First, some good news: meeting planners appear to be booking again -
Yes, there are definite signs of increased demand in inquiries and booking activity based on a recent cross section survey I conducted with sales directors of group-driven resorts throughout the U.S. western region.
Now for the bad news: A great many meeting planners are demanding current heavily discounted room rates guaranteed for 2010, 2011 and beyond. I guess it depends on your perspective as to whether or not that represents bad news.
While it may appear to be good news for meeting planners, I believe that in the long run it will end up as bad news for both.
Any objective observer could make the argument that you couldn't blame meeting planners - - after living through the tough "seller's market" of 2005 – 2007 and pressured now to cut costs everywhere - - for pushing hard to guarantee current discounted rates for future years.
Could it be the pendulum is swinging back now on the side of the planner? Make no mistake here, we should all be grateful that planners are, in fact, booking again - - but, at what price and what sacrifice should hotel suppliers have to pay?
Is today's planner taking advantage of the current economic crisis? Do planners believe that they shouldn't be sacrificing anything? Could it be that this is this simply a case of planner "payback" time? Is the planner overly focused on the short term and overlooking or neglecting by design the long term?
Most resorts are willing to take short-term risks - - demonstrated by discounting room rates - - but longer term discounting will place properties in compromised positions. They will argue they must balance clients seeking discounted room rates over the next three years with the resort's role in protecting the asset and its fiduciary responsibility to the owner.
Could it be that planners are telling resorts now, "I don't care about your fiduciary responsibilities - - - that's your problem"?
I question whether today's planners understand the fact that for most resorts it is the total revenue yielded from room nights that covers the costs involved in delivering a product that contributes to successful meeting experiences. Only a very few successful resorts are able to get a higher yield from catered events and F&B outlets to offset any heavily discounted room rates. That's one reason why resorts place such a high premium on "rate integrity."
Here's a warning to all well-intentioned, pressured meeting planners: be careful of booking a property on the basis of the lowest room rate bid. There's a good chance the planner will indeed "get what you paid for." Chances are that resort may not be in business by the time the 2010 or 2011 meeting rolls around. And should it still be open for business, chances are there will have been heavy management turnover, repairs and maintenance deferred, and service levels far from what the planner demands.
Let's hope that planners don't play the "GM or Chrysler" card here - - hoteliers got themselves into this situation, we should not be asked to bail them out. That commentary is not relevant. Most resorts that cater to group business are managed more professionally than ever before. Most have already done their own operational "re-engineering" since 9/11 and are much more adept at managing costs and the bottom line.
Resorts get into trouble when room rates are discounted so heavily that after meeting operating costs, there is not enough revenue left for the owner to service the debt.
If a planner suspects that the resort in question might not be able to deliver or - - even worst yet - - might not be around by then, the planner should not book there.
What's needed now is for both planner and resort to agree that predatory relationships should never be allowed to exist. Both planner and resort need to continue to seek out strong relationships for the long term.
No one can predict what group room rates will be in 2010. Group booking contracts should be common sense driven, fair to both sides.
If attrition clauses - - eliminated altogether by a major brand for 2009 - - are not put into contracts and strictly enforced, the resort stands to lose hard-to-replace income from those empty rooms.
And resorts must be ever-mindful that planners do study public rates found on the Internet, and must remain ever more competitive in the market and must make good on promises of value received.
Both sides need to be reasonable and fair with contracts and reminded of the symbiotic relationship that exists between the two. After all, aren't they both after the same end result? The planner expects a memorable event experience, well serviced, in a clean, well-managed resort. The resort expects a satisfied group that will fulfill its commitment and return again.
Let's have some good dialogue.David M. Brudney, ISHC, is a veteran hospitality sales and marketing professional concluding his fourth decade of service to the hospitality industry. Brudney advises lodging owners, lenders, asset managers and operators on hotel sales and marketing "best practices" and conducts reviews of hospitality (as well as other industry) sales and marketing operations throughout the U.S. and overseas. The principal of David Brudney & Associates of Carlsbad, CA, a sales and marketing consulting firm specializing in the hospitality industry since 1979, Brudney is a frequent lecturer, instructor and speaker. He is a charter member of International Society of Hospitality Consultants. Previously, Brudney held hospitality sales and marketing positions with Hyatt, Westin and Marriott.Contact:
David M. Brudney, ISHC, Principal
David Brudney & Associates
Carlsbad, CA USA
Phone: 760-476-0830 Fax: 760-476-0860
David@DavidBrudney.com www.DavidBrudney.com www.ishc.com