Meeting Negotiations Evolve as Demand Rises
Published in Business Travel News
by Chris Davis
June 10, 2011
(view original article)
A quickly evolving corporate meetings market, marked by what hoteliers and analysts are characterizing as swelling worldwide demand, not only promises higher costs--though not necessarily immediately--but also calls into question the fate of the tighter meetings policies many corporations enacted in the wake of the 2008 economic recession.
Several large hotel companies boasted strong first-quarter meetings performance: Group requests for proposals rose 20 percent at Omni Hotels & Resorts, in-quarter bookings increased 15 percent at Hyatt Hotels Corp., and corporate group business jumped 35 percent at Starwood Hotels & Resorts. Even at Marriott International, where first-quarter group business was weaker than expected, group bookings were trending 10 percent higher for the remainder of the year.
"We started seeing the return of demand, in terms of bookings, in the fourth quarter of 2010, and it's come back quite strong since," said Greg Malark, COO of site-selection firm HelmsBriscoe. "There's not as much demand in the market as there was in 2008, but we are approaching that threshold."
Many buyers expected their companies to spend more on meetings this year than they did last year, according to a BTN March-May survey of 127 corporate travel buyers. About 63 percent of those respondents foresaw higher 2011 meetings spending, and nearly half of them projected increases of at least 10 percent.
Even buyers whose companies planned no increase in meetings volume should expect higher costs, analysts said, as overall demand growth slowly is beginning to strengthen hoteliers' negotiating hand. However, with many of the growing number of booked meetings not scheduled to take place until later in 2011 or beyond, many hotels have meetings availability. Though a low level of full-service convention hotel construction during that period offsets some of that, there is availability especially for short-term meetings.
"There's a much quicker negotiating period than there has been in the recent past," said BCD Meetings and Incentives president Scott Graf. "There's a feeling of, 'You can help me in this particular instance or you can't. No hard feelings, but if you can't help me find value, I'm going to go to the next option. Not the next option down, but the next option. Whether I'm dealing in the upscale, midscale or lower, there are plenty of options.' "
Still, that short-term availability and flexibility will dissolve by the beginning of 2012 as new bookings turn into actual occupancy, HelmsBriscoe's Malark said. "In the last three or four months average rates for meetings have started to go up, albeit very slowly. We're also seeing hotels being less flexible," he said. "Some of the offers in 2008 and 2009, like zero attrition, a lot of that's gone. It's still very much a buyer's market, but it seems like we'll have slow rate growth over a number of months. It won't all of a sudden be 2007. We're still booking on average $25 less [per room] than we were in early 2008."
Growth in demand and rate increases aren't limited to the United States. Ian Quartermaine, CEO of online site-selection firm MeetingsIn, described meetings demand in Asia/Pacific as "complete bedlam." He observed that demand in the region "is primarily driven out of mainland China, with a little from India. Rates will grow steadily, but no massive increase. What will hold it back is the massive increase in capacity. We see North America more steady with Europe much slower, especially the United Kingdom."
Malark attributed the rise in demand in part to corporations returning to traditional patterns by re-establishing meetings held in 2007 and 2008. Since that time, many companies created or strengthened policies that restricted or forbade some external meetings. As the economic rebound takes hold, it is unclear whether, and to what degree, corporations will relax those policies.
"I definitely see a relaxation of policies in favor of guidelines," said Cvent vice president of enterprise sales Anil Punyapu, adding that he sees corporations de-emphasizing policies that require pre-booking approval by certain executives in favor of post-event audits. "You'd need approval, but not in a structured way, where only a certain person can approve it. When you are tracked and audited and someone else is watching, you're going to be a better citizen and less likely to do something."
Thirty-seven percent of respondents to the BTN survey indicated their companies require senior-level executive approval to hold individual meetings, the most frequently cited policy plank other than contract-signing authority, which more than half of respondents said their companies limit.
One in five BTN survey respondents indicated their companies have policies requiring the use of preferred meeting suppliers, slightly less than those whose policies direct meetings to preferred transient suppliers.
Some new policies include more specific language concerning when meetings must be held via remote conferencing instead of in a face-to-face environment, Iwamoto said. "Some companies are directing that," he said. "You fill out a profile of the meeting, and you're directed to book the meeting online or through telepresence instead of a trip."