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There are many challenges in this current market, not the least of which are rising costs of flights, fuel and F&B. But planners and businesses are being hit with an unfortunate trifecta when it comes to hotel lodging. Rooms are more expensive, there are fewer of them available, and insufficient staffing impacts not just capacity, but also service and quality.

Causes of Reduced Capacity

Jessie States, CMP, CMM, vice president MPI Academy, points to several causes, including the type of destination. “There’s a lot of compression for room nights in large markets. Some destinations are entirely booked by meetings of all sizes, others have hotels that are not fully open yet due to staffing.” Certainly, she adds, in some markets increased leisure travel can play a role, depending on the destination.

Barb Feds, director, SMM operations, meetings & events at American Express Global Business Travel (Amex GBT), points to several causes as well. “Where we find less availability, this is for a range of reasons: a group is booking within a short window, group patterns don’t align with hotels’ need dates and large conventions and city-wide events are back, causing compression in the industry,” she says. “We also need to consider that, in certain places, hotels may not be maximizing their occupancies due to concerns around staffing shortages. They don’t want to risk dissatisfied guests if they don’t have adequate staff to provide service.”

Like States, Feds also notes that some destinations are more problematic than others. Her list of destinations with limited availability or very high rates include:

• All major Florida locations – Miami/Fort Lauderdale, Orlando, Tampa, Jacksonville – especially in peak season: January to mid-April and September to mid-December
• Nashville
• Austin and San Antonio

As for Las Vegas, Feds says, “It’s usually not an issue to find Las Vegas availability for smaller groups; however, rates are normally high.”

In the Global DMC Partners’ Q4 2022 Meetings & Events Pulse Survey, meeting professionals named lack of room availability and issues with service levels and quality as top challenges. This year, first quarter is looking much the same. Catherine Chaulet, president and CEO of Global DMC Partners, agrees that limited availability for group room blocks remains an issue. “This is due to higher leisure travel, including weddings and social events, as well as increased corporate group demand,” Chaulet says. “Furthermore, hotels are still struggling with staffing, which negatively affects their capacity levels.”

Nell Nicholas, senior director of global accounts with HelmsBriscoe, believes a big uptick in transient business has driven rates up, and even though transient business may now be down, she says, higher-than-average rates are still in place. “It’s kind of like taxes, they never go down!”

But she says these challenges were not unexpected. “We suspected during the early days of the pandemic shutdown that competition for group rooms-space would be fierce as programs got pushed one to three years out, but large groups were already on the books,” Nicholas says. “Our suspicions certainly came to fruition and we’re still, post-COVID, finding very tight inventory.  The runway for large groups has eased up a bit.  Finding space for 2026 and beyond is workable.  The flip side of that coin is fears and anxiety on a possible recession, so, as difficult as it is for some to find space, other groups are canceling, which now opens up space.  Smaller, short term groups are finding availability in the larger hotels as they fill the gaps of some groups that have canceled or heavily reduced their blocks.  We’re seeing a little bit of everything right now.”

Blue Janis, event strategist with Maritz Global Events, believes the problem is, in part, the result of the fact that hotels are still trying to make up for the enormous financial losses they experienced during COVID. He believes leisure travel has impacted room shortages but points out that business travel has come back strong. “I’m having a challenge with both 2023 and 2024,” he says.

Suppliers Have The Leverage

High demand and low capacity, regardless of the cause, have a negative effect on a planner’s ability to successfully negotiate favorable room-block rates. Planners simply don’t have the leverage they enjoy when capacity is wide open. Moreover, competition for the rooms that are available can be fierce, meaning planners can’t hold back on making decisions. “The first one that signs and blocks the rooms with a deposit wins,” Chaulet says. “Those who do not act quickly lose out.”

Feds agrees. “When competition is strong, as it is now, hotels can be less willing to hold space for groups while final decisions are being made. We’re finding some hotels will no longer hold event spaces, instead offering them on a first-come, first-served basis. This can make it challenging for negotiations as well as for recommending venues to customers. Hotels are much firmer on first-pass offers; when there are other groups waiting on the space, hotels are less likely to negotiate on rate.”

Angela Baer, CMP, CMM, corporate event coordinator with Caterpillar Inc., says she’s definitely finding it harder to book larger blocks and feels she has less leverage to negotiate. “It just seems to be a seller’s market. The hotel has the power, and we have to deal with what they give us.”

While Baer believes that having strong relationships with hotels is a positive, it’s not a guarantee of success. “I start with hotels I have a good partnership with and go from there,” but she admits that her group has, at times, decided to move a meeting from a primary destination to a second-tier destination, or from a preferred brand to a different brand, due to low-room capacity and/or higher prices, even if the hotel brand or destination is a favorite.  She says location today can be particularly important “as budgets have been tight since COVID, and while people are willing to meet in person, they’re not willing to go back to the pre-COVID spend.”

Unfortunately, there are times when the balance between planners and hotels is significantly off, and planners are seeing hotels occasionally “abuse” their power. Of course, most hoteliers act in good faith and with respect for planners and the negotiation process, but stories are cropping up today about hotels not bargaining in good faith, or with best practices, because they know they have the power.  “We’ve found that a hotel will sometimes even sign another client while we’re reviewing the proposals,” Baer says. “No notification, no right of refusal, it’s just gone.  I feel that’s unprofessional as we are then having to go back to internal clients and say, ‘it’s not available anymore, sorry.’  A head’s up isn’t difficult.”

Janis sees relationships as helpful, but says they only give planners so much in terms of leverage. “At some point, the hotel will draw the line and there’s not much that can be done. At that point, planners need to make sure their client has a good grasp on what his or her pickup will be.”

Nicholas states simply, “Negotiation is tough; it is a seller’s market.” But she believes planners and hotels can find beneficial commonality if both sides are flexible. “Working with my clients to find possible dates or pattern shifts that are amenable to the hotel seems to be a win-win for both parties.”  And she does have clients who have been willing to make such changes as foregoing a five-star property for a four-star hotel to meet the budget.

Chaulet has also seen clients move meetings, but notes hotels may suffer from that in the long run. “There are a lot of discussions going on between meeting planners about which hotels are good partners and which are not. Supply and demand are favorable for hotels and venues right now, but clients who struggle with availability, pricing, services and response time with some properties will revert to others and may not come back in the future. Teamwork is essential in addition to long-term relationships.”

That  said, Chaulet adds, “Some hotels are doing a superb job responding in time and assuring great services and fair prices. These venues are building relationships for the long run.”

Even in this market, there are things planners can do to facilitate negotiations, starting with getting necessary internal approvals as soon as possible. “Many meeting planners struggle with the timing it takes to get internal leadership approvals and thus lose negotiation power,” Chaulet says. “It’s important to get approval and funds from your company early on to be able to block hotels, venues and services right away.” Beyond that, she adds, “Negotiation needs to stay simple and efficient. Avoid lengthy terms or you risk losing your preferred hotel.”

Are Second-Tier Cities A Solution?

Yes … and no.

In terms of shifting from top-tier destinations to smaller cities, Nicholas says that’s not necessarily an answer for capacity issues. “I’m finding more difficulty in destinations with more boutique hotels. Savannah, Charleston, Louisville, Palm Springs, Santa Barbara and other tier-two cities have less availability; however,” she notes, “my programs may not be the best barometer as I’m working with a very short runway; my customers are booking short-term programs.”

She believes customers may look to two-tier cities not just because larger destinations are at capacity — although that could also be true — but because they’re looking for something different, to change things up. She’s seeing groups willing to change brands and destinations for that purpose.

“Even though this is a time of uncertainty, the programs that are booking are looking for something a little different and unique from a meeting perspective,” Nicholas says “Planners can use this opportunity, for example, to bring their program from a five-star hotel in a tier-one city to create a new kind of program in a tier-two city at a brand-new, four-star hotel. Attendees are happy with a fresh outlook on an annual program, while stakeholders are happy that the program is less expensive.”

Nicholas credits planners with being flexible, creative and willing to change as times require it. “I so appreciate the fresh perspective planners bring to the table,” she says.

Chaulet agrees that some groups are looking to new destinations. “To increase availability and options, meeting planners are expanding their reach and considering second-tier destinations, both domestically and internationally. However,” she adds, “some second-tier cities in the U.S. are struggling with availability issues as well, so meeting planners are also welcoming the opening of international markets and increased flight options for key destinations.”

There’s no definitive answer, but the current market may benefit smaller cities, States says. “Smaller cities and destinations are getting the attention of meeting professionals, who may not have considered them before, but who now see that many destinations they overlooked in the past can offer authentic, unique experiences that delight attendees and stakeholders.”

But as Feds notes, some groups will always choose top-tier destinations regardless of market swings. “Many clients have a strong preference for the top-tier cities, as they believe these places offer the best airlift and connections, and optimal attendee count and experience” she says. “Where second-tier destinations are requested, it can be for a combination of reasons, including being close to client offices, the desire to combine meetings with ‘bleisure’ travel, and where the location is optimal for attendee journeys for that particular group. But generally, we’re seeing meeting planners more likely to pay the higher rate than switch brands or locations to save money.”

Janis is seeing some increase in organizations deciding to change locations or brands, perhaps moving a meeting to a second-tier city, but believes it’s most likely to happen when a group has “an unrealistic price target.”

Relationships Still Matter

“Relationships and reputation are vital anytime,” Janis says, “particularly when times are challenging.” Most experts agree.

Chaulet calls both local and personal relationships the key to success, “The hospitality industry is all about connections and networking. Working with strongly connected partners makes all the difference. If all else is equal, these relationships will give you the advantage.”

Nicholas agrees. “This is a relationships business,” she says. “Loyalty and relationships mean so much. From softened cancellation penalties to rebooking programs, our clients greatly benefit from our industry relationships.” And relationships remain important, she adds, whether in such times as a pandemic or when things are booming. “We need to help each other as a supplier or buyer.  At one time or another, one will be up and the other will be down. We’re in this together to bring successful programs to our customers at the best possible price.”

Baer says having a relationship with a property is helpful, but it can also be a double-edged sword, “You can get into ‘feeling very comfortable in that company’s skin’ and not working as hard as you would with new business.”

“Relationships will always help meeting professionals find the space they need,” States says. “With all of the shifts in employment from the past several years, and the exodus of professionals from the business, we’re now in a relationship-building and rebuilding phase, so both sides of the market may find it challenging to rely on the partnerships they’ve had in the past. There are a lot of ‘who do I call’ questions within our space.”

As for Feds, she says, “Hotels that have established relationships are more likely to offer better rates or value-adds and are more accommodating to a group’s needs and concessions requested.”

Best Strategies

So how should planners negotiate today?

“Negotiating is definitely more challenging at the moment,” Feds says. “Useful strategies include providing meeting owners with realistic expectations of what’s available. This can make them more attuned to being flexible with their group’s pattern and willing to make changes, such as reducing the number of setup days needed or removing the requirement of separate meal spaces.”

Planning ahead remains key. “Submit your program as early as possible,” she continues. “And where possible, remain flexible on pattern. Try to avoid Tuesday/Wednesday only groups, and try to include shoulder dates of Sunday, Monday or Thursday. Limit the amount of setup days needed, and work on building those all-important key relationships with suppliers.”

Feds notes the importance of having all group and meeting specifications as accurate as possible when first submitting the sourcing request. “Large deviations from original RFPs, or constant changes, will frustrate hotels and could mean they’ll be less likely to offer savings and work constructively with the group in the future,” she says.

And finally, she advises, “Be flexible. You may not be able to locate a hotel or venue that will be able to provide 100% of your requirements, but if you can flex slightly on some items, there will be more options available to you.”

Baer sees things similarly. She says planners have to understand that, in this market, hotels have the leverage. They must plan accordingly. That includes setting appropriate expectations for internal clients early on. “Source early, if possible,” she advises, “to get more options and better negotiating power.” Flexibility is key. “Everyone is running a business, so going into it thinking, ‘I’ve spent so much money here before so we deserve…’ or ‘I am this company so we should get….’ isn’t the way to do business,” Baer says. “Be fair, be willing to compromise and be aware of what your non-negotiables are. We can’t get everything.” Among her strategies in this market: offering multi-year contracts or reductions in concessions.

Also requiring early attention is the budget. “Time is of the essence,” Chaulet says. “It’s essential to get budget approval as soon as possible and to be flexible with dates.” She encourages planners to educate themselves about the rates, staffing and service levels at the hotel they hope to book.

This is a time when having hard conversations is especially important, Janis notes, “Have careful and in-depth conversations with the client about their meeting. If their rate-targets and/or concession-desires are unrealistic, educate them on responses you’re likely to get from hotels before sending the RFP, so they can budget properly. Obviously, this should be something you always do.” As for his personal strategies beyond that, he says being part of Maritz Global Events is an advantage. “I have many colleagues with whom I can compare notes on what we’re seeing out there.”

Like others, Nicholas says offering multiple programs to a hotel has been successful. “Regarding concession lists, I may not get everything on my wish list, but I exhaust each and every possible concession ad nauseum to assure we have the best deal on the table,” she says. “The most important thing we can do is to educate ourselves on the current market and work with it.  My years in the industry of boom-bust times have prepared me for this exact time and place, because I feel like this working environment is a boom-and-bust time right now.  Continue to learn, grow and connect with colleagues in the industry.  There has never been a better time to demonstrate our wares and prowess to our stakeholders.”

As the saying goes, this too shall pass. The market will change again. When it does, solid relationships between planners and hoteliers will still be important, and lessons learned today will be valuable tomorrow. “Just keep calm and plan on,” Nicholas advises. That just may be the perfect advice to embrace in the months ahead. C&IT