Planners Lose Negotiating Clout, as Meetings Recovery Takes Hold

The long-awaited meetings industry recovery is finally under way, shifting the negotiating advantage away from planners to hotels, according to a new study from Colliers PKF Hospitality Research.

While transient and leisure travel began turning around soon after the recession ended in 2009, hotels did not see group demand recover until 2011, according to Robert Mandelbaum, director of research information services for Colliers PKF Hospitality Research.

The survey, sponsored by Convention South magazine, includes feedback from meeting planners from around the country who book meetings in the southern U.S.

Among highlights of the study’s findings:
•    Optimism. Planners are as optimistic as they have been in recent memory, with the highest percentage of planners since 2007 believing that the current year will be healthier than the previous year.

•    Meetings frequency. The vast majority of planners stated that the number of meetings and exhibitions they organize in 2013 will equal the number they planned in 2012.

•    Higher budgets. In 2013, 46% of planners will enjoy larger budgets than last year. One reason is an expected increase in attendance.

•    Higher hotel rates. The recovery is happening despite the fact that planners anticipate higher hotel rates – 72% of planners expect to pay more for rooms in 2013.

•    Stable availability and booking windows. Most planners do not expect problems in getting space for the dates they desire. Similarly, booking windows will not change; many believe the shorter booking windows of recent years are the “new normal.”

•    Free Internet #1 for attendees. The most important meeting site criterion for attendees is free Internet access, according to planners.

•    What planners want. For planners, free Internet access ranked just ninth out of 16 factors. The top five factors for planners are: available meeting space, willingness to negotiate contracts, price of space, price of rooms, service standards.

Advantage: hotels
The major implication of the meetings recovery is that hotels now have the upper hand in negotiations, Mandelbaum told Travel Market Report.

“The leverage up until now has been with planners but, due to rising occupancy levels, the leverage is swinging back to the hotel sales manager,” he said.

As a result of planners’ declining negotiating clout on hotel rates, planners are negotiating on other elements, including free Internet access, breakfast, meeting room rental fees, etc., Mandelbaum said.

“From a hotel perspective, those items tend to be less profitable than rooms, so they are willing to cede in negotiations as long as they get the rate.”

Meeting planners understand that the hotel industry is cyclical in terms of supply of demand and know they need to need to maintain long-term relationships with hotel partners, he added.

Higher expenditures
“Budget expenditures will definitely be higher but they will not be decided on until the last minute,” Mandelbaum said.

“Planners know they need to have meetings but not for the sake of having them. That annual conference will not be scheduled automatically – only when it’s decided that it’s necessary.”

Advice for planners
Above all, planners should be flexible, Mandelbaum advised.

“The sales manager will be more than happy to make deals on their dead spots, like the week of Thanksgiving or summer in Scottsdale,” he said.

“The reverse side of more scientific revenue management is that hoteliers know when the soft spots are and want to fill rooms then. Groups are an efficient way to do that.”