Tips for Successful Hotel Negotiations

Posted by Mike Mason

Feb 17, 2015 11:35:00 AM

Know-Your-Meetings-ValueNegotiations have changed dramatically with the existing market conditions. The key to getting great deals on your company meetings is knowing what value your meeting is bringing to the hotel.

Meeting Value is often overlooked by planners and when the hotel says “no” to their meeting, they’re surprised and often bewildered by the answer. Understanding how hotels make decisions about their group business is the key to not only successful negotiations, but getting the right hotel for your meeting in the first place.

Value is generated in many ways: your room block size, your booking window (are you booking next week or next year?), your meeting history (where has this meeting been held before?), your flexibility (can you look at more than one date?), your catering spend (how many meals will require banquet staff?), and your space-to-rooms ratio (the amount of required meeting space compared to the number of hotel rooms your group will need).

The question you’re likely asking now is, “OK, but how do I know how much value my meeting brings to the hotel.” This comes from understanding how hotels qualify their group business. In most cases, there is likely a meeting that occurs between Revenue Management and Sales called RevMax (Revenue Maximization) or Business Review. It’s in this meeting where the hotel discusses all potential groups and where they make the decision whether to offer you a proposal - and if they do, on how much to negotiate. Understanding the revenue decisions is key to understanding the value your meeting brings. In this blog post, I’ll spend a little time on RevMax, giving you a glimpse into the hotel’s “underworld” and then focus on three key value-generators: your meeting history, your flexibility, and your space-to-rooms ratio
 

RevMax

RevMax, or “Revenue Maximization,” describes a process that hotels use to drive high occupancies at the highest revenue per room possible. The hotel industry did not invent it, as this concept was actually developed by the airline industry. There are very slick algorithms that take many variables into account to spit out the price for a ticket. In the simplest terms, the airlines realized that when you book has a lot to do with how much you’re willing to pay. So they maximize their revenue by pricing tickets higher as the time to departure gets closer. It seemed to work for the airlines, so hotels soon adopted it.

In most cases, all conversations at a hotel start with a document that shows your meeting profile and how it affects profit centers within the hotel. We’ll call this the RevMax form. Understanding what the hotels are looking for will better your chances of getting what you need.

  • Target Rate by Day: The guestroom rate that’s expected for groups over this time period.
  • Contracted Group Block: This is your requested room block.
  • Washed Block: This is the hotel’s best guess at the number of rooms your group will actually pick up. In most cases they’re “washing” your block by 10%.
  • On The Books: The number of group rooms that are already committed. Ask, “What’s your group ceiling” to gather how many rooms are left for group business.
  • Transient Demand: Every hotel that books groups also takes business travelers, vacationers, etc. known as “transient business”. It’s important to protect this room inventory as transient business is higher rated.
  • % Occupancy Sold: Shows the total occupancy which is the sum of your room block, groups on the books already, and transient rooms divided by the total rooms in the hotel.


Your Meeting History and Why It’s ImportantMeeting-History
Hotel sales managers have an obligation to maximize occupancy. They need assurance that your group will pay the rates, and indeed use the number of rooms you are committing to in your room block.
There are three factors that hotels can determine from your meeting history:

1. Does your group fit the hotel profile?
If your group history shows you used hotels or venues that are of lesser quality, you’ll have some explaining to do. Although very subjective, it’s often the go-to factor for disqualifying your RFP.

2. Can the group pay our rates?
Similar to #1, this is really about profitability of your group. Can your attendees take advantage of the full range of services offered by the hotel? The more services your group will use, the more profitable the group is for the hotel.

3. Is the actual room block request accurate?
Hotels want you to pick up your entire block. 
If it’s a first-time meeting, you still have a few options to offer the hotel. Are there any other meetings (of similar size or with the same attendees) that your company has held that you can use to show comparable results? You can reveal your plan to market the event to your attendees. Or is the meeting mandatory for the attendees? Any one of these will build your credibility to fill the room block you are contracting.

With this data in hand, you can confidently present this integrity at the negotiating table.

 


Let Them Know Your Dates are Flexible – Even If They Aren’t.

Alternate_dates

Hotels want to quote availability for your preferred dates. But they may be completely sold out over the dates you want. For those hotels where you absolutely need to get availability, try these tips.

 

Tip #1:

Never tell a hotel “I’m not flexible”. Doing so cuts down your options and adds extra work if you’re forced to be flexible after finding no availability elsewhere. Instead, let the hotel come back to you with an alternative. In most cases, if a hotel is asking you to be flexible, they’ll offer you added incentives to fit your event where they need you. We suggest adding the line, “I’m willing to explore alternate dates if you make it worth the effort to change from my preferred dates.”

If a hotel comes back with “No Availability” or with an offer that’s too high for your budget, ask them this question, “Where can you put my meeting that makes the most sense for your hotel and helps me reduce my costs?” What you get back may amaze you, and could be so compelling that you find you are flexible. Imagine going back to your decision maker and saying, “Hey, I know these dates aren’t flexible, but this hotel is willing to give us a complimentary opening reception worth $10,000 if we push the meeting forward four days.” Again, the point is to give yourself options.

 

Tip #2:

As soon as your contract is signed with the hotel, send the sales manager and your conference service manager a quick note asking them to identify your group in their system as the first group to call if they need a group to be flexible.

Why is this important? First of all, you really set the tone for the relationship by offering to help up-front. Second, you’re not saying you will be flexible – just that you want the first option to say yes or no. It’s a no-lose offer for both sides.

 

Know Your Meeting’s Space-to-Rooms Ratio

Rooms-to-SpaceIt’s a simple exercise that will help in your negotiations with the hotel. If you’re below their Ratio, then you have some big leverage to drive your best possible deal. If you’re over, you can work with the hotel to find ways to reduce it. Here’s the easy rule-of-thumb calculation:

Space-to-Rooms Ratio =
(Total seats by day x 20 sq. ft.) / (Total guest room block that day)

Here's a typical four-day meeting with 100 attendees:

Rooms_Space_chart

In this case, let's say that the hotel has a Space-to-Rooms Ratio goal of 90. This means that meetings need to use less than 90 square feet of space, per guest room sold, every day. You’ll notice a couple of things in the Space-to-Rooms Ratio column:

  • First, your arrival day is way under (25 sq.ft/guest room) because you’re occupying sleeping rooms, but haven’t begun to meet.
  • Your checkout day, however, is very high (4,000 sq.ft/guest room). This happens with most meetings, but it’s here – around the edges of the meeting – that hotels have the greatest exposure and work the hardest to reduce the space allocated.

So, what can you do to reduce your Space-to-Rooms Ratio?

Focus on minimizing the ratio on your pre-meeting and departure days to get better deals.

Hotels rarely struggle with the Space-to-Rooms Ratio during the main days of your program; it’s the pre- and post-days that will often kill your meeting's mojo. So, what can you do? Here are some ideas that have little or no impact on your overall meeting results, but have huge impacts on your ratio.

  • Rather than having your meeting room set up a day prior to the start of the meeting – say Sunday for a Monday meeting – have the room set up early on the first day of attendee arrival. You’ll increase your chances dramatically in finding availability and the right deal.
  • Reuse your main meeting room for one of your break-outs and dinners. Hotels would rather reuse a room set-up than set up an additional room. In our example above, simply holding one breakout and the dinner in the main meeting room reduces your Space-to-Rooms ratio from 81 sqft/room to 54 sqft/room – a 33% decrease in space usage without really affecting your meeting.
  • On the last day, ask if there is alternate space you can use for breakouts. Most hotels have restaurants, suites, other areas that would work fine for your last half day of meetings. If you’re willing to do it, the hotel will show their love in $$$ of savings.
  • Select room set-ups that help to reduce the Ratio.

When it comes down to it, meeting hotels are more concerned about managing meeting space; after all, they rarely run out of sleeping rooms before they run out of space. Knowing how your group will affect the hotel’s meeting space inventory will help you negotiate one hot deal.

 


 

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Topics: Negotiations

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