by Maria Lenhart
October 28, 2010

Part Two of a Travel Market Report enterprise series.

With all indicators pointing to a rebound in business travel and hotel rates next year, it’s clear that meeting planners and corporate travel buyers may need to exercise new strategies at the bargaining table.

According to Robert Mandelbaum, director of research information services for PKF Hospitality Consulting, the hotel buyer’s market of the past two years will turn to a “neutral” market next year and then increasingly morph into a seller’s market from 2012 through 2014.

“By 2012 there will also be less availability, with a lot fewer hotel rooms coming on line, especially in the upscale hotel segment,” he told Travel Market Report.

Given this scenario, meeting planners, are wise to book hotel rooms as far in advance as possible, Mandelbaum advised. “If the hotel will let you, you can plan further out,” he said. “Most hotel managers negotiate with the current state of the market in mind. It’s still competitive now, so now is the time to book for the future.”

Going Up
Washington D.C.-based meetings industry attorney James Goldberg noted that time is of the essence when negotiating with hotels.

“The bottom of the hotel market has already passed. The time to have cut really good deals was last year and early this year,” he said. “But there are still good deals out there, particularly in some cities. The recovery in hotel rates isn’t happening all across the board.”

Goldberg also noted that booking a meeting far in advance doesn’t always guarantee good rates, since some hotels will cancel a meeting outright if they can easily fill rooms with higher-paying business.

“I tell people to be aware that if the market is back in 2013 and 2014, as many think it will be, you will see a lot of hotels cancelling meetings that have been on the books for a long time,” he said. “If those deals are no longer good for the hotels, they will want to get a higher rate of return.”

Both Mandelbaum and Goldberg said that the best chance of finding favorable rates and availability are in second-tier cities, many of which have greatly improved their meetings infrastructure in recent years.

“Flexibility is always the answer, as hotel markets vary,” Mandelbaum said. “The big coastal markets are recovering at a quicker pace than the Midwest, so there will be more bargains in secondary markets. Flexibility on dates is another factor. If you can fill a hole in the hotel’s meetings calendar or are willing to come in on a Sunday night, it makes a big difference in what you pay.”

Watch Out For ‘Ancillary’ Fees
Room rates are far from the only factor to consider when cutting deals with hotels. Increasingly, add-on fees, sometimes called “resort fees,” for everything from parking to use of the fitness center and even maid service are being added to hotel bills.

“Hotels are following what the airlines are doing in terms of fees,” Goldberg said. “Depending on the nature of your meeting and how much it’s worth to the hotel, you can negotiate these fees out.”

In addition to asking for fees to be waived, Goldberg said buyers need to guard against any new fees that could crop up after the contract is signed.

“Contract provisions should protect you from fees being added on later,” he said. “And then after the contract is signed, you need to stay on top of how the hotel implements that contract. They sometimes hand the contracts over to reservations people who don’t necessarily read them to see what concessions are in there. You have to follow up.”

Independent meeting planner Jeanne Torbett, president of Superior Meetings and Management in Jacksonville, Fla., also said that keeping an eye on fees has become a necessary part of the negotiating process. She discovered this at a recent drive-to meeting where attendees were hit with an unexpected $25 parking fee.

“People couldn’t get out of the car without paying it — and one of my attendees just drove off in a huff,” she said. “You never know what the next money-grabbing gimmick will be, so you really have to stay ahead of the game. I tell the hotel that I want no hidden fees tacked on to the room rate. When I give people a price for the room, I want that to be the price.”

Negotiated Rates and Compliance Are Key
For corporate travel managers, smart, long-term negotiating tactics for favorable rates is also growing more important, according to Christa Manning, director of Xpert insights and research for American Express Business Travel. In Amex’s recently released 2011 Global Business Forecast, she noted that negotiated rates — and traveler compliance — are essential to keep costs under control.

“Average daily rates are expected to rise above 10 percent in many locations in 2011, however, corporate negotiated rates will be lower as hoteliers lock in volume business commitments,” she said. “Companies will forfeit a lot of savings when employees book outside preferred agreements and channels and end up paying consumer rates in 2011.”

Pointers on How to Negotiate
In its recently released 2011 Travel Forecast and Annual Hotel Negotiability Index, Egencia, the corporate travel division of Expedia, made the following recommendations for how corporate travel managers can get the best value from hotels in the current climate:

   – Negotiating with three- to four-star hotels is likely to be easier than with hotels in the luxury category, as they are expected to see the biggest rebound in business.

   – Encourage travelers to book hotels that offer free amenities such as Internet, shuttle service, breakfast and evening events.

   – Negotiations with specific hotels will yield better results than chain-wide negotiations, particularly for smaller organizations without a lot of travel spend.

   – Consider independent hotels. Without costly loyalty programs to subsidize, these properties may offer better rates and amenities.

   – Negotiate last-room availability clauses. This means that properties must offer negotiated rates even if only one room type is available, resulting in lower ADR (average daily rate) throughout the year.

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