Strength in Numbers

HelmsBriscoe founder and CEO Roger Helms
discusses business with HelmsBriscoe International’s
Pat Durocher (center) and others during a break
in the action at an HB luncheon held in
July at the New York Marriott Marquis.

It is 9 a.m.on a Friday morning in late July, and the Broadway Ballroom at the New York Marriott Marquis in Times Square is filled to capacity. Close to 700 salespeople from major U.S. and international hotel chains, independent properties, convention and visitor bureaus, international tourism offices and hotel marketing consortia are gathered in anticipation of one thing -- to hear just how good business is going for Scottsdale, Ariz.-based HelmsBriscoe, and how they can get a piece of the increasingly lucrative meetings pie.

The news does not disappoint. It is revealed that in 2005, HelmsBriscoe’s 767 associates booked 2.7 million group room nights, worth $435 million in hotel room revenue, or about $650 million in total hotel spend. And this year’s numbers, founder and CEO Roger Helms tells the applauding crowd, are on pace to be almost 25 percent better. The company is on target to book 3.25 million group room nights, at an estimated worth of $580 million in direct hotel room revenue. “If you had any doubts relative to the opportunity that exists with HelmsBriscoe and the clients we represent, it is there and within your grasp,” says Helms. “And consider: Sixty to 65 percent of the business we book is consumed within 12 months.”

Planners refer to HelmsBriscoe and its counterparts as site selection companies. Simply put, they are brokers. They research properties for a given program, obtain proposals from hotels, match the client with the property that best meets the group’s needs, and even expedite the contract and booking process. They are compensated in one of three ways: The hotel that gets the business pays them an agreed-upon commission, usually 10 percent of the room rate; the meeting client pays a management fee, or some combination of both is applied.

In fact, however, this segment of the meetings industry, which straddles the line between planner and supplier, is far more complex and diverse. And many senior executives in the hotel industry, who categorically refer to HelmsBriscoe and its peers as third parties, say the time has come to take a closer look at exactly who they are and how they operate.

Three companies -- Los Angeles-based ConferenceDirect, Twinsburg, Ohio-based Conferon Global Services (CGS) and HelmsBriscoe -- dominate the third-party segment.

“Everyone understands who the big three are and their business model, but we don’t discern between the big players and all the others,” says David Scypinski, Washington, D.C.-based senior vice president, industry relations, for Starwood Hotels & Resorts Worldwide, who says Starwood’s group business booked as a result of third-parties has grown 15 to 20 percent year-over-year for the past three years.

However, in 2005 the White Plains, N.Y.-based hotel chain paid commissions to more than 2,000 third parties. “We as an industry should be looking at some kind of designation and accreditation for this segment of the industry who are all lumped together as third parties,” says Scypinski. “We, the hotels, have created our own mess. There is no policy, and there is so much abuse that the end user doesn’t know about.”

HOLDING SWAY OVERSEAS

 

HBI’s Pat Durocher (left)
is growing the company’s
international reach.

In 2000, site-selection company HelmsBriscoe took a gamble, turned its attention to the worldwide market and launched HelmsBriscoe International in three destinations: France, Germany and the United Kingdom. These were uncharted waters for the Scottsdale, Ariz.-based firm, says Pat Durocher, HBI’s managing director. At the time, she says, the third-party model didn’t exist overseas anywhere but in the U.K. (where roughly 2,000 third parties operate today).

“There I was in France, trying to recruit people. I would outline our whole business model, and at the end I would always get the same question: ‘What type of company car do I get?’ But to our advantage,” says Durocher, “international hotels want a piece of U.S. business, and we are a door to the sales force they don’t have.”

Today, HBI has 130 associates in 31 countries, including China and India. Outbound U.S. meetings business to international destinations will represent 11 percent of its projected $580 million group room revenue for 2006, a 50 percent increase over 2005.

Rosy Merlino, director of sales and marketing for the U.S.A. and Canada for Jolly Hotels, says her chain has gained enormous exposure as a result of HelmsBriscoe. “I attended our first HB conference last year. From that, we got 26 leads,” says Merlino. “One hotel booked $100,000 in group business.”

For London-based Rachael Ferrand, account director, agency sales, of InterContinental Hotels Group, which gets 28 percent of its business from third parties, nurturing the HBI relationship is extremely important. “The potential is there to develop revenue, because they are writing new business all the time,” she says.

To Pat Durocher, the future looks very bright. “I think that in a few years, HBI can represent at least 25 to 30 percent of all HelmsBriscoe business,” she says. -- C.A.S.

The power players

The “big three” have tremendous industry savvy, solid business operations and are getting more powerful each year, as they grow and expand into new markets. Combined, they employ more than 1,500 associates in dozens of offices, and in 2005 the three brought hotels a combined total of 9 million room nights in meetings business -- making them the largest purchasers of group hotel rooms in the industry. In hard cash, that translates into well over $1 billion in overall meetings spend, an amount projected to grow by as much as 25 percent in 2006.

Two significant events occurred in the past four years that contributed to the exponential growth of these third-party leaders. The all-out competition that followed 9/11, when the hotel industry faced plummeting occupancy levels, made third parties indispensable for securing incremental group business that a hotel’s internal sales force could not penetrate. At the same time, as corporate America became enamored of outsourcing, the top three firms made great strides in the association market and in corporate meetings departments, from Nike to Nextel and Best Buy to Boston Market.

While each of the three has a unique business model and core client audience, all have spent significantly on recruitment and training, and they have invested heavily in research, strategic partnerships and technologies to support their internal systems. In addition, they have grown their ranks, largely through the hiring of former seasoned hotel salespeople, and extended their reach by opening new offices.

Finally, they have achieved recognition in the market by attaining key roles in industry organizations, such as Meeting Professionals International, where their employees sit on executive boards and head regional chapters. From that vantage point, the power players made some smart moves. Among them:

* New partnerships. In April, CGS, whose 650 employees handle 3,000 events a year for an association-heavy client base, announced a restructuring that integrated the three main arms of the 35-year-old company -- Conferon, ITS and ExpoExchange -- into a single entity, creating Conferon Global Services. That move was intended to eliminate any confusion as to the company’s services. It also hired a public relations firm to explore ways to rebrand and strengthen its position. Three months later, the company announced two significant partnerships: one with Boston-based event data management firm nTag, and the other with Philadelphia-based StarCite, an online event management service.

“Organizations today are putting together global solutions, and they want to align themselves with people who have the expertise and the solutions to manage all of their needs, not just a meeting here and there,” notes Rick Binford, chief marketing officer for CGS. “We are focused on bundling our multiple products and capabilities and becoming a cost-effective, seamless provider.”

To that end, CGS seeks to extend its reach into the corporate meetings market, where it will go head-to-head with HelmsBriscoe and ConferenceDirect, which have made that market the core of their group business. “We are tailoring our services to the needs of each customer,” notes Binford. “For some, it will be full-service meetings management, and for others it will be a la carte services. But the key thing remains expanding our service capability.”

For its part, HelmsBriscoe formed a partnership in July with Southlake,
Texas-based GetThere, a leading online corporate travel reservations company. The move will allow HelmsBriscoe access to GetThere’s DirectMeetings module, so it can more easily respond to client meeting needs. That alliance gives Helms-Briscoe significant cache in the corporate marketplace, because GetThere’s booking engine, which accounted for $6.3 billion in corporate travel spend in 2005, is used by 62 percent of Fortune 200 clients, per company records.

* Technology investments. HelmsBriscoe has spent the past several months investing in two online proprietary technologies, which it will roll out by year’s end. HelmsBriscoe Express 2.0, in conjunction with StarCite, aims to make requests for proposal more content-heavy, more accurate and more efficient for hotels, leading to a faster response and turnaround for clients.

HelmsBriscoe University, an online tutorial program slated to be launched this month, features topics such as international protocol, negotiating, contracts and general business skills. Each new company hire must spend two weeks going through the tutorial process before being allowed to represent HelmsBriscoe in the marketplace, in addition to four days of extensive on-site training.

* Destination research. Knowing a place well enough to recommend it to a client, says Brian Stevens, president and chief executive officer of ConferenceDirect, requires an investment of time and money. Stevens, who founded the company eight years ago, says his team of 180 associates, who booked $200 million in group hotel rooms in 2005, knows the places they are pitching.

“We are very willing to invest profit dollars into marketplaces to grow this enterprise,” says Stevens. “When I am researching a market, such as St. Louis, I hire a salaried person for a year to live and work in that market. It’s their job to learn everything they can, network and form partnerships, so we are experienced in that destination before we recommend it to a client.” Today, the company has offices in several major meeting cities, including Atlanta; Boston; Charlotte, N.C.; Chicago; Salt Lake City; and Washington, D.C., with more planned.

Hotels up the ante

In November 2000, the Ritz-Carlton Hotel Co. announced it would cut commissions paid for group business received from third parties -- specifically those who did not engage in full meetings management -- from 10 to 3 percent, due to the proliferation of group leads coming from this segment. The fallout was immediate and harsh, with some third parties declaring they would steer clients away from the hotel chain altogether. After 9/11, the issue quietly faded, as hotels were grateful to get any business they could. Now, however, the specter of commissions is about to rise again.

“MPI calls these people independent planners, we call them third parties, while planners call them site selection,” says Mike Beardsley, senior vice president of sales, North America, for Washington, D.C.-based Marriott International and a member of MPI’s Foundation board. Beardsley says the board has discussed the need to “look at this segment. There are several thousand of [such room brokers], but in reality, 20 percent of them are driving 80 percent of the business. The majority are mom-and-pop operations who work out of their garage on one or two pieces of business a year.”

Whether mom-and-pop or juggernaut, third-party business is at an all-time high. For Marriott and every major hotel chain, group business booked through such channels is growing by an average rate of 20 percent each year, according to several sources. In 2005 alone, Marriott estimates third parties accounted for 3 million group room nights booked, on which the chain paid out a standard 10 percent commission. For HelmsBriscoe, which Beardsley says provided his hotel company with $90 million in group room nights, that amounts to a $9 million commission payout. And that’s just one supplier. Not surprisingly, hotels are taking notice.

“What Marriott did back in 2000, putting Ritz-Carlton out there to test the commission waters, was really smart,” says Starwood’s Scypinski. “The idea was good, but the timing was wrong. The timing is better now.”

According to Scypinski, Starwood has begun to “take a hard look” at its growing commission payout list and is aggressively advising its sales force to do the same. “We will not pay more than 10 percent, and we insist there be full disclosure to the client on who is getting this payout,” he says. The backlash comes from an unregulated system that is open to abuse, he says.

Consider the classic scenario: A third party hears of a group lead and passes it along to a hotel’s director of sales, with the proviso that if the business pans out, the third party gets the 10 percent commission on the room rate. The salesperson agrees, the lead becomes reality, and the hotel pays the third party the commission. It doesn’t end there, however.

Next, the meeting client advises the hotel to pay the same 10 percent commission to the independent meeting planner his company hired to work out the logistics and execute the business. The confused salesperson says the commission already was paid to a third party, to which the client responds, “I never heard of them. I made my own deal with the person I hired. It’s in my contract; didn’t you read it?”

“What happens next?” asks Scypinski. “You have a hotel out 20 percent in commissions, because our salespeople haven’t stopped to ask the questions. And it happens a lot.”

One potential solution is the concept of tying commissions to accreditation. Although the meetings industry is already awash in certifications, there’s nothing specifically for third parties. Starwood is among the companies that favor the idea. According to Scypinski, the chain is weighing a “preferred” and “nonpreferred” third-party model as a means to address reduction of ever-growing commission payouts. The lead players, such as CGS, ConferenceDirect and HelmsBriscoe, would be considered preferred third parties, and not just because of the sheer volume of business they deliver.

“They have invested time, money and training to get to the level they are at,” Scypinski notes. “If we say the industry needs accreditation and a payment schedule based on that level of professional, and have an outside entity police it, it will be completely transparent for all sides.”

Scypinski asks, “Why do hotels have to pay a standard 10 percent commission? Why is that a sacred cow? I’ll tell you why -- the fear factor is huge in the hotel business. The mindset is, ‘If we upset XYZ customer, they might not do business with us again.’ Well, we are examining that risk and asking ourselves, ‘What does it mean for Starwood?’?”

Ty Helms, senior vice president of sales for Chicago-based Hyatt Hotels Corp., which in 2005 booked 2.6 million group room nights through third parties, is not so sure the room brokers need regulating. “I am more inclined to let them weed themselves out,” says Helms, who believes as more site selection business is outsourced to the few at the top, the “lesser players will fall off.”

Until then, he says, Hyatt will play ball with whomever brings value to the table. “As long as third parties, including HelmsBriscoe, attack the C and D accounts we don’t have access to, and they aren’t tripping over the A and B accounts that my sales force is working on, we will continue to value them.”

But on the issue of commission restructuring, Ty Helms would like to be more proactive. “If there are third-party accounts that we think don’t warrant the standard 10 percent commission, we should take a look at that.”

The way Beardsley of Marriott sees it, most business from third parties is good business. The question, he insists, is one of quality of the business delivered. “Just because a third party is small is not to say they aren’t bringing in good business,” says Beardsley. “It’s just that the really big ones bring real value to the table. They are bringing us accounts we don’t have or can’t get to ourselves,” such as Minneapolis-based electronics retail giant Best Buy. “Because of the HelmsBriscoe sales associate who managed that account, we were brought to procurement’s attention and placed on their preferred vendor list,” he notes. “That was a really big deal for us.”