With three decades of experience in hospitality, including 14 years as a buyer for corporate travel programs, I’ve been afforded the luxury to sit on both sides of the negotiation table. In each role, I have pulled from prior experiences to coach my teammates and direct reports as to how to put their best foot forward in getting what they needed during negotiations with the other side.
When I worked at Johnson & Johnson, my previous hotel industry knowledge made up for the lack of transparency in room rates. It wasn’t until travel booking websites emerged that anyone could gauge hotel pricing for the transient population. Group rates remained another matter entirely.
How then should a buyer approach a hotel to receive the best rate? When sourcing for group travel, it’s in the best interest of both the meeting planner and the hotelier to simply tell the truth.
Show your cards
Imagine going to interview for a new job opportunity. The most uncomfortable question we’re asked is, “What do you want to make?” Many of us have been reluctant to name our salary expectations upfront because it could go either way. What if we bid too low and leave money on the table? What if we ask for too much and price ourselves out of the position?
An employer who is willing to underpay you will eventually lose you to someone who sees your value. Conversely, if they find your salary range above their expectations, they will often negotiate so that you can both come to a fair agreement.
This same dynamic tends to play out in rate negotiations as well. The desire to negotiate seems to be human nature — we’re naturally looking out for our own interests. But no one wants to get into a buying situation that feels like you’re haggling in a car dealership.
Let’s say your budget is $250 a night for one of your meetings. As an event planner, if you’re willing to spend that amount, you shouldn’t be reluctant to reveal your budget. You shouldn’t fear that the hotel might take advantage because the hotel has an important decision to make.
For example, if their standard room during that time commands a $200 rate, but they charge you $250, they have to figure out how to support the additional $50. The transparency of the internet levels the playing field once one of your attendees goes to make a reservation. This doesn’t mean group rates will always be lower than what a person can find online because there is value in a hotel protecting your block from the time a group is contracted to the time the meeting takes place. What’s more, oftentimes other amenities are included in the group rate, such as complimentary parking, included resort fees and others.
It’s not uncommon for attendees to look online to see what the hotel usually charges. What happens next should be obvious — these attendees end up booking outside the room block. The meeting planner risks looking foolish, and the group may fall into attrition. That’s why a hotel has to charge fair market value based on the meeting dates. If they don’t, they may end up having to rerate your business, which means revising the contract to reflect a lower rate.
Rates versus occupancy patterns
On the other hand, imagine your budget is below the hotel’s going rate. A budget of $250 might not get you the rooms you want in a market like San Francisco, where occupancy tends to be higher. You either have to pony up more money or shift your event a week to fit a hotel’s particular pattern.
One of the advantages of GroupSync, an online sourcing platform that empowers planners to create simpler, more effective RFPs, is its market estimate feature. Powered by STR and other data, GroupSync utilizes historical rate trends in searched cities according to dates. (How the fallout of the coronavirus pandemic will affect these predicted rates remains to be seen.)
With intelligence from GroupSync, you will know in advance of contacting the hotel the average rates within that market and timeframe. So, if you have a budget of $250 a night, but the market bears a range of $199 to $220, you’re going into a rate negotiation more educated on what to expect.
You can also evaluate occupancy trends for both transient and group travelers. If a hotel has high transient occupancy but low group occupancy, they may allow you to have a higher meeting space ratio over that period. During a citywide convention, for example, the hotel may sell a lot of sleeping rooms but have excess venue space and no banquet bookings. Your group business benefits the hotel by not only selling those remaining rooms but renting meeting space and contracting for F&B. It’s a win for all involved.
Contribution per room
Beyond room rates, your F&B spend greatly contributes to the value of your event. Some planners who have spent $300,000 on F&B on similar past events will only commit to $100,000 in their hotel contract, but you’re better off being upfront. If you know you are going to spend it, contract it. It gives your hotel salesperson more ammunition regarding the value of the program. When a market has compression, space and rooms are limited. So it’s best to be the most valuable piece of business that revenue managers and salespeople are considering. Any extra F&B and ancillary spend represents a greater contribution per group room, which could also mean a lower room rate.
If you keep all these numbers to yourself, however, you’re not making your best case to the hotel about the value of your event. In reality, the more information you provide the salesperson, the better he or she can make a case to revenue management that your group won’t displace higher value transient or group business. By being transparent with a hotel about your financial intentions, they won’t have to guess at how to win your business or how to maintain their bottom line.
When you approach a hotel, tell them your priorities, including what you want to pay in room rates and your anticipated F&B spend. That gives the hotel a chance to put you in the right place at the right time for the right rate, with the right concessions and in the right space. The hotel may have another planner client with different priorities whose event can take place concurrently — two valuable pieces of business means everyone wins.
Everyone negotiates with their own best interests in mind. The meeting planner wants to get the best deal possible, and the hotel wants to be as profitable as possible. Planners need to understand that if hotels cut too deeply into profitability, something suffers, and that’s usually service. And hotels need to understand that if they overcharge, they have to be able to support that rate through upgrades and added services.
We all want to get to the same bottom line, and hotels are willing to be creative and flexible in how they do that. In the end, being transparent and truthful keeps the process from devolving into a guessing game and allows the two parties to come to an agreement that benefits them both.