Making Inroads

How purchasing’s involvement is changing the nature of planner/supplier relationships

Tammi Krone

HelmsBriscoe’s Tammi Krone
says procurement departments
make great partners for
placing meetings.


P
rocurement. The very word seems to have taken on a life of its own. Even as some planners grouse about procurement professionals’ increasing importance in the meetings business, suppliers have come to embrace them, arguing they are unfairly mistrusted players in the industry, whose role is largely misunderstood. 
    That is certainly the way Tammi Krone sees it. A regional director for Scottsdale, Ariz.-based site selection firm HelmsBriscoe, she counts among her top clients a billion-dollar national wholesale corporation. Over the past four years, the Duluth, Minn.-based Krone has worked with several different divisions within the company, helping place more than 50 meetings annually worth millions of dollars. She says she owes her success in large part to the client’s procurement department, with which she has developed a solid working relationship.
    “It has been a huge benefit to have procurement behind me,” says Krone, herself one of the client company’s preferred vendors. “I think they do their work incredibly well when they go out to bid, getting all the hotels where they need them and working on preferred rates. So, when I’m looking to place a meeting for a department, it makes sense for me to partner with procurement and reference the preferred vendor list first.”
    And if Krone initially cannot find the right hotel match, procurement is willing to listen to her property suggestions, simply because she has proven she’s on their side. “At first their guard was up, but over time they’ve come to see the value I bring to the company,” says Krone. “Now they give my name to other divisions that need to book a meeting. Even when I place a meeting with a preferred vendor, the hotel will give procurement the negotiated rate and still pay me my commission.”

Hotels buy in
With procurement’s role in the selection process growing due to companies’ ever-increasing emphasis on the bottom line, the typical supplier and meeting planner relationship has expanded into a more complex three-way affair. The planner, by reason of industry knowledge and experience, might easily grasp the nuances of a hotel’s RFP response, but procurement has to be made to understand the value embedded in the only element worthy of its attention, the room rate which, for a meeting, is often higher than what was negotiated with a preferred vendor for the company’s official corporate travel program.
   “When procurement is involved, a lot of the time it is an accountant who is in the middle of the process,” notes David C. Fine, Key Biscayne, Fla.-based vice president of sales and marketing for Sonesta Hotels of Florida. “And when you are dealing with a person who is quantifying everything financially, from one perspective, usually using a matrix, that’s a tough process.”
    Among the steps hotels cite as inherent to procurement-driven negotiations:
    " Proving value. Hotel chains understand that procurement officials are commodity buyers who simply apply the same rule for purchasing hotel rooms as they would for purchasing file cabinets in volume namely, to get the best price possible. They also understand, however, that simply submitting a bid and waiting to see if they are awarded a company’s business is the wrong approach.
    The looming influence of procurement has forced hotel salespeople to emphasize the value inherent in their quotes by literally breaking them down into quantifiable segments, from the quality of food and the standard of service right on down to the condition of public spaces.
    “Procurement forces you to be competitive,” says Fred Shea, vice president of sales for Chicago-based Hyatt Hotels Corp. “Our sales managers have to show price value, not just price, because dates and rates are all online, right there for the customer to see. We are training our people how to do a better job of making that procurement customer understand the value that goes back to them, both in service and actual attendee experience.”
    Sometimes that means not winning the business. Paul Davis, vice president of procurement for White Plains, N.Y.-based Starwood Hotels & Resorts Worldwide, has been working with his company’s sales force to develop techniques appropriate to a procurement-based selling environment. “Do you really want to be the lowest bidder, when you have a higher quality than another bidder?” he asks rhetorically. “Sometimes it is better to lose an auction. That’s the message we have sent back to our sales folks.” 
    " Standardizing contracts. Because procurement buys in bulk, many hotel chains in the past several years have deliberately created standardized meeting contracts. It’s an effective tool, they say, to snag multimeeting deals, such as back-to-back training sessions or incentives. Such is the case both with Boston-based Sonesta Hotels, Resorts & Nile Cruises and Hyatt Hotels Corp., which a few years ago standardized meeting contracts at some of their properties. “You offer one standard contractual deal and get three to four meetings,” says Shea of Hyatt. “The standardization allows us to offer discounts, which procurement likes, and it also means procurement only has to solicit a bid once.”
    Offering a standardized contract also gives hotels a bidding edge, says David Fine of Sonesta Hotels. “If procurement already has an agreement with us at one property, and we can say the contract obligations are the same for some of our other properties, it shaves a lot of time off the whole bidding process,” he notes. “Procurement likes to see conformity.”
    " Making on-site calls. On paper, a hotel’s bid might not look especially good to a procurement specialist, but the planner knows the property is right for the meeting. Bridging the divide often comes down to hotels taking the time to make an in-person sales pitch to buttress the client’s stand and win over procurement.
    “There often is a struggle getting from the procurement mentality to the planner mentality, because price is the biggest factor coming between the two,” says Chicago-based Denise Lodrige-Kover, vice president of business travel strategy and strategic partnership accounts for Beverly Hills, Calif.-based Hilton Hotels Corp. “I feel our job is to help planners educate the procurement side of the industry, so we have gone in and sat with procurement officers and explained why we priced our bid that way, taking them through the process. That open dialogue has been very successful.”
    " Touting success stories. Just as planners pitch their meeting’s worth to a hotel by touting the financial success they will bring to a property, hotels dangle the same bait when pitching their bid to procurement.
    “The greatest things to have on hand when explaining the value built into your pricing, and why the company will have success holding its meeting at your hotel, are your success stories with other meetings, especially those within procurement’s company,” says Lodrige-Kover. “We have to show them that price is not an indicator of the greatest value.”

SMOOTHING THE WAY
Daphne Meyers, CMM

Daphne Meyers, CMM

Daphne Meyers, CMM, came to Microsoft Corp. in 2001, when the technology behemoth bought her employer, Great Plains Software. In the following years as program manager for partner events, she watched a strategic-sourcing initiative spread through the company, focusing first on reining in the amount of money being spent on events.
    For the most part, she dealt with procurement officers who had specific roles on the events team people with financial backgrounds who handled the event purchasing. She had no trouble talking numbers with these colleagues but found she had a lot to learn about quantifying the worth of meetings elements that didn’t lend themselves so easily to a spreadsheet. What subtleties in service did a $40-a-plate caterer bring that made that vendor a better value than a $30- or $35-a-plate caterer? And, to be added to Microsoft’s preferred list, was the vendor’s business on solid ground, and would it be able to handle the volume the giant company might send its way?
    “The speak I found I was not very good at was how to measure and place value on things that are beyond pricing, like service levels and doing performance reviews of vendors,” says Meyers, who started her own business, Durbin, N.D.-based Red Barn Group, in November. “As we talked about whether we would continue to use certain vendors, it was very difficult to describe why I found them valuable.”
    Ultimately, Meyers feels the process changed how she thinks about planning, teaching her to look at an event’s puzzle pieces the way the procurement person would look at them. She then passed this knowledge on to her suppliers. Essentially, she sat with them to come up with ways to measure their services. “I said, ‘I want to continue to work with you; let’s try to figure out how we live in peace in this new world.’”
    While some of her sources welcomed the process, it caused trepidation for others. “Some knew they weren’t going to make the cut,” Meyers says. “There were thousands of vendors involved in events at Microsoft, and a lot were redundant.”
    Meyers learned how to tell procurement what she needed up front and how the vendor delivered, or didn’t, beyond, “They hire really nice staff, and they’re polite,” she says. -- SARAH J.F. BRALEY

Relationships that work
Procurement, say some suppliers, has gotten a bad rap. Too many meeting professionals, they charge, unfairly view the department as playing an adversarial role in the industry. In response to such concerns, in January, Dallas-based Meeting Professionals International issued a white paper titled “The Power of Partnership: Capitalizing on the Collaborative Efforts of Strategic Meeting Professionals and Procurement Departments.” The paper advises both planners and suppliers on the challenges of working with procurement and suggests they “learn to leverage both groups’ expertise for the good of the business.”
    " Reaching out. MPI’s statement makes sound sense to Dianne Killian, CMP. As regional director for HelmsBriscoe, Killian, based in Columbus, Ohio, handles a large amount of meetings business for federal and local agencies in her state. She also serves on the board of the Alexandria, Va.-based Society of Government Meeting Professionals’ Buckeye Chapter, a role that has allowed her to bring government planners and procurement together to learn from each other.
    “I have taken more of an initiative to come up with ideas to help alleviate the frustration of the government meeting planners I represent within the state and the procurement office we must go through,” says Killian, who over the past year has organized two meetings with procurement officials one specifically for suppliers to vent their frustration about working with them, the other for meeting planners to discuss issues. The next step, she says, will be to bring all three parties together.
    “Right now, there are a lot of barriers,” Killian notes, “but I think we’ve opened procurement’s eyes to the uniqueness of meetings. I think it finally sank in that when it comes to meetings, conferences and trade shows, they will have to change the way they buy, because meetings are not just another commodity.”
    " Respecting their role. “You know, procurement folk don’t get their due,” says Fred Shea of Hyatt. “Today, they are being asked to make business decisions that they are held accountable for, just like the meeting planner. What happens when the CEO says, ‘Yes, you saved us $10,000 on that meeting, but it was a terrible experience for our customers’? It’s a whole new responsibility for them.”
    The way Shea sees it, procurement can be relied upon to fulfill agreements, simply because they have the clout and the tools to do it. “If you have a preferred vendor relationship with a company, it has more muscle because companies now have more control over their employees, thanks to corporate travel programs,” Shea notes. “So, on the good side, when procurement says they can deliver the volume they promise, they can.”
    " Providing regular updates. Putting business out to bid, weighing proposals and pushing volume that translates into savings   these are the key tasks of procurement. Yet, says Tammi Krone, taking the initiative to keep procurement abreast of the meetings business that they signed off on, whether it is placed with preferred vendor hotels or otherwise, goes a long way in winning their acceptance and approval.
    “I do a cost analysis for procurement every month showing what I am working on, what’s been booked, price, value, everything,” Krone says. “The planners know I am doing this. In turn, procurement has come to me asking if I can provide them with feedback on events at hotels that are preferred vendors, such as the condition of the property. And over time, they have added hotels I have used to their preferred vendor list, based on the feedback of the meetings that were held at those properties. The communication has been very beneficial to both of us.”
    " Thinking long-term. “When procurement first came into the buying relationship, they were very much ‘lowest price, lowest cost,’” says Hilton’s Lodrige-Kover. “That is changing as we educate them on our industry and show them that we are not just a commodity. It will also help our meeting planner clients be successful indeed, all of us.”
    Fred Shea goes a step further. He says the better planners understand procurement’s role in the process, the better equipped they will be to navigate the future buying arena and the two areas will merge. “I believe planners will come to understand what procurement looks for, and they will develop their own standards of doing business that procurement understands and approves,” he predicts. The end result? “People’s roles evolve. Meeting planners eventually will become an extension of procurement.”