The Delta variant might have tempered the sunny outlook of mid-June, but even before the renewed uncertainty of August, planners were facing a number of challenges when sourcing their small meetings. Getting back to business has required some patience and ingenuity on all sides. Here’s what to expect — and how to deal with it.
When Brett Sterenson’s clients began booking events again in earnest early this summer, they weren’t entirely prepared for just how high the room rates would be for next year.
“Initially, it was a shock,” says the president of site-selection firm Hotel Lobbyists. “I mean, you could walk past a hotel in Washington, D.C., that hasn’t yet reopened and then hear from them that they’re sold out for April of next year. That’s a really hard thing for a client to understand. But there are essentially three years’ worth of meetings compressing into half of next year — everyone wants to hold their meeting in the first half of 2022, and they’re all fighting for the same real estate.”
While clients hadn’t initially planned or budgeted for these market conditions, Sterenson notes, “they quickly understood why the rates were right back where we left off in 2019.”
It’s not as if vacationers are getting attractive rates, either. “Leisure rates are absurd,” says Sterenson. Buoyed by pent-up travel demand, average daily rates in the United States have skyrocketed. In absolute terms — that is, not accounting for inflation — ADR and revenue per available room both hit record highs (of $143.30 and $99.71, respectively) for the month of July, according to STR, which tracks lodging data. When adjusted for inflation, those metrics just slightly trailed the all-time highs set in the summer of 2019. July occupancy, too, hit 69.6 percent, its highest level since October 2019.
“Initially, it was a shock... but clients quickly understood why the rates were right back where we left off in 2019.”
Brett Sterenson, president of Hotel Lobbyists
Simply put, this means group business isn’t as attractive as it used to be for some hotels. “Transient leisure demand doesn’t have corporate or group discounts, and in many markets is concentrated in specific periods,” points out lodging-industry expert Bjorn Hanson, an adjunct professor at the New York University Jonathan M. Tisch Center of Hospitality. “That’s creating higher occupancy, making it possible to charge higher rates.” Under these conditions, he says, groups are a low priority, since they could displace higher-paying vacationers.
What will happen when the summer travel rush dies down is still unknown, and the recent virus spikes have shaken hotelier confidence in post-summer leisure travel a little bit, Hanson notes. This could either boost or detract from the desirability of group business: There might be less leisure demand to compete with, but some hoteliers worry that groups won’t be able to meet room-block commitments or will have to flat-out cancel their events.
Those concerns are not without merit, according to Northstar’s August PULSE Survey, which has been measuring meeting planner sentiment regularly since March 2020. One-third of respondents have cancelled, moved or rescheduled events between early July and mid-August, and another 18 percent were planning to do so. Seventy percent of the 826 survey respondents had grown less optimistic about the industry’s recovery during that time frame. (The full survey results also show the primary focus for nearly one in four planners is rescheduling and rebooking events.)
Head for the City
Between strong leisure demand and relaxed gathering restrictions in a number of warm-weather resort destinations, planners might need to look elsewhere to book their meetings business.
“Resort destinations in general have received tremendous demand and significant short-term group inquiries,” notes Jim Mostad, senior vice president of sales for the 540-room Breakers Palm Beach in Florida. “Our situation certainly is different from that in San Francisco or Atlanta or Chicago or New York.” Not only has leisure demand been strong this summer, adds Mostad, “group demand for the fall of 2021 and into ’22 and beyond has been back to normal levels.”
In the near term, points out Sterenson of Hotel Lobbyists, that makes big-box convention hotels in many cities a good bet for small to medium-sized meetings that historically wouldn’t have gotten a lot of attention from those large venues. “For upcoming meetings, I’m looking at hotels that are attached to a convention center. They need your business,” says Sterenson, “because they’re not getting jam-packed with leisure business. The urban city centers are going to be the last to bounce back.”
Very few citywide conventions are happening, he adds. “In most places, when the convention center is empty there’s no compression, and these large hotels are empty. They need that convention business to drive rates.”
Room to Breathe
Small groups also are going to bigger hotels because they want more space for distancing, adds Sterenson. “In the longer term, however, booking that gets challenging,” he says. One convention hotel already has asked for some space back from his December group, which was originally booked to allow for distancing requirements that have since been relaxed. “We’re getting a great deal on the space we required at the time,” he points out. “Now we’re being flexible in giving some of it back.”
Service Is a Gamble
The affordable rates promised by urban convention hotels often come with a caveat: “Some are in a bad spot right now,” says Sterenson, “because they don’t have enough demand to bring on staff. So when they do have a meeting, if it’s coming up soon, they don’t have a full staff yet. It’s going to be hard to guarantee the client the level of service they expected when they contracted with that hotel.”
“If you can’t do all of what we’re asking, you can’t expect us to pay the same prices; we have to meet in the middle somewhere.”
LaToya Williams, manager of global accounts for HelmsBriscoe
LaToya Williams, manager of global accounts for third-party planning firm HelmsBriscoe, has been dealing with exactly those staffing issues at some of the venues she booked for clients — and has been fighting to maintain the expected service levels.
“We have some properties telling us in advance that the meal can’t be what was originally contracted — as plated — because they just don’t have enough banquet staff,” she says. “And our concern with a buffet, of course, is the virus. So we’re trying to work through logistics of whether we’re going to have shields up, or if we’ll have employees serving the food… There’s just a lot of those murky waters as we figure out what this will look like.”
Negotiation Results Vary
A savvy sourcing specialist, notes Williams, can use the venue’s limitations as negotiating leverage. “I was able to get one of my client’s food and beverage reduced by more than $20,000,” she says. “The hotel can only be at 75 percent capacity, and they can’t do open bar. There were so many things they couldn’t do that were originally contracted. If you can’t do all of what we’re asking, you can’t expect us to pay the same prices; we have to meet in the middle somewhere.”
But not all contract terms have proven so flexible, nor are all venues so open to negotiation, adds Williams. “I’ve noticed that some brands are more flexible than others,” she says. “And some management companies are not at all flexible. They’re telling us that we have to hold the client to the 80 percent attendance minimum, or we have to hold them to this food-and-beverage minimum, and there’s no wiggle room. I think it’s unfair, with the way that the world is now — and the staffing we’re likely to find — that they’re holding contract signers to such strict terms for financial reasons.”
That said, meeting professionals are finding widely differing experiences in their negotiations with suppliers. “Planners can be especially successful by shopping around,” advises Bjorn Hanson. “They report a surprising range of attitudes towards group business. Attrition rates and cancellation policies range from extremely flexible to as rigid as ever from hotel to hotel.”
In Hanson’s research, meeting planners have reported scoring a laundry list of desirable terms, including extremely favorable attrition clauses, cancellation with no penalty or flexible rebooking, generous comp-room allocations, use of outdoor spaces — often with favorable set-up and/or breakdown charges, the option to bring in off-site food-and-beverage providers, and surprisingly attractive room rates. It pays to be flexible with arrival dates, he advises, and to widen the search if necessary.
Accepting a New Reality
Staff shortages and changed personnel throughout the supplier chains are requiring a heightened degree of patience from experienced planners.
“For me, the biggest challenge at this point is not only managing my clients’ expectations about what I can provide to them, but also what my vendors can provide to them,” says Trish Simitakos, CPCE, owner of Trish Star Events. “In previous years, if a client asked me in the morning to book a venue, I’d have something confirmed by 2 p.m. that day, no problem. Now, if they ask me to book something, maybe in three weeks I’ll have that venue. Even though they understand the situation, it just doesn’t look good.”
Above All, Be Nice
Both buyers and suppliers should do their best to temper frustrations — and to remember the spirit of collaboration that has carried the industry this far through the pandemic, sources agree.
“We as humans need to be a little bit more kind and patient,” says HelmsBriscoe’s Williams, “because everyone is going through something — especially in the hospitality and health-care industries. Patience and kindness go a long way.”
Elise Schoening provided additional reporting for this story.