What strategies are effective in obtaining value deals from hoteliers today?
Leann Coppola, CMP, Customer Experience Specialist, GE Oil & Gas
Terry Dougherty, CMP, Director, Benchmarc360°, Inc.
Terri Woodin, CMP, Vice President, Marketing & Global Meeting Services, Meeting Sites Resource
For the last several years, hotels have generally enjoyed a reversal of fortune from the weak demand period of the recession. And quite understandably, they have often taken the opportunity to maximize revenue from room rates as well as surcharges and fees, while curtailing their concessions to planners. In a sign of the times, Terry Dougherty, CMP, Director, Benchmarc360°, Inc., observes that the ratio for complimentary guestrooms has gone from 1:35 to only 1:50 in some cases. “But there is negotiating power out there if you have good history and good performance,” she assures, “and I believe the hotels still are willing to negotiate some good concessions.” In the discussion that follows, Dougherty and two industry peers take up the future of the seller’s market and how planners can navigate it in the meantime.
A SHIFT IN MARKET CONDITIONS
Woodin: In general, if you’re going to a first-tier city like New York, Boston, or DC, they haven’t had many new builds and there is very high demand. It is very difficult to find availability, and of course rates are high and concessions are low. However, I did have a lot of signing bonuses at the end of last year because 2016 was the worst performing year for the hotel industry since the crash of ‘08 and ‘09. So GMs are on their directors of sales, directors of sales are on their salespeople, and the owners want to know why are we behind. And it always takes a while for revenue management to catch up. So the salespeople are starting to feel the shift and we’re feeling the shift as planners, but revenue management is still driving rates. I don’t think the pendulum is going to swing back quickly, but I definitely feel the shift in some markets.
Dougherty: I think we’re beginning to see the supply slowly increasing, and the buyers are actually using more upscale select service and limited service hotels, where we’re able to negotiate better contracts for them. So I do think we’re going to slowly begin to see a shift at the end of 2017 into ’18 toward more of a buyer’s market.
FIRST-TIER CITIES WITH OPPORTUNITY
Woodin: We’ve seen much of the new hotel inventory coming on board in the past year and a half. The cities that have the new inventory are the ones that are more available. And you have cities like Houston that have a high number of new hotel rooms but their demand has dropped severely because of the oil crash. Cities along that oil belt are where we’re seeing the most flexibility with rates and concessions. And Houston is an incredible destination; it’s second only to New York City in number of corporate headquarters. Orlando is also interesting because it’s always in demand but they have so much supply that you can still find great values there.
FINDING VALUE IN SUBURBS AND SECOND-TIER CITIES
Woodin: There is a big push when clients first source to consider second-tier cities and the suburbs [of first-tier cities], though they haven’t considered them in the past. So in a city like Seattle that has very high demand/low inventory, you might go just across the water to Bellevue, where there are some great hotels that don’t have the same demand of those in Seattle. So you can get better rates and concessions that way. And in Denver there are tons of hotels in the north corridor in Broomfield and the south corridor in the Denver Tech Center, where you’re in easy access of a large airport and saving money because you’re not in the core of that city. [Similarly for] Schaumburg, IL, an incredible second-tier city that’s still close to O’Hare.
Coppola: With budget being very front of mind these days we’ve started to go to some of those second-tier cities, such as the Fort Mill area of South Carolina. I’ve done a few events in Warwick, RI, and Quincy, MA outside Boston, where I’ve found the rates to be significantly lower. There is much more availability in those locations. But unfortunately, sometimes the feedback from attendees isn’t that great. The hotels are fine; they do a wonderful job with the meetings. But in the attendee experience the first thing they have to deal with is getting to a venue that’s not [conveniently located], and that can set the tone for the rest of the day.