An armchair analysis might suggest that second-tier cities are a boon to planners as corporations climb out of the recession, given the overall savings on room rates and greater negotiability that these cities promise. But the reality of site selection on a tight budget is more complex than an automatic switch from first to second tier.

One of the main strengths of cities such as Chicago, New York and Las Vegas is of course airlift, and that can mean significant cost avoidance on transportation, as well as headache avoidance for attendees.

“Airlift seems to be the single most important factor driving location selection the last couple years,” noted Vicki Kern, vice president planning with Irvine, CA-based JNR Incorporated. “Travel isn’t as glamorous as it used to be, and having to navigate airports is hard. So our clients are really looking for cities that have great airlift.” That access is especially valuable for large, geographically dispersed attendee bases, as well as for smaller groups that want a quick meeting at an airport hotel without taking multiple flights.

Just as it’s not a cut-and-dried matter whether a first- or second-tier site choice ends up being more affordable once airlift is factored in, neither is it a given that second tier equals better value. There is the attraction of (potentially) lower room rates, but the attraction of the city itself must also be considered in light of the meeting objectives. New York, San Francisco, Orlando and other first-tier cities still have sway over even well-traveled attendees, and are extremely marketable destinations for incentives, as well as annual meetings and product launches. So even when a meeting in a second-tier city does come with a lower “price tag,” it might not provide a better ROI. “The lowest room rate isn’t going to bring the best ROI necessarily,” said Tim Brown, CMP, partner Irvine, CA-based Meeting Sites Resource. “If you pound the rate down to the lowest available and you don’t meet all of your meeting criteria, that’s not ROI, that’s ROB, return on budget.”

The Window of Opportunity Is Still Open

And before the pendulum swings back toward a seller’s market, it may well be the window of opportunity for planners interested in first-tier cities’ beaucoup lodging, meeting space and entertainment options. “At this point, I still feel like there are pretty good bargains out there,” said Amy Chandler, manager of corporate

Like other first-tier cities, Orlando offers the access, infrastructure and appeal required for both meetings and incentives. Photo courtesy of Walt Disney World Resort

meeting planning with Newport News, VA-based Ferguson Enterprises. “In talking with the hotels, it seems they’re starting to shift, but it probably won’t be until late 2011 or 2012 that they’ll be able to get their rates back up. Some of the main hotels have really dropped their rates, which you wouldn’t have expected, and many customers got a taste of the hotels. So now it’s going to be rather hard for them to jump prices.”

What’s helping many hotels to raise their rates is the resurgence of individual business travel, particularly in major hubs such as New York and Chicago. That means hoteliers there are becoming less needy. “The room rates for individual business travel are higher than the group room rates,” Brown explained. “Consequently that segment is driving demand a little more than when the recession was taking place, where typically a businessperson who was normally going on 11–15 trips a year was only going on three or four. So now hotels are allocating more inventory toward individual business travel rooms. But there’s also better group pickup and the occupancy is creeping up.”

More Flexibility

In the meantime, planners have noted increased flexibility in at least one major first-tier city: Las Vegas. Not only has the corporate meetings market suffered there due to the general pullback during the recession, but also due to the perception issue, and so the city is now positioning itself as a site choice that makes business sense. Plus, new and upcoming properties are boosting the city’s already significant room inventory: Aria Resort & Casino recently added 4,000 rooms; and the new Cosmopolitan of Las Vegas will add another 3,000 rooms in December. Alexandra O’Keefe, director of sites and contract services for Atlanta, GA-based Meeting Expectations, said that for her firm’s larger clients, first tier is basically required given space needs, but fortunately “we have noticed the convention centers

The Golden Gate Bridge, signature landmark of San Francisco. Photo courtesy of Starwood Hotels & Resorts

and hotels are a lot more flexible to work with in Las Vegas. It’s a very positive trend. It was just incredibly difficult to negotiate a contract with the large convention facilities three years ago.”

Robin Reuben, CMP, senior meeting planner, with San Francisco, CA-based McKesson Corporation, corroborates the assessment that now, more than ever, “Vegas Means Business” — group business. “Las Vegas has been easier to work with the last couple years,” said Reuben. “They were hit pretty hard [by the recession] and I think they had to wheel and deal more than they were used to.”

As one of the world’s largest pharmaceutical distributors and healthcare IT companies, McKesson often stages events in first-tier cities because “our people are coming from all over the U.S.,” said Reuben. Her general approach to getting the desired rates and space in these cities is to avoid certain meeting dates: “We try not to book high season if possible.” But it doesn’t always work. “Chicago just seems to be really busy all the time,” she added. “We get many requests for Chicago, but it’s hard to find space.”

In fact, a planner site searching in any major meeting hub should be prepared to be flexible with dates, and to inform prospective facilities of that flexibility. “Communication is key, and in this case it’s asking a hotel what makes a group attractive to them, because they will tell you,” said Kern. “It’s going to be based on patterns: booking up next to other groups, going over citywides, and so on. So when I have a client that says, ‘I need to do this program in April or May and I want a Sunday to Thursday pattern,’ I’m going to provide that information to my hotel partners and say, ‘This is what they’re asking for, but if there’s a pattern that works better, let me know.’ We recently had a client in the high-tech field that simply moved their arrival date by one day and saved 20 percent on their room and concession package.”

As the first-tier cities get busier next year and the following, seeking leverage in negotiations will become a bigger issue, especially for smaller groups whose business isn’t particularly impressive for hoteliers in places such as Las Vegas or Chicago. Among the many strategies here is to work with national hotel chains who are longtime partners and have a property in the city, something quite likely when it’s first tier.

Getting Rate Relief

“We tend to go back to the partners that have provided us good programs, and as a result of that we’re able to negotiate and get some rate relief,” said Michele DeRosa, manager of corporate events at Ferguson Enterprises. “With a hotel partner that I’ve had for

Historic Grand Central Terminal is in the heart of Manhattan. Photo courtesy of NYC & Company

years, I can say, ‘Let’s be realistic with each other. You’ve got to do better than this. I need it to be $250 a night inclusive,’ for example. That’s only because we have a history with them and they know that traditionally we’ve been very good at picking up what we say we will.”

Leverage also can come from ramping up the group’s F&B contribution by agreeing to stage as many dinners and special events on property as possible. The “possible” here should be constrained by the meeting’s objectives, of course. It may be desirable that attendees get a taste of the city outside the hotel walls, and the great variety in dining and entertainment is, after all, a major selling point for big metropolises. “You can get bullied into thinking you have to do all four nights on property,” Kern commented. “The hotel will tell you we have to have $200,000 in F&B revenue to take your business, but you have to seek a win-win.” Some negotiation can allow for an onsite/offsite mix that is more favorable to the group. “The mix does matter whether it’s an incentive or a meeting because you have to dive into the culture,” said Kern. “For a short meeting it may not make sense to go off property, but then we try to bring some of the city to the group through entertainment elements.”

Shotgun RFPs

On the other hand, if a hotel proves recalcitrant on its F&B requirements, thinks the group needs too much meeting space relative to its room block or negotiations reach an impasse for some other reason, there are always plenty of other hoteliers to approach in a first-tier city.

But simply because the town is teeming with hotels doesn’t mean scores of RFPs should go out in the first stage of site selection. “You can send an RFP to 50 hotels in Las Vegas, but that’s not really a fair analysis because you can’t be comparing a Mandalay Bay or Venetian with the Holiday Inn— that’s apples and oranges,” said Brown. “And the hotels are awfully frustrated by these shotgun blasts where you’re expecting four- and five- star hotels to be in the bid with two- and three-star hotels.”

After some paring down by property tier and other obvious criteria such as meeting space, perhaps the RFP will reach only a dozen hotels, and then perhaps half of those will be put on hold, meaning the group gets first right of refusal on the space over a certain period. Whether the RFP should include desired contractual terms and concessions is open for debate, however.

“We don’t do the contract content in the RFP process, but only when we go to the seven or eight choice hotels. At that point we create a custom contract for our customers with all their terms; it’s a complete document ready for signature,” Brown explained. At the RFP stage, “we don’t even know if the hotels have availability yet, and we don’t want to make them jump through hoops for no reason. And while many planners put their concessions list in their RFP, we still don’t even do that because those needs may change based on specific hotel or location. That’s something we like to tailor as part of the negotiations package with the hotel of choice.”

O’Keefe, in contrast, prefers to know about contract flexibility right off the bat. “We have become very specific with our RFPs, meaning that we are not just looking at the room rate and the meeting space, but we actually include the concessions and want to know the attrition and cancellation flexibility,” she said. “If there’s not great contract flexibility, if the hotel tells me we are firm at 10 percent attrition or that they need, for example, $200,000 in F&B minimum to take this piece of business, we may just have to cross it out.”

A decision between properties usually doesn’t come down to contract terms, “but it could,” said Reuben. “We have an extensive addendum, four versions depending on the type of meeting, one specific to small meetings, one specific to meeting space only, and so forth. And it’s e–mailed along with our RFP” via Starcite, which the planning department has used for a couple years. Another key requirement that’s communicated is that no competitors must be on property during the meeting dates. “That’s been a huge issue for us lately,” said Reuben, who typically provides the hotelier a competitor list. “It’s a deal breaker.”

The neon and lights of the Las Vegas Strip. Photo courtesy of Las Vegas News Bureau

Leverage Citywides

Sometimes a corporate planner may not want to share the city itself with a major association group, the kind that might bring, say, 20,000 orthodontists into Chicago. The likely result is severe limitations in hotel negotiability and offsite venue availability, along with transportation hassles. “If you’re looking for a great deal over a citywide convention you probably will not get it. The occupancy will drive the rates up,” said O’Keefe. “But you might be able to get your dream meeting space.” That’s simply because delegates will be meeting primarily at the convention center, freeing up much hotel meeting space. A leverage opportunity is thus created for groups that need relatively few sleeping rooms for the amount of meeting space they’ll be using.

JNR Incorporated has in fact deployed this stratagem with the help of Hyatt. “Our Hyatt global team has a really great back-office system that tracks citywides all over,” said Kern, who gave an example. “Recently I had a corporate client that is very space intensive. I booked the program in Las Vegas over a citywide. I had tons of hotel function space for my client, and the hoteliers were happy to give it to me because it’d be sitting there empty otherwise. So I did it purposely using the citywide so I could provide my client a better value.” While the client in question was a prepaid credit card company, Kern added that many insurance and medical groups also have problems “selling” their rooms-to-meeting space ratio to hoteliers, “and they’re missing the boat if they don’t take advantage of the citywides.”

Suburban Sites

To secure better room rates while enjoying the airlift of a first-tier city, planners can take advantage of properties outside of the downtown area, perhaps even in suburbs or nearby towns. This site decision is again a matter of assessing meeting objectives: If attendees will need to head downtown regularly, the transportation time and costs may offset the lower rates. If it’s an incentive program, it’s likely the winners will thrive on being in the middle of the action, whether it’s the Las Vegas Strip or New York’s Fifth Avenue.

“If it’s a VIP event and they want to ‘wow’ everybody with location, then they will pay for it,” noted O’Keefe. “But we are definitely seeing clients moving out of the city center a little bit.”

Since first-tier cities have strong tourism industries, one thing to be wary of as a planner explores less-trodden hotel options is properties that aren’t well-versed in corporate group service. New York City, for example, is brimming with boutique hotels that feature intriguing themes, architecture and locations. And while many have meeting space, they tend to lack the experience serving groups offered by the major brands. For example, they may not be accustomed to handling F&B for a corporate group of 150, but rather small tour groups.

Group Business Expertise

“The level of service in today’s marketplace can vary greatly, so we definitely look at what a hotel’s group-to-individual travel ratios are,” said Kern. “Many hotels will say, ‘Yes, we like group business,’ but they only do 10 percent of their overall business in groups. That’s not going to give them a lot of expertise in the industry.” Then there are hotels trying to break into the group market. “You can get a good deal from them, but you don’t necessarily get value,” Kern advised. “For instance, the client might have wanted to instill loyalty and hard work in their employee base if it’s an employee program, and they may not get that result if attendees are not happy with the service.”

Apart from asking the hotel what percentage of its business comes from corporate groups, planners can also ask colleagues who have staged a meeting there about their experience. “If we ever have a concern about a hotel handling group business, I’ll get referrals from three other corporate groups,” said Brown. That’s because a tourism-oriented clientele and/or a small amount of meeting space isn’t proof of poor ability to serve a corporate group. The hotel may have demonstrated that ability in the past.

While first-tier cities have their share of hotels that focus on tourists or individual business travelers, they surely compensate with many that are decidedly in the group market, and some of these hotels are even designed with groups in mind.

Las Vegas, now more than ever vying for corporate meetings business, is a case in point. “What I love about Caesars Palace is that you can reserve a Tower that has both meeting space and sleeping rooms, which keeps attendees from walking through the casino. For me that’s a selling point,” O’Keefe remarked. Similarly, “the new Aria is a true business hotel, with well-separated meeting space and gaming venues.”

It’s properties that are real pros at hosting corporate meetings, while surrounded by a slew of top-notch restaurants, entertainment and culture, that make it worthwhile to negotiate a place for one’s group in a first-tier city.    C&IT