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7 Budgeting Must-Know Best Practices Robyn Mietkiewicz, CMP, CMM Senior Director, Global Meeting Management Meeting Sites Resource
8 Goals For Today Understand Industry Issues And Trends That Impact Negotiations Learn How Hotels Manage For Profitability Review Methods To Track And Leverage Meeting Spend Know Specific Cost Savings Tips And Value Metrics Examine Key Hotel Contract Clauses / Cost Containment Methods
9 Industry Trends Increased demand and attendance in corporate & association meetings Reduced new hotel inventory Meeting budgets not keeping pace with projected hotel revenues Increased meeting costs due to demand, rising F&B, technology & ancillary hotel fees
10 Industry Trends Continued Cont. Greatly increased hotel buy and sell activity Airbnb and Shared Economy lodging impacts hotel transient business Hotels focus on revenue management to maximize profitability Planners focus on Strategic Meetings Management (SMM) to assure accountability and measurable value
11 Understand Your Leverage For Each Meeting
12 How Hotels Value Your Meetings Variables That Influence Pricing & Availability Transient demand Arrival / departure pattern Rooms to space ratio Group food & beverage revenue Lead time Season History Potential incremental revenue Value of total account Risk # of rooms held vs. ability to pick-up block Cancellation/attrition clauses in contract Other groups contracted over same dates / revenue contribution
13 Industry Profit Margins (Average Hotel Chain & Independent) ROOMS - 77% GROUP F&B - 38% F&B OUTLETS - 19% RECREATION/SPA - 15% RETAIL/MISC DEPTS - 15% Sleeping Rooms Group F&B F&B Outlets Recreation/Spa Retail/Misc Depts
14 Meetings are BIG investments: have a negotiations plan for each meeting!
15 Assess Your Leverage From your strategic RFP, evaluate the following: Season / demand over your date(s) Peak Night Pattern / Flexibility Sleeping Room Block / Revenue multiply total room nights by proposed room rate Group Food & Beverage / Revenue all functions from RFP X average menu prices X attendees Room To Space Ratio total space on heaviest use day, calculate as % of total space in hotel Ancillary Spending projected revenue for business center, AV, production, Internet, golf/spa, sponsored events / ICW revenue, etc.
16 Cost Savings Components Sleeping room rates starting proposal room rate $209, final negotiated rate $189 = $20 savings x contracted room block Suite upgrades at group rate - benchmark against group rates, not rack rates (i.e., group rate for one bedroom suite $475, contracted at group rate of $189 ($475 - $189 = $286 savings per night) Staff rooms generally 50% off group rate (i.e., $189 group rate = $94.50 staff room rate) Complimentary rooms total contracted room block negotiated comp policy (i.e. 360 contracted rooms 1/40 = 9 complimentary rooms at $189 group rate) F&B Discount total contracted F&B guarantee X percentage of negotiated discount (i.e., $65k F&B guarantee X 10% off catering menus = $6,500) Waive In-Room Internet Fee total contracted room nights X published in-room Internet rates (i.e., 360 contracted room nights X $12.95 = $4,662) Waive Meeting Space Rental / Set-up Fees do not report savings if space is complimentary based on room block pick-up percentage / F&B guarantee. Show as cost savings if negotiated out of RFP proposal.
17 Cost Savings Components Continued A/V Discount A/V budget X percentage discount (i.e., $17k A/V budget X 15% negotiated discount = $2,550) Hotel Fees & Surcharges the goal is to eliminate or reduce fees / calculate savings against published fee or surcharge rates (i.e. waive $20 resort fee X 360 rooms = $720) Complimentary Pre-Planning Room Nights - total negotiated planning room nights X negotiated room rate (i.e., 8 pre-planning comp rooms at $189 = $1,512) Complimentary Acceptance / Storage Meeting Materials calculate published rates / savings by box or pallet size, pound or storage duration Preferred Supplier Volume Buying calculate savings for meeting support services, off-site venues, DMC s, etc.
18 Creative Cost Savings Tips Food & Beverage Piggy-back onto the menu of another group in-house Any open wine bottles are yours claim them for VIP suite Cash bars credited towards your F&B minimum Work with chef to develop custom menus and pricing If hotel provides off-site catering capture for F&B minimum Negotiate complimentary continental breakfast and breaks in staff room daily
19 Creative Cost Savings Tips Food & Beverage Shorten receptions Consider plated meals over a buffet Pass hors d oeuvres instead of placing at stations Create fruit or dessert centerpieces for consumption Determine what theme, décor and specialty linens the hotel has in-house and negotiate at no charge
20 Creative Cost Savings Tips Food & Beverage Water coolers are less expensive then water bottles / hotel water pitchers are free Compare costs for smaller groups to dine in restaurant vs. catered meal Ask hotel if they have a meal package plan Compare liquor purchasing methods by drink / bottle / per person cost and control amount of pour with preselected brands Inventory bars before and after each event Seek sponsors to pay for breakfast, breaks, lunch, dinner, in-room amenities, event signage, etc.
21 Technology, AV And Production
22 Creative Cost Savings Tips AV / Production Negotiate AV discounts Bring AV equipment from your office Bid AV to multiple companies Assign meetings to rooms with the same AV set-ups (when possible) Meet AV specialist during site inspection Microphones are generally not required for groups of 50 people or less Guaranteed pricing and costs when contract is signed
23 Creative Cost Savings Tips Technology Complimentary or discounted internet access / lines in meeting rooms Based on history and expanded technology needs, estimate the bandwidth needed for prompt content delivery Flat rate for phone lines / Internet in meeting rooms Bid technology services out to multiple companies No fee or surcharge for outside suppliers Multiple technology suppliers communications
24 Creative Cost Saving Tips Concessions and Hotel Fees & Surcharges Determine if hotel or venue is union and if so, what are the hourly / daily rates and charges Waive / reduce resort fee Waive in-room per day internet charges 1 per 40 complimentary room policy Complimentary or discounted parking Complimentary acceptance and storage of materials No early departure fees 3% - 10% off master account if paid upon departure or guaranteed minimums
25 Sample Cost Savings Report
26 Hotel Contract Negotiations Hotel contract risk mitigation has become an important metric in SMM landscape Focus on cost containment measures in the event of non-performance
27 Key Performance Clause Analysis (SMM Focus) Guestroom Attrition Cancellation Published Rates Breach By Hotel
28 Current Trends In Attrition Performance Clauses Sliding Scale attrition / use it or lose it (10% at 45 days / 5% at 30 days Guaranteed room block in contract / no allowable attrition No resell clause / only rebook clause Vertical attrition / damages calculated on per night basis Attrition damages based on average in-house room rate over meeting dates (generally higher than contracted group rate)
29 Solutions Guestroom Attrition * Example based on 250 rooms $189 room rate ABC Corp agrees to guarantee 80% of their contracted room block In the event ABC Corp fails to utilize 80% of the total room nights (200 total rooms), during the meeting, ABC Corp will pay XYZ Hotel a Guestroom Attrition Fee equal to: Base calculations on profit, rather than revenue / less rooms captured / credited via rooms audit (Calculation: $189 x 75% = $141.75)
30 Solutions Guestroom Attrition ~ continued ~ XYZ Hotel to honor ABC Corp group rate after the cut off date based on availability (group vs. prevailing) XYZ Hotel shall use best efforts to resell any unused or cancelled guestrooms. All revenues derived from Hotel s resale of such guestrooms will be applied toward payment of any Guestroom Attrition Fee payable hereunder. (Resell) ABC Corp has option to apply 75% of attrition damages to a future meeting at the XYZ Hotel within one year. (Rebook)
31 Current Trends In Cancellation Clauses Sole cancellation damages for group / no accountability if hotel cancels Liquidated damages no obligation to resell and credit rooms to group Not applying paid cancellation fee to future meeting 100% damages due on sleeping rooms & guaranteed F&B
32 Solutions Cancellation Example based on 250 rooms $189 room rate / F & B Guarantee $52,000 If ABC Corp cancels the entire Meeting without cause, ABC Corp will pay XYZ Hotel a Cancellation Fee, in accordance with the following schedule: If Notice of Cancellation is given by ABC Corp From Signature 120 days prior to arrival (August 6, 2012) 119 days 60 days prior to arrival (August 6, 2012 October 1, 2012) 59 days 30 days prior to arrival (October 1, 2012 November 5, 2012) 29 days until arrival (November 6, 2012 December 5, 2012) Cancellation on Profit Cancellation on Revenue 40% of Total Room Profit = $14,175 $18,900 65% of Total Room Profit = $23,035 $30,713 85% of Total Room Profit = $30,122 $40, % of Room Profit ($35,438) + 35% of F&B ($18,200) = $53,638 $99,250
33 Solutions Cancellation ~ continued ~ XYZ Hotel shall use best efforts to resell the cancelled guestrooms and credit ABC Corp. All deposits paid by ABC Corp and all revenues derived from Hotel s resale of such guestrooms will be applied toward payment of any Cancellation Fee payable hereunder. XYZ Hotel will refund any amount due to ABC Corp within thirty (30) days after cancellation. ABC Corp has option to rebook meeting and apply 75% of cancellation damages.
34 Solutions Published Rates If, at any time after signature of the contract, hotel publishes, issues or promotes room rates via promotional web sites (during group peak room nights) that is less than the contracted group s rate, hotel shall adjust the applicable group rate to equal the lower published rate. Note: The goal is to reduce the possibility of guests booking direct at a lower rate.
35 Solutions Breach By Hotel Failure by hotel to provide the space and/or services as agreed, or breach of any representation or warranty by hotel, shall render Hotel liable to Group for all direct, indirect and consequential damages, expenses, attorney s fees, and costs incurred by group on account of such breach. Exercise by group of any of its cancellation or termination rights under this agreement shall not waive or otherwise affect this provision. Note: The goal is to have mutual accountability with damages due the group in the event hotel does not perform as contracted.
36 Hotel Contract Addendum vs. Custom Hotel Contract Addendums - generally include concessions and select performance clause language Addendums - often attached to hotel contract / conflicting performance language Addendums generally do not address hotel responsibilities and accountability
37 Custom Hotel Contract Process Your custom hotel contract should address all contract components, value added concessions, hotel fees and surcharges (eliminate or reduce), hotel performance clauses (based on profit, not revenue) and company liability language.
38 Key Risk Reduction / Cost Containment Components Sleeping Room Rates Rate integrity process Value Added Concessions Prioritize for each meeting Published Rate Clause No lower group rates via website after contract signing Attrition Guarantee percentage of room block / no sliding scale fees / damages based on profit not revenue Cancellation Sliding scale damages on profit not revenue / resell / if damages, apply to future meetings F&B Guarantee Allowable attrition Hotel Fees & Surcharges Eliminate or reduce
39 Key Risk Reduction / Cost Containment Components Resell / Audit Resell / credit accountability, percentage of damages applied to future meeting Relocation Accountability when attendees walked Construction / Remodeling No construction or renovations over meeting dates that impact meeting, image, logistics, guest experience Unauthorized Changes Hotel not to change or alter contracted room block, meeting space, services without written approval Meeting & Event Space Complimentary / no sliding scale fees Force Majeure Termination without damages Breach By Hotel Failure to provide services as agreed render Hotel liable for direct & indirect damages Legal Department Language Indemnification, insurance, dispute resolution / arbitration, bankruptcy, successors & assigns, etc.
40 Five Steps To Value-Based Negotiations Utilize a strategic RFP / assess your leverage & revenue contributions for each meeting Have a negotiations plan and goals for each meeting Track meeting activity and spend, by category (contracted rooms vs. actual, F&B revenues & ancillary spend) Create a custom hotel contract, ready for signature Generate a cost savings / risk reduction / cost containment report for each meeting.
41 Complimentary Planning Resources Sample Cost Savings Report Hotel Contract Top Ten Tips Track & Leverage Spend for maximum $uccess Robyn Mietkiewicz, CMP, CMM Senior Director, Global Meeting Management Meeting Sites Resource
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