TIPS FOR TOUGH TIMES
Economic uncertainty breeds a climate of confusion and fear, which can derail even the best-planned event. Lynn Stadler Randall, right, strategic meetings consultant for Maritz, a Fenton, Mo.-based sales and marketing services company, offers this advice for avoiding potential pitfalls while achieving management objectives.
Don’t stop communicating. Maintaining focus and morale is critical. Keeping the flow of communication between leadership and employees open is essential to provide a sense of comfort.
Know your audience. “Get the pulse of attendees, so you can ensure the meeting’s message is on target,” says Randall. “If they have an issue that is not being addressed, they will never be mentally in the space you want them to be.”
Expand your audience. Take a look at your current portfolio of events. By adding a virtual element to a physical event (e.g., a national sales meeting), management can send a message to the entire organization.
Speak up. “Step outside the order-taking bubble of meeting planning and think more like a meeting marketer,” Randall suggests. “Take the temperature of your attendees. If you don’t feel an event you’ve been asked to plan will bring a return to your company, say so, because going ahead might affect other events.”
Don’t rush to cancel. Planners who are good at measuring the value of a meeting can craft a good data story explaining why it shouldn’t be eliminated. The data might show that carrying on with an event can alleviate cer-tain workplace issues, while canceling would intensify the situation. -- C.A.S.
Deficits. Foreclosure. Layoffs. Recession. These are the watchwords of the current precarious state of the U.S. economy. What does all the bad fiscal news mean to planners and the process of organizing events? The picture is not nearly as bleak as events would portend. M&C spoke to industry insiders to reveal a shifting landscape in which real opportunity can be found amidst the uncertainty.
Reality check
It is far too early to trumpet the dawn of a buyer’s cycle, such as the one that followed 9/11, when hotel occupancies plummeted into the single digits and properties wrestled for the few pieces of meeting business out there. In fact, the hotel industry, which racked up breathtaking year-over-year profits for the last three years, is forecast to continue to see revenue and profit margins increase in 2008, albeit a tad less sharply.
“From a market and financial perspective, we believe the U.S. lodging industry is in a healthier position entering this economic recession than prior recessions,” says Mark Woodworth, president of Atlanta-based PKF Hospitality Research, citing a continued increase in room rates and healthy occupancy levels that will keep 29 of the top 50 markets tracked by PKF humming at full throttle. “The typical U.S. hotel will enjoy increases in both revenues and profits, but at a more modest pace,” he adds.
For planners, this outlook means it would be unrealistic to expect hotels to offer an avalanche of freebies or to forgo attrition and cancellation clauses. According to Bjorn Hanson, principal of New York City-based Pricewaterhouse-Coopers’ hospitality and leisure group, in red-hot markets like Boston, New York City and San Francisco, where occupancy and room rates are through the roof and new inventory is slow to arrive, there will be little change. PWC is forecasting a 62.9 percent average occupancy rate for 2008 -- just slightly off the 63.3 average notched in 2007.
According to a report by American Express, room rates are expected to climb further in 2008, between 5 and 8 percent -- particularly at the luxury level -- before they begin to level out by year’s end. (By contrast, in New York City last year, where year-round occupancies hovered at 83.3 percent, the average room rose 15.4 percent.)
SUBTLE CHANGES
For Linnell Navarro, CMP, associate director, meeting services, for Tarrytown, N.Y.-based Alpa-Medica, a third-party vendor that specializes in pharmaceutical meetings, it’s mostly business as usual. “Tons of association meetings business is being held right on schedule,” says Navarro, whose office of three planners typically handles 40 meetings a year, including product launches, advisory board sessions and training programs. “One thing I am noticing is more postponements after bookings,” she adds. “If a particular speaker or attendee is not available, the meeting will reschedule to accommodate them. Also, one association told me they had condensed their meetings schedule from four days to three, to save attendees money and time.” -- C.A.S.
Playing it smart
Experienced planners who have been paying attention to the underpinnings of the hospitality market know there is an upside to this cycle that will help stretch budgets and even get them into their first-choice cities.
* Follow the rooms. After years of drought, the bottlenecked hotel pipeline finally is gushing like a newly tapped oil well. According to Portsmouth, N.H.-based Lodging Econometrics, 101,238 new rooms opened in 2007, with another 133,623 scheduled to come online by year’s end, putting growth at “an all-time high,” says Patrick Ford, president of Lodging Econometrics.
For planners, that means greater availability in those markets flooded with new inventory as the competition heats up among hotels to fill beds. And that, says Robert Mandelbaum, director of research information services for PKF, translates into a business environment where planners will be able to negotiate more attractive deals.
“For the most part, 2008 is still going to be a seller’s market,” Mandelbaum notes. “But in cities such as Fort Worth and San Antonio, which have had to absorb a larger portion of the new hotel inventory, occupancy will be flat compared to 2007, and room rates will change little, so planners will be able to strike better deals.”
Las Vegas, despite its reputation as recession-proof, is another example of a city facing a challenge due to its ballooning inventory of accommodations. According to Lodging Econometrics, Sin City has 50,283 new hotel rooms in the pipeline, which represents 30.3 percent of existing inventory. That influx will force hoteliers actually to work at keeping their occupancy levels up -- and they have already started.
This past April -- usually a month with near-perfect weather and tourists coming in droves -- every high-end hotel on the Strip, from the Venetian to the Four Seasons, was offering incentives such as free cocktails and food-and-beverage credits. “For so long there was no space, and now we are finding space, dates and rates,” says Pat Palacios, a Plano, Texas-based vice president of third-party site selection firm HelmsBriscoe. “In tough markets like Las Vegas, hotels are calling us for business, and we are negotiating great deals for our clients.”
Palacios adds that her office of 30 is reporting group business up by 20 percent over the first quarter of 2007.
Another sign of the times: In April, MGM Mirage, which owns 10 properties in Las Vegas, said it was eliminating more than 400 middle-management positions, saying the move was expected to save $75 million annually. And in a recent interview with the Reuters news service, Jim Murren, president of MGM Mirage, the largest casino operator on the Strip with properties such as Bellagio and Mandalay Bay, went so far as to predict, “I think the industry is certainly going to be down, when you add it all up in 2008.”
* Fill the transient void. During the past several years, the transient business traveler has been a cash cow for hotels. Unlike meetings business, which has to be deconstructed and negotiated, the transient traveler shows up, pays the posted rate -- which typically is top dollar -- taps room service and technology services, checks out, and then repeats the process again and again. These lucrative travelers make hotel revenue managers less willing to give up room blocks to planners with time-consuming contract requirements and service demands.
As belts have tightened, however, the numbers of such travelers are beginning to level off, and hotel managers are reacting swiftly to counter potential losses.
“Hotels put a premium on the transient rate, but with that slowing, they are adding more group business to their selling equation,” says Jim Schultenover, president of Washington, D.C.-based Krisam Group, a third-party firm with 230 member hotels. “That means planners will find a bit more availability. It is not going to be that they can get into New York any time they want, but they certainly stand a better chance now.”
Victoria Barr, director of sales and marketing for Le Parker Meridien in New York City, agrees. “We have seen more weekend availability than in past years, which has allowed us opportunities to host groups,” she notes.
* Do not fear short lead times. In the past, last-minute bookings left planners with fewer options and little negotiating leverage. Now, it appears that in some cities, it actually might pay to wait. “What is driving the group market now is that planners are holding off, waiting for upper management approval,” says Schultenover. “The feeling is the longer they wait, the less chance there is of attrition or cancellation penalties.” And, he adds, there are “desirable places” where planners will find last-minute availability. “Nothing in the market is at disastrous proportions yet,” says Schultenover. “But a little here, a little there, and suddenly you have a haircut.”
* Take advantage of incentives. In every business there are deals to be made, and the hotel business is no different. Ironically, just as playing the waiting game can be beneficial for planners, so too can biting the contract bullet and committing to a room block.
Hotels are keenly aware that their product has no shelf life. An unsold room cannot be repackaged and resold at a later date, which is why hotels value business on the books. It is a vital measurement of anticipated revenue performance, which tells hotel owners how effective their management team is. And when lead bookings take a dive, hoteliers become anxious.
Expect to see properties come up with booking incentives. For example, Krisam launched an “Economic Stimulus” package earlier this year that has been fruitful for the company and beneficial to its clients. Planners who signed contracts between March 15 and May 15 for events taking place by year’s end received a $30 airline credit per attendee, to be applied to the hotel master bill. In the month after it launched, Krisam raked in $600,000 in new committed group business.
Likewise, the Boca Raton Resort and Club in Florida launched a promotion on March 31 offering up to a $10,000 credit to the master account for meetings or events held by year’s end, provided the planner executed a contract by June 20 and was willing to commit at least 25 room nights.
