April 12, 2012 by Dave Lutz
Our profession is at risk.
More small meetings, shorter lead times and RFP abuse are on a collision course for commoditizing our industry. It shouldn’t be commoditized!
Hotels react by throwing technology and lower-level sales professionals against the problem. The model is not sustainable.
Even a small meeting of 25 rooms for three nights can deliver revenue north of $20,000 — hardly chump change. That piece of business shouldn’t be sourced the same way in which office supplies are purchased.
While big chains and brands receive the lion’s share of group business, the facts are:
These dynamics make for a competitive-rich environment, where a planner’s deal-making expertise can make a big difference, one transaction at a time.
Any hotel executive worth his or her salt tracks the cost of sales and close rates in real time.
Today, the average planner sends 13–15 RFPs to hotels. Only one can win. Planners put hotels in a grid comparing date availability and initial price quote. It’s difficult for hotels to differentiate themselves beyond those two variables.
Meeting-procurement initiatives often follow the lead of corporate travel best practices. Stanley Slaughter offers a peek into what that future might hold in “RIP: The Traditional Corporate Travel Policy?”
Hotels acknowledge that close rates are declining. They try to resolve the cost-of-sales problem by automating responses or replacing higher-compensated strategic sales executives with transactional staff. These decisions take away a hotel’s X-factor for consultative selling and deal making.
Hotels are experiencing RFP overload. They need help prioritizing which opportunities require their best efforts and resources. Hotels will work a lot harder to earn your business if they know they are on the short list and are able to differentiate.
We can improve transparency in the meetings industry sourcing process with these three strategies:
Planners should disclose the number and names of hotels and/or destinations under consideration.
Planners should allow qualifying discussions before responding to an RFP. Hotels should strongly consider not bidding on business where they cannot differentiate.
Hotels should be honest about group business that is not the right fit for them vs. not responding to the RFP or claiming the dates are not available.
Some planners think that by doing a thorough market scan and creating impressive-looking grids that they are justifying their existence. Smart executives evaluate employees on their results, not on the amount of work that it took to get there.
Planners who view themselves as matchmakers — and bring the best two or three options to the table — will be held in higher regard than their transactional counterparts. The best way to do that is to research and limit the field before the RFP stage.
Experienced procurement professionals use a two-part process before negotiating with and selecting the vendor.
Step one is the RFI (Request for Information). This is usually the point when a vendor provides its indication of interest, availability and desire to take the next step.
The RFP (Request for Proposal) follows after that.
Expert planners will apply a two-step process of narrowing the field through an analysis and grading of the RFIs. Then they request RFP of the finalists only.
What are your thoughts about venue sourcing becoming commoditized? Do you think the two-step process RFI and then RFP will decrease commoditization?
Adapted from Dave’s People & Processes column in PCMA’s Convene. Reprinted with permission of Convene, the magazine of the Professional Convention Management Association. ©2012.
Filed Under: Event Planning
Great points…my only gripe (with a smile) is that you focused this on hotel RFP’s. Your three key mantras of disclosure, qualifying discussions, and honest actions can apply to virtually any RFP a planner would send out for any services required for the successful execution of their event. The RFI/RFQ approach is something that seems to have been lost…but can be very beneficial for all parties involved. A thorough and comprehensive response for some RFP’s can take a significant amount of company resources (time & money)…by adding the interim step of an RFI/RFQ process you will actually end up with a more detailed and appropriate response to an RFP and less responses to evaluate. As a supplier I would have no issue responding to an RFI/RFQ as an initial step for an opportunity…but to close the loop this this would also need to be done following the principles of disclosure, qualifying discussions, and honest actions.
Thank you for yet another thought provoking blog article. I hadn’t thought about the industry being in danger of commoditization before. During a recent session at MPI Cascadia planners and suppliers had discussion with each other regarding the dilemma of being placed in a grid versus having opportunity to differentiate. While I don’t feel the dialogue solved anything I did think it was valuable for both sides to listen each other. The idea of a two-step process RFI and then RFP really appeals to me.
‘@Jim, thanks for adding your view from the supporting supplier side. No question that selecting partners like A/V, exhibit service contracting, destination management, etc. is a similar situation. With the increase in small meetings though, the field of hotels initially considered is increasing to 15 or more when only one can win. For supporting suppliers, the RFP number should be no greater than three companies.
For A/V suppliers, the equipment is a commodity. The consulting to the client, expert knowledge of how to optimize equipment and service are what separates the good from the great. You can’t show that on a grid.
@Meilee thanks for adding your thoughts and experience with the MPI Cascadia chapter. It’s awesome that your chapter is talking about this openly. Any planner that is an ex-hotelier should be ultra-sensitive to this issue. What’s sad is that sometimes ex-hoteliers are the biggest abusers. Let us know how the two step process works for you.
Dave this is a great post and causes one to think about both the “buy” and “sell” side of this question.
Many, not all, planners have adopted a “shotgun” approach and blanket the market with their RFP, whether the piece of business fits or not.
Many, not all, hotel sales managers are overwhelmed with the process and don’t have the time or resources to effectively and efficiently respond to the RFP but it doesn’t change the opportunity to explore the possibilities, nurture a relationship or close a deal.
So where does this leave us? One can only assume that this dilemma will continue until planners and sales managers can come to some sort of understanding on how to fix the problem.
This can only take place when someone picks up the phone and communicates as opposed to hiding behind an electronic distribution veil.
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