvement from reacting to becoming an adviser:

• Be specific in your decline. No rooms or no space is not a reason for a decline. Why is there no availability: citywide, definite business on the books, rooms-to-space ratio, pattern, etc.?
• Offer solutions. What do they have to change to get a yes on their requested dates rather than just asking if they have alternate dates?
• Be a trusted adviser. You know your hotel best, so manage the process rather than letting the revenue management process manage you, and help your client get to yes and your property get the business.
• Think outside the box. It is not what you book but what you move! Build the wall between groups and put the puzzle together by getting creative.
• Dates, rates and space. If you responded yes to the RFP but changed what the client specifications requested, then be an adviser rather than saying you can do it when you really can’t, and the client finds out after you have been shortlisted and they ask you to map the space flow. Advise on what you changed in your response, i.e., two per six feet changed to three per six inches, “we have all that you requested except one breakout,” set or tear-down times adjusted, etc.

Track and Leverage Meeting Activity and Spend Data

We have all heard the term “information is power,” and that is certainly the case in the meeting industry. Track all meeting activity and spend by each meeting and by individual hotel and chain. This includes contracted rooms vs. actual pickup, group food and beverage and ancillary spend (business center, AV, production, technology, spa, golf, “in-conjunction-with” events, etc.). You can then consolidate and leverage this “business intelligence” for maximum success.

Yes, the art of the deal is changing, but having a strategic plan for each meeting will improve hotelier communications and drive value-based outcomes. It is important to remind planners that regardless of shifts in the marketplace, when they carefully evaluate each RFP, track meeting spend, understand their leverage and flexibility and have a negotiations plan, they will add more value to their meeting and bottom line.

This article originally appeared in the Summer 2019 issue of the MPI Northern California Chapter’s Perspective magazine.