Negotiate Like A Pro
Meeting planners who negotiate successfully all have one thing in common: They know the value of their meeting from the hotel’s perspective. All too often, planners make the mistake of assuming that because their annual convention is valuable to their organization, it must be valuable to the property. But that’s not always the case.
Remember that a piece of business is only valuable to a hotel if it provides profit — maximum profit, if possible. (The value of your meeting drops, for example, if any other group wants the same dates and is willing to pay a higher room rate or provide more food and beverage revenue.) So be sure to thoroughly analyze every aspect of your event — just the way a hotel sales manager would. The result will be power and confidence at the negotiating table. Here are seven major areas to consider in your analysis:
1. Corporate or Association Influence
Corporate meetings can be more attractive to hotels than association meetings for several reasons. For starters, they’re typically short-term and yield a higher average daily rate. Corporations also usually spend more on food and beverage than associations and are much better at estimating their room pickup since attendance is often mandatory.
On the other hand, corporations tend to cancel their meetings more frequently. Associations rarely cancel because their bylaws generally require them to convene once a year and their annual meetings are, more often than not, their biggest revenue-generating events of the year. In addition, association meetings are often booked many years out, allowing hotels to forecast future years much better. An association’s annual meeting also can offer more guest room nights — a hotel’s largest profit area.
2. Number of Room Nights
You may think that the more room nights you can offer a hotel, the stronger your negotiating leverage will be. But that’s not necessarily a given. More important than the number of room nights is how those room nights fit into the business mix of the hotel. The transient market has been on the rise for the past several years, resulting in an overall drop in the number of rooms committable for the group market. So, in certain instances, a large meeting may actually be too large for a particular property’s group block allotment.
Fortunately, the number and variety of mid-range hotels geared toward the transient market (Courtyard by Marriott, Fairfield Inns, Hilton Garden Inn, etc.) is also on the rise, which means group room blocks are slowly inching their way back up again.
Most properties have three seasons. During high season, hotels typically have occupancy rates of 90 percent or better and, as a result, have little incentive to be flexible and make rate concessions. During shoulder season, occupancy rates usually fall between 70 percent and 89 percent, giving you a bit more negotiating power. You have the most bargaining leverage in low season, when occupancy dips below 70 percent and properties are pretty much willing to “do whatever it takes” to book the business. (Low season conditions also can occur when a hotel is hit with a short-term cancellation and needs to fill the hole quickly.)
A hotel’s seasons most often correspond with the seasons of the year. In Florida, for example, winter is high season and summer (especially August) is low season. But a hotel’s “seasons” also correspond with the days of the week. At most downtown and airport hotels, for instance, high season is Tuesday, Wednesday, and Thursday; off season is Friday and Saturday; and shoulder season is Sunday and Monday.
At resorts, high season is generally dictated by the weather and its relationship to the resort’s recreation focus. May through September could be high season at a midwestern resort, low season at a desert resort, and shoulder season at a ski resort. (In gaming destinations like Las Vegas, weekends are high season and weekdays are shoulder season.) And if you meet over a holiday, you are definitely in low season at most hotels.
4. Food and Beverage
Food and beverage has gone from being a break-even line item for hotels in the ’70s and early ’80s to their second-largest profit center. So the more F&B revenue you can offer a property, the more valuable your piece of business becomes. Using post-convention reports, calculate exactly how much your meeting is worth to the hotel in terms of food and beverage dollars. Don’t forget to include “hidden” revenues from affiliated groups, hospitality suites, exhibit floor concessions, and other trackable revenues that a hotel may be able to provide. After tallying up these miscellaneous sources of revenue, you may discover that you have more negotiating clout than you initially thought.
5. Space Requirements
Ideally, the amount of meeting space you need to book should be proportionate to the number of rooms you need to block. If you’re blocking 100 rooms in a 500-room hotel, but require all of the function space, for example, your event is not going to be perceived as valuable because it leaves the property with no space to sell to another group. If you find yourself in this position, look for ways to reduce your space requirements. Perhaps you can use your general session room for lunch. Or maybe you really don’t need 16 concurrent breakout sessions.
Your arrival/departure pattern should fit into the group pattern of the hotel — historically Sunday to Wednesday or Wednesday to Sunday. If your convention falls into one of these time frames, its value automatically increases. If you want to arrive on Tuesday and depart on Saturday, however, its value significantly decreases since the property would most likely have to break apart a standard date pattern before and after your meeting.
7. Opportunities for Ancillary Revenues
The more opportunities you create for your attendees to spend money, the greater the value of your business to a hotel. Properties in gaming destinations love to see open afternoons and evenings. Resorts want your attendees to utilize their spa, golf course, and other extras. If your program runs from 7 a.m. to 10 p.m., the hotel knows those facilities will not be utilized. Other areas to consider are in-house service providers such as a destination management company or audio-visual company, which typically give a portion of their revenues to the property.
Once you have a handle on the true value of your meeting to the hotel, you are ready to negotiate. Begin by compiling two lists: one of your needs (items that are not negotiable) and one of your wants (items that you would like to augment your event). An example of “needs” might be a specific number of guest rooms, a rate no higher than $140 a night, a general session room that seats 1,500 people, and 12 breakout rooms accommodating 200 people each theater-style. Your “wants” might include a complimentary breakfast for your board of directors, limo transportation for your keynote speaker, and six suite upgrades. Always negotiate your needs first. If the hotel can’t meet these basic requirements, move on to the next property on your list. When negotiating your wants, remember that the hotel has to turn a profit. Your “wish list” should be reasonable, based on the value of your meeting, and not so extensive that the hotel decides to take another piece of business over yours. Also keep in mind the three main factors that come into play when negotiating with a hotel or any other supplier: 1) time, 2) information, and 3) power.
Recognize time as an investment. Don’t expect to select the site for your next meeting in a day. (There may be times when your meeting fits well into the first destination you call, but don’t expect this to happen often.) Expect to invest a significant amount of time researching various destinations and properties as well as analyzing the value of your meeting. Only then will you be able to negotiate successfully. Listen for key indicators to get the upper hand. Every salesperson has performance goals. So if a hotel sales manager indicates a sense of urgency by saying, “I could really use the contract back by the end of the week” or “What is it going to take to get this done by the 26th?,” it most likely means that he needs your piece of business to meet a quota or secure his performance bonus. As a result, those few remaining contract points or concessions that you still haven’t obtained may be in reach if you can address the hotel’s need to close the deal quickly.
Remember, this works in reverse too. If you are behind schedule in selecting a site for your annual convention and tell the sales manager that you need to sign a contract by the end of the week, don’t expect to close the conversation and be successful with: “And by the way, can I have three more dollars off the rate and six limo transfers?”
You set the clock. Don’t allow time to become your enemy. Never begin the process of negotiations or allow someone else to force you into a scenario where, due to lack of time, you agree to unfavorable terms just to get it done. At the same time, don’t draw the process out once you have a fair agreement.
Concessions are made when time is running out. A sales manager has no added incentive to make concessions at the start of the negotiation process when he knows you are looking at seven cities and 21 hotels. He does have incentive, however, when he is one of three finalists and this is the last shot at earning your business…and if he thinks you may walk away from the negotiating table if your requests aren’t met. Very few hotels, after all, are willing to lose an important piece of business based on two suite upgrades or not wanting to provide a complimentary newspaper delivery.
Know their business. Before you can sell the hotel on the value of your meeting, you need to know how the hotel makes its money and what its “hot buttons” are. (Did you know, for example, that the profit margin on hotel rooms can be 70 percent or more, food can be in the low 20-percent area, and beverages are over 70 percent?) Only then can you show the strengths of your meeting and how it fills the hotel’s needs. Ultimately, only meeting planners who provide the best historical data on their events that address the overall value of their meeting to the hotel get the best deals. Know your meeting. A sales manager who has been in the industry for six months may not be familiar with your organization or understand the significance of your piece of business. As a result, it’s up to you to continually prove the worth of your meeting.
Volume. The more business you can give the hotel, the more negotiating power you have. If you can book two meetings — the annual convention and perhaps a board of directors meeting, for example — you will have more leverage than a planner looking at the same dates who can only offer the property one event. If you know you have or can influence multi-year bookings or multiple meetings, bring these to the negotiating table.
Competition. If a sales manager thinks there’s no competition, there’s no reason to offer you the best possible rate or make any other concessions. On the other hand, if a hotel knows it’s competing against two or three properties, it will be much more likely to sharpen its pencil to offer you the best deal possible. If too many hotels are in the final running, however, a property will be less likely to compete aggressively.
Flexibility. The ability to be flexible automatically puts you in a position of power. If you can change your dates slightly, add another food and beverage function, live without 24-hour holds on all meeting space, or switch from classroom to theater-style seating, you may very well boost the value of your piece of business.
The ability to walk away. Even when both parties have done everything they can to attempt to create a win/win situation, you may still find yourself short of your negotiation goals. You must be willing to walk away. Remember, every hotel has a “walk-away rate” as well.
Mike Burns is Vice President, Mid Central Region at Conferon Global Services, Inc. in Twinsburg, Ohio. Visit us at http://www.conferon.com.
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