Budgeting for 2016January 1, 2016

Savvy Planners Share Ways to Prioritize Needs and Maximize Value While Negotiating Concessions By
January 1, 2016

Budgeting for 2016

Savvy Planners Share Ways to Prioritize Needs and Maximize Value While Negotiating Concessions


Among the signs of the overall health of corporate meeting budgets is the response to Meeting Professional International’s Meetings Outlook Winter Edition survey: 11 percent of respondents anticipate budgets to increase by 6 percent or more in the near future, while 42 percent expect an increase between 1 percent and 5 percent.

Of course, cost savings and avoidance strategies must still complement a larger budget in order to maximize value, as well as offset higher lodging rates. A vibrant travel industry continues to drive up demand and RevPAR, which translates to room rate increases. “The market dynamic has changed because there has not been (significant) new supply in the convention hotel sector and the economy is clearly improving, which increases the demand for meetings,” notes Julie Lindsey, director, global events, Gap Inc. in San Francisco.

Lindsey and her planning team book primarily in first-tier cities where the seller’s market is strongest. A robust airlift is typically high priority for their events, which rules out many lower-tier cities with more affordable lodging costs. Fortunately, meeting in second- and third-tier cities is but one possible avenue to cost control. If meeting in a first-tier city is a “must have,” then a planner can consider which “could haves” the meeting owners may be willing to forego.

“Prioritize what the needs are,” advises Kathy L. Miller, president of Schaumburg, Illinois-based Total Event Resources. “We’ll often ask a client, ‘What are your must haves, what are your should haves and what are your could haves?’ ” That’s the first step to developing creative solutions that deliver value on the spend.

“One of the best things the buyer can do is be flexible with their dates because a lot of the hotels are filling holes: 2016, ’17 and ’18 are booked with holes.” — Kathy L. Miller

For example, if the specific dates desired are a “could have,” there is the opportunity for date flexibility and perhaps meeting hoteliers’ need times, thereby increasing negotiating leverage. “One of the best things the buyer can do is be flexible with their dates because a lot of the hotels are filling holes: 2016, ’17 and ’18 are booked with holes,” Miller notes. If a downtown hotel is just a “could have,” a suburban or airport property may offer some rate relief or other kinds of savings. Dale Fisher, CMP, senior project manager with Takeda Pharmaceutical Company in Cambridge, Massachusetts, recently booked a short meeting for a global group at the Hilton London Heathrow Airport for logistical convenience, and “a nice side benefit is that I’m not paying for ground transportation,” she adds. If an offsite special event is merely a “could have,” perhaps it can be held at the hotel, increasing the F&B revenue the planner brings to the table during negotiation.

Bargaining Chips

Leverage is equally important to negotiating concessions, which can be more challenging in the current market conditions. And since hoteliers are more selective about the group business they take, they often want to assess the full piece of business — including all requested concessions — at the RFP stage. “Hoteliers are taking the request package into consideration more holistically than they perhaps did in the past,” Lindsey observes. “I’m being asked more frequently in the early phases of an RFP for concession requests. So the hotels want to look at what the rate is and what else the planner is going to be asking them down the line.” Apart from greater selectivity on the hotel side, this trend also is motivated by “pressure on hotels to show revenue growth,” Lindsey says. “It’s a little difficult (to detail all the desired concessions) with the electronic RFP process, but we’ve been trying to accommodate by following up quickly with our concessions requests for each meeting so they can actually quote on the total package.”

If a concession on an ancillary fee is not addressed at the RFP stage, then it should be discussed at the contract stage, she recommends. “Get any ancillaries into the contract because you have the most leverage before you sign,” Lindsey says. “So anything you can think of that you might be paying for should be negotiated in the contract upfront.” That can include quite a few line items: For her larger meetings, “it’s not unusual for my contract to have two pages’ worth of agreed-upon concessions and operational considerations.”

With regard to F&B, for example, numerous items can be included in the contract, such as waiving replating fees, waiving bartender or carving fees, and discounts or modified menus for crew and staff meals. More general F&B pricing constraints also can be included. Due to the regulations on transfer of value to health care providers at meetings, “we put it in our contracts that breakfast, lunch and dinner need to be below a certain rate,” Fisher notes.

Kim Hentges, CMP, senior planner, events and incentives, Lennox Industries Inc. in Richardson, Texas, adds, “Most hotels and resorts provide a standard 3–5 percent ‘prepare and overset allowance’ for each F&B function,” and suggests planners “incorporate this into your hotel contract and your guarantees.”

Food & Beverage

F&B is a traditional target of cost control, given that it “can be up to 40 percent of your meeting budget” depending on the nature of the event, says Lindsey. “It’s not only a place where you can be more strategic, but it’s also an enormous area of spend.” Among the myriad cost-saving considerations in this area are the following.

Onsite vs. offsite F&B. As mentioned, the promise of keeping more F&B functions onsite can accrue some negotiating leverage, but there is still “a lot of evaluation to be done,” says Lindsey. “The hotel F&B can be very expensive because of the union and labor requirements around it. So I think you can often get less expensive catering at an offsite venue, but then you’re paying for transportation and you have to keep an eye on your F&B minimum at the hotel.”

Group dynamics as a basis for decisions on pricing structure. What is the expected “attendee flow” at a reception? Will they come all at once, or come and go in a more casual scenario? This knowledge of attendee behavior can inform the choice between paying on-consumption or buying an F&B package. “If they tend to come all at once a package would be the better option; if it’s a casual reception then on-consumption may be better because they might come just for 30 minutes, grab one drink and leave,” Lindsey says. “One thing I’ve started doing is making the one-hour cocktail reception before dinner on-consumption and then at the dinner go into a package.” Similarly, Hentges recommends “knowing your audience” when paying for alcoholic drinks: “Paying ‘by consumption’ can be more cost effective compared to ‘by the hour,’ ” she says. Also, items that are provided à la carte are not necessarily charged on-consumption, so this must be confirmed. “There are hotels whose food-break options are sold per item, but are not on-consumption, so if you order 100 and not all 100 are taken they are still yours,” Hentges advises. “Provide the extras you paid for to production staff, at another event that day or take them back to the office.” Overall, keeping records on which pricing structures best fit a group’s behavior will guide decisions on future F&B functions, as will information on the actual number of attendees fed for each event compared to what was guaranteed. “The banquet captain can provide this information and it is great to have for the next program, so you do not over-guarantee,” Hentges adds.

Custom-designed menus. A tried-and-true approach for savings is to provide the F&B budget to the convention services manager and ask for a menu to be designed that fits that budget. “Nine times out of 10 we won’t pick off of the standardized menu,” says Miller. “Instead, we say to the hotel that we want to spend, say, $30 (per head) on a lunch or we have this coffee break budget, and ask them to design something accordingly. That’s a great way of being able to save.” What is more, “chefs enjoy having the opportunity to create outside of the standard banquet menus,” Hentges observes. Cost-saving customization can be requested even for non-meal items. “For jumbo cookies, ask the hotel to make smaller-size cookies using the same amount of total dough,” Hentges suggests.

Sustainable, healthful and less expensive. Proteins generally cost more than vegetables, starches and grains, so when possible, offer the latter, which also are more often the more healthful choices. In addition, using “proteins (results in) a higher carbon footprint,” says Lindsey, so by using fewer proteins “you can actually create a more sustainable menu and decrease your costs.”

Hotel beverage services. “Have a clear understanding of the type(s) of complimentary water service that is offered,” Hentges advises. “We have partnered with a hotel that offered small bottled water as their complimentary water service, so there was no need to pay for bottled water during meals, meetings or breaks. Sometimes hotels offer a few complimentary water coolers.” And when it comes to the group’s caffeine needs, “half gallons of coffee are not advertised, but can be offered if you ask and are typically at a lower cost than a gallon of coffee,” she adds.

Décor and Offsite Venues

When décor for a special event is called for, and the budget is tight, consider that “sometimes less is more,” as Miller puts it, especially when the venue itself is the star. “We just did an event at Union Station here in Chicago and spent very little on the design, and it looked like a million bucks because you’re in this grand venue.” And while the rental fees for some ornate and/or historical spaces can be significant, the ROI should be borne in mind when the goal is to drive attendance (e.g., a customer-facing event).

Oftentimes, people will know of such a venue and be excited to attend an event there, as opposed to a created space that, while fabulously designed, is unfamiliar to them. In that case, using a crowd-pleasing venue can be more of a “should have” than a “could have.” Miller adds that all the ancillary costs associated with a given venue should be laid out, so there are no surprises. That includes details such as whether they have tables and chairs, and the caterers on their preferred list. “So when the client comes to us and says, ‘We have this budget for the event, and we’d like to have it at this venue,’ we say, ‘Here’s what you need to know before you fall in love with that venue,’ ” Miller relates.

AV Features

There are certain features of audio-visual technology that fall into the “must have” category, although a planner may not realize it. For example, backup projectors and computers are an added cost, but not one that should be avoided, Miller maintains. “You need to be prepared. That’s not the area to cut costs. If you’re on the stage delivering a message or an awards ceremony (and there is a technical problem with the system), it’s embarrassing,” she says.

There are less risky ways to save, such as taking care not to use more screens than necessary given the audience size. In addition, discounts on AV can sometimes be obtained by pushing the hotelier — pre-contract signing — to “take the time to negotiate with the third-party vendors, especially the exclusive third-party vendors that are supporting the event that you have to use,” Lindsey recommends. “Many times the response will be ‘No, cannot do’ because it’s an outside vendor. Well, that’s not the answer, because if you’re going to make me use them, I need to make sure I’m getting a good price on it. You can get them to go a little further by engaging that third-party vendor to make the commitment in order to get the business.”

Ancillary Fees

Keeping track of hotel pricing trends on all levels is important to protecting the bottom line, and that includes ancillary charges. “Resort fees are getting really high,” Fisher observes. “I’m having a hard time negotiating out of them. Internet fees I’m finding are going down a bit.” Together with parking, resort fees and Internet-access charges “seem to be the top three hotel/resort ancillary charges,” Hentges comments. “All three are negotiable; if you cannot get these 100 percent waived, ask for discounts. Review what the resort fee provides, and if you know your attendees do not use all the features, share that information with your hotel salesperson.”

Knowing the specific needs of one’s group and meeting is thus critical to determining the impact of ancillary fees and the negotiation focus. For example, what Internet fees will the group incur across the property, not just in the guest rooms? The answer may well be different if it’s an incentive program vs. a training session. Also consider what labor costs will be incurred. “Typically the hotel will have their in-house electricians and then, depending on the facility and what you’re designing, carpenters, decorators or teamsters. You just need to know what your labor requirements are going into it,” says Miller. “How you design the event around that knowledge is important.”

Other ancillary charges of note include the following:

  • Re-keying office and storage spaces. “Lately there have been charges for that service, which you can negotiate out upfront,” Lindsey says.
  • Displaced minibar items. Many hotels in Las Vegas have items in their minibars under a sensor that detects if an item is displaced. “So if you move the item it is considered sold and that item’s cost will be applied to the room bill,” Hentges explains. “During a recent Scottsdale site visit, I came across this same concept in one of their hotels. This additional expense is important to share with your attendees.”
  • Early checkout fees. Hentges suggests reviewing this contract clause as it sometimes happens that an attendee may need to depart earlier than expected. “You should not have to pay for an early checkout fee in addition to already paying for the guest room,” she maintains.
  • Additional gratuity. “There seems to be a trend in room service charges where the gratuity is already included and shown on the receipt, but then there is another line item called ‘additional gratuity’ for the guest to fill in,” Hentges points out.
  • Housekeeping charges. Hentges suggests that “If these charges are mandatory, negotiate that nightly turndown service is included.”

Flexible Negotiation

Negotiating concessions can sometimes reach a standstill where the hotel representative won’t budge on a particular item. In that case, it’s important to bear in mind that there can be different routes to the same (or similar) level of savings. “Maybe you’re trying to get a free coffee break, but what the hotel can offer is a deeper discount on all the gallons of coffee that you’re ordering for the duration of the conference,” Lindsey describes. “And that might actually save you more money, but you were hung up on wanting a free coffee break. So that’s where having the conversation is essential to getting the bottom-line savings that works for both parties.”

History Lessons

Keeping a record of these kinds of successes is certainly worthwhile. Much is made of tracking a group’s meeting history with hoteliers, but negotiation history is also important. “I revise my concessions checklist about every nine months based on learning from previous meetings,” says Lindsey. And that list is part of the knowledge sharing among the five members of her department. “We share the concessions checklist, and we all add to it and discuss it periodically,” she says. “We talk quite a bit to share our successes and our learnings and standards. For example, ‘if the venue won’t say yes to this, here’s the fallback position we would take.’

“It’s really important not to have just one person who is a savvy negotiator.” Especially with the current market conditions, the more savvy negotiators on the front line, the better for the bottom line. C&IT

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