Hotel Contracts: The Good Deal Is Out There

Once the travel industry recovered after the events of Sept. 11, corporate event planners had a rough time snagging desirable dates at hotels, particularly in the top markets.

Now, with the recent downturn in the economy, the tables have turned, and the planners, in many cases, have the upper hand at the bargaining table. Certainly, fewer corporations are spending big bucks to fly customers or employees to meetings, but there are fewer leisure travelers as well, so what was once a dearth of available hotel space, in some cases, has become a surplus.

Richard Danley, CFO of corporate event planning company Success Unlimited, said he recently negotiated a contract with a hotel in Dallas where his client had held an event before. Even recently, Danley added, if he went to a hotel asking for 20 concessions, he might get half of them.

This time things were different. “I asked for 20 concessions and there were only two they didn't accept,” he said. “These guys were pretty hungry.”

Success Unlimited plans about 10 major meetings each year for a client list that includes Compaq, Coca-Cola USA, PepsiCo, Denny's, Sunkist and El Pollo Loco.

Luckily, the situation with the hotels has arisen, he added, because, with fewer dollars to spend, corporations are looking for ways to make them go further.

“Most corporate buyers are becoming more prudent with their dollars,” Danley said. “In 1990, they used to spend $100,000 on event openings. Now they spend $25,000.”

Kaye Sparks, vice president at ResourceOne, HelmsBriscoe's corporate event planning division, said the slow economy hasn't caused a “big financial shift” with her 70 clients' budgets.

But, she added, there have been more subtle changes. Budgets are slightly lower and fewer people are being sent to events.

“The venues have been great at giving us the same concessions at a reduced rate,” Sparks said. “We're getting more for our money than the last couple of years.”

She told of a recent instance where a hotel, eager to book her client's business, said the group could have the first hour of cocktails at its event on the house.

“There are lower F&B minimums, with no rental fees being offered,” Sparks added.

Tony Aslanian, director of sales and marketing at The Peabody Orlando, agreed, saying he has seen a shift in the way groups are booking their meetings and, as a consequence, the hotel is trying to make as many deals as possible.

Room nights still are on target for this year, Aslanian added, but there has been a decrease in food and beverage spending, and the lead time to book groups has gotten shorter.

Sheri Wallen, Peabody's co-director of sales, said, “Contract negotiations have become a little more difficult. (For example), we're removing food and beverage minimum clauses. Rate negotiations have been really unique. We've seen competition we've not seen before.”

Aslanian added that it's crucial for the hotel to be aggressive with its pricing, otherwise it might not get a second look from groups. “There is a concern in our industry because there's more demand,” he added.

According to Aslanian, the Peabody handles 150 to 200 corporate events per year in its 57,000 square feet of meeting room space.

So far, even with the tough negotiating on the part of corporate planners, the Peabody has been fortunate.

Aslanian said there's been only a slight drop in group business, and they're looking toward the next 12 months to see how the economy really affects their business. “We've been holding strong,” he added.

Still, Aslanian said, the next 12 months will be crucial.

Rick Kerstine, national sales manager at the Hilton Waikoloa Village on the island of Hawaii, said his property was weathering the economic downturn because groups booked business there a few years ago for this year. “We also have a lot of repeat groups,” Kerstine added.

The biggest challenges he has had selling to groups, he said, is first convincing them that Hawaii can be an affordable destination, and then negotiating a contract with them that is feasible given their reduced budgets.

“We say, 'Tell us what you'd like, and we'll make it work,'” Kerstine added. “We are in the hospitality business.”

Sometimes, it's all about location when it comes to being successful at booking group business, at least according to Karen Colliton-Thomas, director of sales and marketing at The Westin New York at Times Square.

“We have between 90 and 140 groups a month,” Colliton-Thomas added, even if they're not all that large. “We joke and say we make our (catering) budget one chicken at a time.”

Even so, other venues would most likely envy the numbers the Westin pulls in, despite the struggling economy. “Some people are a little misled,” Colliton-Thomas added. “This is not a buyer's market, this is still New York City. There are no deals on Tuesday and Wednesday nights. We encourage people to come in on Sundays if they are watching their pennies.”

That doesn't mean the Westin is immune to some headaches caused by companies that are finding it hard to part with their dollars.

“There is no lead time (on booking meetings),” Colliton-Thomas said. “It's giving me a heart attack.”