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.
Group Meetings Are Big Business
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:
- Hotel ownership is extremely fragmented
- Inventory is perishable.
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.
The Affects Of The RFP Grid
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.
We Need Transparency
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.
2. Qualifying Discussions
Planners should allow qualifying discussions before responding to an RFP. Hotels should strongly consider not bidding on business where they cannot differentiate.
3. Honest Actions
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.
Matchmaking vs. Market Scanners
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.
A Better Way: RFI and RFP
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.