Competition for meetings business between destinations and hotels has never been more fierce. And winning hinges more than ever on collaborating and partnering with the growing number of third-party planners who are guiding decisions for the elusive meeting client.
It's an evolutionary shift that the San Diego Convention & Visitors Bureau (aka ConVis), which booked 1.6 million group room nights in 2011, not only acknowledges, but actively embraces as part of its new marketing strategy. "All the fights in days gone by about who gets credit for a lead no longer matter, as long as the destination wins," says Margie Sitton, senior vice president, sales and marketing, for the CVB. "We are not asking for a 10 percent commission. We are not asking for any money. All that matters at the end of the day is that we stepped in, helped them sell the destination and won the business."
Destination marketers who might have privately grumbled at the growing influence of third parties gradually have come to the same conclusion. According to a study released in July 2012 by Washington, D.C.-based Destination Marketing Association International, bureaus that are actively involved in group sales (such as the marketing arm of ConVis) influence 19 percent of group room demand booked to their destinations. That report, which is based on the collective data of nearly 100 destination marketing organizations representing three-quarters of the U.S. market, gives a nod to the important role DMOs play in securing group business for their cities. It also, however, begs this question: Who is influencing the other 81 percent of group room demand?
Sources agree that a large chunk of business is coming from third-party planning firms. Eager for their attention and the room volume they wield, many DMOs -- including Greater Phoenix, San Antonio and Orlando -- have overhauled their marketing strategies accordingly. A host of DMOs have rolled out preferred partnership agreements and educational and marketing programs for these new partners, hosted annual events for their associates and even forced member suppliers to be judged by third-party standards.
In mid-2010, after analyzing and measuring where its group business leads were coming from, the Orlando/Orange County Convention & Visitors Bureau realized a seismic change was underfoot. Meetings business generated by third-party firms, like Los Angeles-based ConferenceDirect and Scottsdale, Ariz.-based HelmsBriscoe, had increased so dramatically for the destination, says Fred Shea, vice president, strategic partnerships for the OOCCVB, that his bureau had to acknowledge the rules of the game had changed.
Shea implemented an aggressive new business plan. Instead of continuing to focus on having the sales team chase down potential group leads coming through third-party generators, the bureau set about developing key long-term partnerships directly with third parties by offering them destination education, targeted familiarization tours and marketing support. By October 2012, the effort was paying off, with the number of third-party bookings tracked by bureau reps up by double digits.
"Third parties are sourcing agents who like to work directly with hotels in a destination. It just did not make any sense for us to ask them to send us their leads so we could send those along to our hotels," says Shea. "They want the hotel to know up front that they are the ones sourcing the business, and if their lead comes through the CVB, they might not get the commission. Now that we understand their rules, and they trust us, the number of leads they copy us on has actually increased."
ConVis, the San Diego CVB, has won Los Angeles-based third-party firm ConfrenceDirect's bureau of the year award six times, more than any other CVB. They have done it, says Margie Sitton, via strategies that target and support third-party-generated business. Sitton, a former hotel executive, established an accountability program for hotel members based on third-party evaluations. At the time, it was viewed as a controversial move that would alienate members.
After hosted site visits, third-party customers are asked to evaluate the hotels they have inspected in five key areas, including the sales team's use of their time during the visit, their approachability and how eager they seemed to secure business. The feedback, whether good or bad, is immediately relayed to each hotel's general manager. "Everyone told me I would be run out of town when I started this accountability practice. Well, it hasn't happened yet," says Sitton. "It's a leap of faith for third parties to entrust their customers to us. We can only take them to a certain point, and at the end of the day I can't afford for the hotel's salesperson to blow it for us."
The Scottsdale Convention & Visitors Bureau, which has no convention center to market and is primarily a resort destination, faces some unique challenges, particularly when it comes to attracting corporate group business in tough economic times. In 2008, the bureau decided it would meet the challenge head-on by harnessing the power of the growing third-party segment. It's first action was to form a partnership with HelmsBriscoe, which included hosting a reception for the company's new associates when they came to town for three days of mandatory training at nearby headquarters.
Kelli Blubaum, CMP, vice president of convention sales for the Scottsdale CVB, says the investment was an obvious move. "HelmsBriscoe is a large meetings player, based right in our backyard," she notes. "It gave us the unique opportunity to have face time with them and get Scottsdale on their radar right off the bat." Blubaum estimates the group market represents 60 percent of Scottsdale's tourism business.
Next, the bureau rolled out a series of seminars for its members on the role third parties play in the group market and how to work with them to leverage business. For speakers, they tapped local HelmsBriscoe executives. Then, in November 2011, Scottsdale launched its "Site See, Fly Free" initiative, a series of hosted site inspections for third-party associates. According to Blubaum, the program, which hosts at least one HelmsBriscoe associate or client each week, has been wildly successful. In its first year, more than 46 percent of clients taking part have generated confirmed group business.
"It has been a mutual shift to embrace what we each do and come together," says Blubaum. "For us, the most important thing is establishing that we are not competitors with the third parties, so we get a chance to bid on their business."
The Hotel Perspective Like DMOs, hotel
companies have been forced to acknowledge the power third-party players
wield in the meetings market. It would be hard, after all, to ignore the
sheer volume of their group bookings. In 2012, the three largest firms
-- ConferenceDirect, Experient and HelmsBriscoe -- generated more than
11 million group room nights combined for hotels. And, that's just the
top three. There are more than two dozen smaller companies that each
year bring in several hundred thousand group room nights for hotels.
With
that kind of revenue potential up for grabs, it's no wonder hotels have
lately entered into guaranteed "no add-on" clauses on the 10 percent
commission they pay to certain third parties on negotiated room rates.
In the early days, the commission typically was added to the quoted
rate. But today, when one third party can deliver, say, 400,000 room
nights to a particular chain, it has the strength to negotiate
competitive rates that smaller companies, or even individual meeting
planners, simply cannot match.
"Of
course, we would prefer not to have to pay commissions," says Christie
Hicks, senior vice president of global sales for Stamford, Conn.-based
Starwood Hotels & Resorts Worldwide, who notes that such annual
payments are significant. "But we have to sell the way the client wants
to buy, and many of them are using third parties. That makes them
invaluable in securing group business."
Today, every major hotel
company has preferred partnerships in place with third-party firms, and
their value for the meeting client goes way beyond discounted room rates
or meeting space concessions. Most chains have created sales units just
to handle business coming through third-party channels. Not only does
that mean their requests for proposal are green-lighted for immediate
action, but hotels are more willing to make value propositions to secure
the booking because of the overall financial worth third-party business
represents.
Of the 140 salespeople Mike Fegley oversees as vice
president, Americas sales, for the Atlanta-based InterContinental
Hotels Group, 40 are dedicated to third-party business. "These firms are
big players, and I want more than my fair share of their business, so I
have my best people on their accounts, people who are the face of IHG,"
he says. "If ConferenceDirect sends an RFP to one of my hotels, they
know we have to give them answers immediately, because they have other
choices. And I want my people to win their supplier of the year award
every year."
At Chicago-based Hyatt Hotels Corp., where
third-party-generated business represents roughly one-third of the
company's overall annual group business booked, Ed Smith, director of
worldwide accounts, has dedicated a special unit within his 85-member
global sales force to handle their accounts. "We rely on them to know
our brands and guide clients to our hotels," he says.
The
collaboration between hotels and third parties continues to evolve on a
variety of different platforms. For example, this past June, to
celebrate its 10th anniversary, Scottsdale-based Hospitality Performance
Network Global gave away 250,000 Marriott Rewards points to one lucky
client who booked a definite piece of business by close of summer. It
was a promotional campaign designed to draw favorable attention to
Marriott among HPNG's associates and clients.
Fostering such
bonds is key. To that end, every year IHG's Fegley is a speaker at
ConferenceDirect's annual educational client event, where meeting
planners are given a frank update on the state of the hotel industry,
from rate projections to specific market pitfalls they need to be aware
of. It's a commitment he is happy to make because the potential return
is tremendous. "We are now dependent on these guys, because our funds
are limited," he says. "If you want to fish where the fish are biting,
you have to take care of the big boys."