A leading healthcare organization once saved more than $53,000 a year once they negotiated for each sleeping room to include three complimentary bottles of water.
Here is a list of small-priced items, that when negotiated as complimentary, can save you big bottom line meetings dollars:
• Bottled water
• Power strips
• House sound, including all microphones
• Phone charging stations
• Upgraded premium Wi-Fi
• First three pieces of appetizers are complimentary
• One domestic beer or glass of wine per person
• Dry snacks in each sleeping room (avoids costly mini-bar raids)
• Chef charges
• Bartender fees
• Free business center printing
• Complimentary handling of meeting boxes
• Complimentary fitness center access
• Housekeeping gratuities
Last year, Joanie Phillips, director of purchasing and industry relations of MotivAction, and Kristi Martin, principal of Planning Partners Global, conducted a survey of global executives and sales representatives at a range of hotels and hospitality brands. The report, "Mounting Difficulties in Executing Sourcing Strategies," assessed the top priorities of sellers in answering proposal requests and making pricing decisions. With their permission, Incentive is publishing this white paper in full below. For more, visit the recent Successful Meetings webcast on "Navigating the Merger Landscape," in which Phillips and Martin present some of their findings and their implications:
"It isn't the mountain ahead that wears you out -- it's the grain of sand in your shoe."
-Robert W. Service
"The pessimist sees the difficulty in every opportunity. The optimist sees the opportunity in every difficulty…I am an optimist. It does not seem much use being anything else."
In a stabilizing economy, challenges have shifted and difficulties in executing sourcing strategies have climbed to Everest heights. Hotels are now "King of the Hill," and incentive and meeting planners are looking for the best route to climb over the challenges presented by the current seller's market.
Buyers are becoming more flexible, pulling out all the negotiation tools, but still find themselves running out of rope. Planners and sourcing specialists report feeling that even baseline negotiations are just not good enough. They feel like they are taking steps forward, but moving nowhere.
So what is "good enough" now in negotiations? What are hotel sales teams doing to try to keep relationships stabilized when the only words are "no" or "not now"?
In the summer of 2016, we sent a survey to top global sales team leaders asking for insight and collaborative approaches in this difficult buyer environment. The survey responses provided critical action steps, strategies, and helpful tips which could extend the rope of help and offer planners a lifeline of support. Here are the steps buyers can take to improve their position in a seller's market -- drawing on research from the sellers themselves.
The Right Room-to-Space Ratio Makes or Breaks a Deal
Hotel leaders surveyed shared that a record number of proposal requests in 2015 to mid-2016 were declined, even though space was available. Why? The inquiring company did not meet their selling criteria or financial goals. The hotels were waiting for a better offer. Survey results showed that only 30 percent of proposals sent for space resulted in first options being offered.
The takeaway: If your meeting-space needs are substantially greater than your sleeping room block, find non-traditional meeting space and/or creative space that aligns with your meeting objectives. Consider having your meeting space at a convention center with a hotel that is adjacent. Connect to boutique properties or hotels with limited meeting space for sleeping rooms.
A continuing education tax law company was in shock when their five-year Las Vegas contract expired and the hotel did not want to bid on the next multiyear deal due to the requested room-to-space ratio. The hotel simply said "no." They knew that better business was around the corner.
This was rarely a concern for meetings -- until the market shifted so strongly to favoring hotels. If you have a space-heavy program (compared to the number of guest rooms), consider dates over citywide conventions. During these conventions, hotels typically have the meeting space available so the rooms-to-space dilemma isn't as much of an issue. For a city-wide approach, however, be sure your meeting space, as well as airline and ground transportation, are available for your event experience.
Multiple Deals Deliver
Hotels say the same. Multiple deals (buyer assets) are critical right now for obtaining the right space at the right price. More than 90 percent of survey participants indicated that pricing will only change if the property hotel or brand is negotiating multiple offers.
According to Amanda Skena, account director, group at the Walt Disney World Swan and Dolphin Resort in Orlando, the resort is trying to motivate their customers to lock in multiple programs by offering escalating, customized concessions based on the number of committed programs -- the more booked programs, the greater the savings. After a client books one program with them, the resort wants them to be excited about finding additional programs to book so that they can take full advantage of multiple program concessions.
There is limited pressure to book multiple programs at the same time, knowing the involvement of procurement. The resort will typically offer the customized package -- available up to 60 days -- in order to secure multiple programs. By offering such an incentive, the resort hopes to stand apart from its competition. The sales team understands that within many companies, there are multiple divisions sourcing meetings.
Swan and Dolphin's sellers want their offer to be something that is discussed across multiple departments in an organization, so they can capitalize on all programs within the organization, instead of focusing on just one or two. This incentive has the power to show value and savings and potentially move the booking process along more quickly.
So planners should make sure they are clearly communicating the breadth of their opportunity -- a "small" opportunity may be the starting point for a much larger program. Make sure the hotel isn't short-sighted in their decision to turn down the "small" program.
What You Spend is Your Power Asset
Track your overall spending. Your assets in negotiation go beyond the room and food-and-beverage revenue. Demonstrate to the property what ancillary spending may be as a part of the program, including retail, bar, recreation, and even participant hotel extensions (e.g., a participant's individual pre- and post-extension represent revenue to the property and additional spend value to your asset negotiation).
Concentrate on Presenting Your Assets
Hotel owners are still feeling the pain of lost recession revenue and are seeking ways to make up for it. Hotel sales teams are not saying who has set rate hikes and created new rooms-to-space ratios, but you can hear sales directors whispering, "If it was up to me, I would, but our owners…"
The hotel owners hold the negotiating power.
No negotiation method can completely overcome differences in power, but negotiation experts say there are ways to protect the weaker party against tough agreements. The weaker party just needs to make the most of their bargaining assets.
According to William Ury, cofounder of the Harvard Negotiation Project and award-winning author of Getting to Yes: Negotiating Agreement Without Giving In, "The reason you negotiate is to produce something better than the results you can obtain without negotiating."
Ury continues: "Concentrate on presenting your assets and review possibilities including future and collective negotiations. When a hotel says no, give a reason to reconsider their position. Spark a battle of the possibilities and shared interests." Ury believes good agreements focus on the parties' interests rather than their positions. Your position is something you have decided upon; your interests are what caused you to decide.
Tone, Timing, and Truth
Online sourcing platforms make it easy to cast a wide net for room availability, but hotels sometimes see it as only fishing, and will not respond with the right space and rates. When survey respondents were asked to provide recommendations to buyers in this seller's market, second to multiple-program deals, was the hoteliers request for qualified program leads. In anecdotal responses from the survey, 90 percent of global sales leaders said the tone of the phone call -- meaning a personal call -- will shift negotiations.
When hotels come for their office visits, spend time negotiating programs and present the assets you have to offer in making deals. Present, analyze, and review your business plan with that hotel. Show a high level of interest and the hotel will work harder to make the program work.
Make sure you qualify and target your hotel requests. When they know their hotel is one of 20 being considered, they find it difficult to offer outstanding concessions. According to one survey respondent, until the hotel knows they are among the final one or two properties, they won't get to brass-tacks offers.
When hotels have multiple options out on the same space, the first buyer to proceed to contract wins. More and more often, however, buyers are losing first-option space, and other buyers are going to contract on a second option. According to the survey, fast decisions spark the right financial package. Without an intention to sign within 30-60 days, hotels are truly unable to hold space. Be transparent about your timelines. Educate end users so that they will be able to react to values presented and take action.
Depending on the hotel's specific market, it varies how far out to check space. If your meeting is considered "large," the hotel will consider it to have a solid base on the books. If it's smaller, the hotel will want to use it as "filler" after they have larger events contracted, so they may consider it on a short-term basis.
The more flexibility you have with dates, the better. Hotels are trying to maximize their space: Their goal is to match new business with other business already on the books, or they are trying to fill in gaps, especially with short-term business. Depending on the specific hotel market, they may be looking for weekend business (if they are heavy with weekday business travel, Chicago is a good example). Or they may be looking for weekday or even a Sunday arrival, if they are heavy with weekend leisure business (Napa, for example).
Use meeting space wisely. If time allows, why not use general session rooms for breakouts, changing the set to theater style? Or use a mobile app to collect feedback versus creating yet another breakout session? Reducing or eliminating set-up times will all contribute to hotels providing the lowest rate.
Consider changing your patterns to Sunday arrivals and providing weekend buy-in packages to participants. (Participants can have the option to bring friends and family for the weekend, offering an offset incentive for weekend travel.) The buy-in revenue for rooms, paid on own, adds to the hotel's financial assets and increases buyer's leverage. If there is a chance that the group will increase in size or need rooms on either side, secure the space at time of contract and manage attrition cut-offs sensibly. Do not expect the space to be available at a later date.
The Hotels' Take on Loyalty in Today's Market
According to the survey, hotel global sales leaders are expected to have the upper hand in negotiating for the next three years. They claim the new administration may cause a flattening of rates as consumers become skittish about the economy, but rates will continue to increase. Global sales directors say some markets are softening such as San Francisco, but resort destinations are not building fast enough to support demand, so vacation markets will continue to hold rates and increase by as much as 10 percent in 2017.
Most buyers remember hotel presentations in 2009 when sourcing specialists were "on top of the hill" and hotels presented "loyalty" buying program packages to secure the business, including free transfers, free receptions, free VIP suite upgrades, and food-and-beverage credits that would reflect up to almost a 30 percent discount overall on program spend. They just needed to fill the rooms. If buyers were loyal, the rewards were great.
The survey asked leading global sales team members what role loyalty had in securing business. Only 9 percent of respondents indicated that loyalty would always secure business; more than 90 percent said sometimes. Anecdotal responses show that loyalty and buying power will not always open the space and rates. In the survey, 100 percent of global sales leaders polled said they had turned away business in the last 12 months from a loyal customer.
Insight and Intelligence
Ryan Estis, an international speaker on business performance for the new economy, explains that negotiation is a transformative talent for companies in this economy. Estis commented that you must start from a position of intelligence and that will create acceptance. A good negotiator understands the situation first and rarely defaults to assumptions. It's critical to know what hotels are negotiating and what they are not. Network, benchmark, and get the facts gathered before you start negotiations.
Estis also recommends creating layers of additional negotiation options. Be prepared for what you seek and look for non-traditional negotiation points including referrals.
The View From the Top
Mountain climbers always have a carefully crafted plan in place before they start out. In a seller's market, creating a well-crafted negotiation plan will give buyers the best route to climb through seller's market challenges and over any obstacles.
Our survey participants of national and international hotels sales leadership know that the view from the top is great, but they still want to maintain positive relationships and will work hard to meet buyers' needs. These savvy hotel sellers are telling buyers to establish their assets, be flexible, leverage multiple relationships, and bring deals to the table that are as fast as a climber's Carabiner clipping on to a safety line in the middle of a steep ascent.
Buyers and hotels align on one key thought: Even though loyalty is not the most important factor in negotiations at this time, everyone will most assuredly remember who was with them on the climb up and the climb down.
Joanie Phillips is director of purchasing and industry relations for MotivAction. She has more than 29 years of experience in the meeting and incentive travel industry and is responsible for designing and costing travel programs, managing supplier relations, and providing in-depth knowledge of destinations around the world. She is certified in Strategic Meetings Management. Joanie is active with SITE Minnesota and serves on several international industry advisory boards. She is also a volunteer tutor in the Minneapolis School District.
Kristi Martin is principal of Planning Partners Global. Sought after proposal/RFP writer, SMMP strategist and creative event designer, Kristi's global network and out-of-the-box creativity brings innovation to the table. Kristi has more than two decades in crossover experience in consumer event marketing, consumer engagement communications, and technology support for events. She is a national IFEA awards winner.