Our profession is at risk. More small meetings, shorter lead times, and RFP abuse are on a collision course for commoditizing an industry that shouldn’t be commoditized. Hotels are reacting by throwing technology and lower-level sales professionals against the problem. This 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 kind of business shouldn’t be sourced the same way that office supplies are purchased. Indeed, while big chains and brands receive the lion’s share of group business, the facts are: 1) Hotel ownership is extremely fragmented, and 2) inventory is perishable. These dynamics make for a competition- rich environment, where a planner’s deal making expertise can make a big difference, one transaction at a time.
Cost of sales and close rates
Any hotel executive worth his or her salt tracks the cost of sales and close rates in real time. The average planner today is sending out 13 to 15 RFPs to hotels—and only one can win. Often, hotels end up on a planner’s grid where it is difficult for them to be differentiated beyond date availability and initial price quote.
Hotels acknowledge that close rates are declining and try to resolve the cost-of-sales problem by automating responses or replacing more highly 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 and need help prioritizing which opportunities call for 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 themselves. 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.
Meeting-procurement initiatives often follow the lead of corporate travel best practices. Stanley Slaughter of Air & Business Travel News offers a peek into what that future might hold in “RIP: The Traditional Corporate Travel Policy?”
Experienced procurement professionals use a two-part process before negotiating with and selecting a vendor. Step one is the RFI (request for information). This is usually the point at which 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, and then require that only the finalists go through the exercise of a thorough RFP response.