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April 22 2013

The Evolving Art of Hotel Negotiation

By David McMillin, Staff Writer

negotiation

Looking to lock in the best room rates for meeting attendees? Hoping to receive some discounts on F & B costs or get complimentary Wi-Fi throw on to that contract? Today’s business climate has meeting planners asking for plenty of price breaks, but having a big group doesn’t guarantee big savings. Here’s a look at four of the key factors that are influencing hotel contract negotiations today.

1) The Economy Is Better Than You Think.

While headlines may continue to highlight global economic uncertainties, the reality is that business travel is picking up. The Global Business Travel Association predicts that business travel will rise by 5.1 percent in 2013 to more than $268 billion, and that positive outlook is trickling down to the meeting industry, too.

“Some organizations who booked their meetings very conservatively over the past few years are now increasing their room blocks as they see their attendance numbers rise,” Cecilia Bell, Key Account Director, Global Sales, Intercontinental Hotels Group, says.

“Despite post-recession concerns, the reality is that corporate profits are hitting all-time highs,” Bell adds. “That ultimately trickles down to impact association business, too.”

SEE ALSO: The New Normal of Business Travel

2) We Need More Hotels - - But That’s Not Going to Happen Right Now.

While business travel may be picking up, the amount of rooms in the area are not.

“As the economy continues to improve and more people are traveling, meeting planners should expect to encounter challenges finding rooms in some markets,” Raymond D. Martz, CFO, Pebblebrook Hotel Trust, says.

“Outside of New York, Austin, Denver and Memphis, we aren’t seeing a ton of new developments,” Martz says.

Bell points out that the supply-and-demand relationship has an impact on negotiation power for planners.

“As demand increases and supply remains relatively the same, it means that hotels aren’t as quick to throw in concessions as they were just a few years ago,” Bell says.

3) The Operator Has to Answer to the Owner.

While planners are under pressure to save money, hotel representatives are under just as much pressure to maximize their profits, and that pressure comes from another party: the owner of the property.

“Many hotel companies don’t own a lot of their real estate anymore,” Bell says. “They don’t own many of the physical properties they manage, either.”

“The companies that actually do own the structure are emphasizing that hoteliers must increase profits in every revenue center,” Bell adds.

SEE ALSO: 5 Key Challenges Facing Hoteliers

4) The Screen Is Replacing the Sales Person.

In an industry built on creating face-to-face relationships, online site selection services have technology has dramatically changed the way that planners send out RFPs.

“These selection services can help planners save time and energy, but they create another layer between the decision maker, the planner and the hotel,” Bell says. “It can be very difficult to develop a trusted relationship.”

How Planners Can Sweeten the Deal

While planners may face plenty of challenges in the negotiation process, they can take steps to give suppliers the ability to consider offering steeper discounts or more value-adds.

“Flexibility is key,” Bell says. “Planners who are willing to consider alternative seasons or alternative locations are most likely to secure attractive terms for their groups.”

While some organizations may not be willing to offer that kind of flexibility, planners may want to educate Board members on what the willingness to shift dates or cities can mean for the meeting’s bottom line.

“When a planner isn’t tied to a specific time of year, a specific destination and a specific property, they can often get everything on their list of concessions - - and in some cases, even more,” Bell says

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