HSMAI Marketing Review August 2009 - 28

“It is important to keep an open mind and try to negotiate a middle position,” says David C. Scypinski, senior vice president with Conference Direct and a veteran hotelier. “It will never be possible to have a true win-win outcome, but likely you can reach some kind of compromise that all parties accept—probably a future piece of business. The key is to identify the important issues for each side, such as the planner wants to avoid paying damages and the hotelier wants revenue. One gives, and one gets, and so on.” Navigating the New Normal Industry veterans are characterizing this year’s lodging and meetings market as “unprecedented” and the “worst in memory.” Most buyers and sellers are in the same boat, rowing for survival, and heading for unknown waters. Hoteliers are scrambling for revenue. Planners are fearful about their own livelihoods and any booking that could impair their organization’s bottom line. “This is a very deep and extended recession for the lodging industry,” says Robert Mandelbaum, director of research information services for PKF revenue is good revenue, and they are being more stringent in enforcing these clauses because owners are breathing down their necks. Salespeople are often so desperate for business that they are willing to sacrifice long-term customer relationships. Though we haven’t yet seen foreclosures and bankruptcies like we’ve seen in retail, they are likely to happen if this continues through 2009.” Industry lawyers are busy this year, helping clients navigate the twists and turns. Jonathan Howe, president and a senior and founding partner of Howe & Hutton, Ltd. in Chicago, says he sees both sides of the meetings industry hurting, probably as never before. “This is a very bad time. Meetings are under attack, budgets are being slashed, and people are rethinking what they will do,” he says.” Nobody has a crystal ball that will help us get past this. People are more realistic about what they commit to, and both sides need to know what the other side is doing and where they are going. This includes sharing bad news. Hotels need to tell planners if they are cutting back on staff or services. the hotel to eat damages, they had better have an offset – like a commitment for future business. Or, if the hotel lowers rates today, will the planner agree to accept higher prices in the next year or two?” Carol Verret, a hospitality sales consultant and trainer, says she is among others who describe today’s economic situation as the “new normal.” She expects industry revenues have fallen to levels that could be typical for years to come. “The economy is undergoing a paradigm shift,” she says. “Demand patterns are different than they have been in the past. The hotel sales and revenue management professionals who can learn flexibility in response to changing demand patterns will fare well in the recovery. Those who cling to processes that served them well in the past and don’t make adjustments in their thinking will suffer the most.” Verret joins Scypinski, Mandelbaum and others in predicting the shift is here to stay for awhile. “Some people have a false sense of security as they see the stock market a bit more buoyant,” says Scypinski, “but hospitality is a lagging industry. This year is a very Hoteliers say too many event planners wait until the last minute—maybe two or three weeks out—hoping their meeting will go off as expected. Hospitality Research. “What differentiates this one from past recessions in 1991 or 2001 is that there is a falloff in demand for accommodations at the same time there is a rise in a new supply of hotel inventory. All the hotels built by developers three or four years ago are opening up now, and this is exacerbating the situation. “Another thing we are seeing this time around,” continued Mandelbaum, “is that in 2001 there was a sudden drop-off in demand, and hotels protected themselves by putting attrition and cancellation clauses in contracts. Hotel managers and owners now have a shorter term focus so any 28 Planners need to talk about their down numbers. There has to be give and take. Putting your head in the sand doesn’t help anyone. Yes, this market is worse than any we’ve seen in recent decades. And it’s both economic and emotional. so there’s lots of fear. That’s hard to get past.” Attorneys say they often must educate planners who expect a hotel to write off damages to the fact that hotels are under no legal obligation to do so. “Hotel management companies are having lots of trouble justifying a budget to owners,” says Joshua L. Grimes, a hospitality attorney based in Philadelphia, “and if a planner asks big problem and 2010 could be just as bad. People might dribble a few more bucks into their meetings next year but they will be very cautious. The industry is very unhealthy down deep, and I advise meeting planners to keep their eyes wide open in the process.” Further, he warns planners that they should keep informed about what’s going on with owners and hotel groups, making sure their contracts have out clauses for change of management, ownership, or Chapter 11 bankruptcy. They should be able to cancel and move. Otherwise, he said, they could be sitting in a bankrupt hotel. s HSMAI MARKETING REVIEW • AUGUST 2009

HSMAI Marketing Review August 2009

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