Are You Smarter Than A 5th Grader Hotel Revenue Manager?

Are You Smarter Than A 5th Grader Hotel Revenue Manager? Tips For Securing 2010-2012 Meeting Venues

This post is written by Dave Lutz, Managing Director, Velvet Chainsaw Consulting. Read more about Dave.

How’s your crystal ball doing these days?

If you’re a Hotel Revenue Manager, you’ve gone through one of the toughest years of your life.

I mean, how many times does it take to lower a forecast before you nail it? Who would have thought that things would get as crappy as they did in 2009? In forecasting or budgeting, you ideally want to exceed your prediction…not by a lot (that’s sandbagging), but by a percent or two.

Last week, Smith Travel Research’s President, Mark Lomanno made a statement that really got my attention. “On an inflation-adjusted basis, it’s going to probably take eight to 10 years to get room rates back to where they were in 2007.”

This means that we’re in for a much longer recovery than any of us have experienced or may be expecting. I for one, think he’s right. Read the full article: 5 Questions Every Revenue Manager Should Be Asking and judge for yourself.

So what does this mean for meeting planners? How can you use information like this to do the best you can for your organization?

Here’s a few of my thoughts and predictions:

  • Short-term price, long-term value
    You’re in the driver’s seat throughout 2010 as long as you are booking meetings that will occur within a 12 month window. Negotiate hard because your hotel sales professionals will win the battle with their revenue manager on bookings with shorter lead times.If you are sourcing meetings that are scheduled to occur more than 12 months from inking the deal, count on hotels to be more aggressive on rate and more willing to throw in value-adds like free internet, breakfast or room upgrades. Revenue managers don’t have enough data to lower forecasts for dates this far out yet.
  • By up, not down
    You’ve probably heard that most of the market is buying down. Meetings that used to go to Hyatt’s may now be booking Courtyard Marriott’s or Hilton Garden’s. This evolving trend has caused many hotels to redefine their competitive set.For 2010-2011 and perhaps 2012, you will be able to get some sweet deals at hotels/destinations that were previously unaffordable. Perception issues aside, now is the time to find the most desirable location possible. For most large groups, this means going 1st tier instead of 2nd and selecting destinations with exceptional air access with heavy member concentration. For smaller groups, that means if you’re used to paying $65/gallon for coffee at a $149 hotel you can get a much better hotel for $149, but they may charge $110/gallon for coffee. Do your homework on the ancillary costs!
  • The rules have changed
    Most meeting hotels have really eased their booking parameters. You may not need to commit to 200 rooms and $80/day in F&B to get 1/3 of the Grand Ballroom. Hotels that previously were hard to get availability, may now really want and need your business. Their transient demand is way down and won’t come back any time soon.

Your mileage may vary, so would love to hear what you’re seeing in the market. Whether you’re a planner, a hotel or CVB sales pro, what recommendations do you have on better booking practices for 2010? What do you see in your crystal ball?

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  1. Great post. I have been reviewing RFP responses over the past few weeks for a group planning a conference summer 2010.

    What I find is that, as the planner, you have to do most of the work. While the Hotels are flexible, they are not as forthcoming with creative options.

    If the hotel you’re working with doesn’t come back with what you’re looking for. Make an offer, or ask. “where does my F&B minimum need to be to wave meeting room fees?” or “where does my room block need to reduce the rate by $10-20?”

    I’m not mad at the sales people for not coming up with more creative solutions, they haven’t had to be this creative… well ever!

    I just suggest planners put on their creative hats and ASK the questions. the worst that can happen, is that they say NO. and based on your post, that’s not likely to happen too often.


  2. Greg Ruby says:

    Great post Dave!

    Just curious – how do you feel about this issue in regards to Convention Center and CVBs/DMOs? Are venues and cities trying to reposition themselves as well in this market?

    Greg – @GregRuby

  3. Social comments and analytics for this post…

    This post was mentioned on Twitter by Jeffhurt: Are You Smarter Than A VelChain Fifth Grader [I mean] Hotel Revenue Manager? by @VelChain #pcma10 #eventprofs

  4. davelutz says:

    ‘@Partyaficianado (love that name Cheryl) Thanks for adding to the conversation! I think there’s been a shift from consultative to transactional sales at quite a few hotels. This has been caused by a heavy increase in incoming RFP volume and a desire to reduce cost of sales by the hotels. The RFP overload has triggered lower quality or no responses at all.

    Planners respond by sending to more hotels. It’s a trend that we’ve been watching unfold since the movement to the online RFP. I’ve written a couple article on this topic in Convene that include best practices – Have We All Gone RFP Mad and Getting a Quality Response For Your RFP

    Hopefully in this time of need and recovery, hotel sales execs and planners will have more dialogue on how they can help each other vs. filling in squares on a spread sheet.

    @gregruby – Great queston! The supply and demand equation for Convention Center space favors the planner even more than hotels. It’s a big time buyer’s market for Convention Centers especially if you are booking inside 24 or 36 months (1st & 2nd tier destinations).

    There was a great session at PCMA this week that Kitty Ratcliffe w/ St. Louis CVC and Teri Tonioli w/ Experient led. Planners are definitely seeing an increase in flexibility at many destinations and centers. Here’s a recent article that describes the booking conditions at Centers and CVB’s If They Build it Some May Come

    Does all of this match up to what your seeing?

  5. Timothy Arnold says:

    Dave, great post as always. Certainly seeing a major change in how hotels who used to be hard to deal with are now really working overtime to get the business. Places like Vegas are now really working for my small meetings, before they would not have really cared all that much about 300 rooms. Also seeing hotels being very flexible on F&B and booking terms.
    My gut feeling is that this will continue for another 6 months, and then will start shift back to the hotels, in all but some of the hardest hit areas. I do not think we will ever be back to the 3 and 4 years market swings we once had, but rather will have 2 or 3 market shifts in a single year.

  6. davelutz says:

    ‘@timothy Thanks for providing your insight here…it’s great to get the perspective of a booking machine! I’m not as optimistic as you on the speed of market shift change, but know that in certain destinations or peak season date requests, your gut feel is right on target. Vegas in particular will have a long runway to recovery…too much new supply vs. the decreased demand. That’s a destination where the opportunity to buy up is very abundant.

  7. Helene Wein says:

    My predication to my VP after the devastating tragedy on 9/11 was that it would take 5 years for the New York market to get back on it’s feet. What I soon found out is that folks have short term memory. Not only did folks start coming back, but within 3 years, well pricing was just CRAZY! A nights lodging became the price of my first car. Personally, I just didn’t get it, we couldn’t raise prices fast enough or high enough, and as we increased revenues out the window, I was accused of sandbagging as my profits exceeded expectations every week. It was the time to pay more.

    Now the tables have turned again, value is king! It is not in vougue to pay $599 for upscale when you can get a perfectly fabulous luxury accomodation at $199. Luckily for me, I also left the field or revenue to advocate for clients as I could no longer justify the greed I was seeing on the hotel side of the industry. Time after time it seems the client preference is to the hotel that is offering them the best value for thier group. Yes, it is back to basics, to learn about your clients needs. One offer does not fit all. My clients are benefitting by being able to use hotels that they would not have had the budget for previously. And, the hotels win by offering reasonable rates, they are able to maintain and rebuild their occupancies.

    Times will always continue to change, and hotel pricing continues to be what the market can bear. Staying on top of the trends and leveraging our purchasing power allowing my clients to sign for the very best deal for their needs. Congratulations to all the Directors of Revenue out there, this indeed has been a stressfull and ungratefull year. This year will be the year for the Sales Teams!

  8. davelutz says:

    ‘@Helene, thanks for adding to the conversation. It’s neat to get the perspective of someone that has recently played on both sides of the negotiating table. Revenue management is so much easier in good times than bad. As more business travelers lived through a belt tightening year where they saw co-workers laid off, 401K matches suspended and salaries/bonuses cut, they begin to spend the corporations money more like it was their own.

    I love luxury hotels and being pampered as much as anyone, but at the end of the day, give me a comfy bed, tv w/ remote, coffee maker and a hot shower and I’ll make it through the night just fine. The buying down of the business traveler is going to create more opportunity for decent pricing for groups in the upper/up and luxury segments.

  9. Mike Burns says:

    Dave…I would also add that the deals are beyond just short term (as you defined being 2010) and we are seeing great deals into 2011 for sure and in some cases 2012. Excellent points on understanding the ancillary costs. Just because you book a 4 or 5 star product at $99…doesn’t mean you can automatically afford to eat there too.

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