Hotel Negotiation Strategies for an Uncertain Economy

By Cory Fransway, CMP, CMM, Director, Strategic Account Management

hotel negotiating-330These are unprecedented times.

That phrase is getting more mileage these days. Change disruptors are impacting nearly every industry. The meetings industry is hardly immune. For us, these are truly unprecedented times.

Legacy event planning strategies that worked well for years aren’t delivering the same results. Whether event logistics, experiential design, technology/data, or revenue management, event organizers are tackling a number of tough change decisions.

As it applies to site selection and contract negotiations, the stakes are high and the road ahead, less certain. Booking decisions for larger groups and/or Tier 1 cities are often made years in advance. In today’s fast-changing world, it’s challenging to predict how things will look in a few months, let alone in a few years.

Seller’s Market Continues, But How Long Will It Last?
Most agree that we’re still operating in a seller’s market. Still, buyer/seller dynamics are a cyclical thing. The bigger question is when will this pendulum swing back? When will event planners be back in the power seat at the bargaining table?

[pullquote align=”left” cite=”” link=”” color=”” class=”” size=””]A 3.5% increase is forecasted for group business bookings by year end, with the biggest surge coming in Q3.[/pullquote]

The economic outlook for hoteliers continues to be rosy. According to last month’s TravelClick Hotel Performance Outlook, a 3.5% increase is forecasted for group business bookings by year end, with the biggest surge coming in Q3.

Scanning economic indicators beyond our industry, last December, the Federal Reserve predicted several interest rate hikes for 2016. After a turbulent January and February, that plan appears to be on hold for the moment. When you factor in slowing growth overseas, coupled with continued volatility in China, it’s easy to see why financial advisors are a bit more cautious.

Rest assured, promising signs of recovery continue to emerge, but this economy is more fragile and we have fewer leading indicators we can rely on. After all, these are unprecedented times.

Improving Negotiation Discussions in an Uncertain Economy
For those booking conference or trade show venues several years out, here are three tips to help strengthen your position at the bargaining table, while keeping risk to a minimum:

  1. Dig deeper for historical data on total event spend.
    Beyond room block utilization, gather data on ancillary spend (Food & Beverage, Audio Visual, etc.). For example, if many in your group flock to the lobby bar, ask to see that data. Not every hotel can accommodate this request, but as we help our clients get clarity around ancillary spend, you’d be surprised at what we find. Planners armed with deeper and more credible historical spend data tend to strike better deals.
  2. Be more realistic (& forthcoming) about what you’re capable of spending.
    Often, event planners will hold budget numbers close to their vest. In a more vigorous economy, that tactic might win additional concessions, but that’s less true today.  In today’s business environment, you need to be a bit more transparent and cut to the chase. You don’t need to reveal everything early on, but sharing critical insight sooner sets the stage for more win/win decisions. For our clients, we’ll also arm them with booking data for groups of a similar size – valuable insight that can be leveraged to get room rates down and concessions increased.
  3. Push for more latitude around room block adjustments.
    For events booked several years out, it’s smart to add a clause that will allow you to increase or decrease the room block without penalty. One year out for such an adjustment is reasonable, though timelines will vary, depending on the destination and venue. We’re constantly studying the changing market conditions across the thousands of events we book each year, so we can advise our clients on when to hold firm and when to flex.

If you’re gearing up to conduct site research and/or negotiate contracts for a future event, we’d be happy to weigh in with recommendations to help streamline and improve your journey. Click here and tell us more about your group and we’ll get back to you soon.

Another article you might like: 7 Ways to Navigate Group Reservation Needs in a Seller’s Economy

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