Financial Fallout: More Negotiating Clout for Planners?

Financial Fallout: More Negotiating Clout for Planners?

In the wake of the financial crisis, future hotel development will slow to a crawl and we’re likely to see a significant slowdown in all types of travel, says Sean Hennessey, CEO of Lodging Advisors LLC, a hotel consulting company in New York City. But, he says, there may be a silver lining for planners: As hotel occupancy weakens, the value of meetings business goes up, and planners’ negotiating clout will rebound.

“I see much more negotiating flexibility for meeting planners going forward. . . with greater leverage in 2009 and 2010 than in the past several years,” says Hennessey. For starters, he says, we’re likely to see complimentary meeting space coming back as a concession.

Among the effects of the financial crisis, according to Hennessey:
  • Many new hotels currently under construction in the U.S. will be opening in the next few months—at the end of the second quarter of 2008, there was a total of 1,723 hotels with 242,229 rooms in the pipeline, according to Lodging Econometrics. But of the more than 4,000 hotels in earlier planning phases, most “will never be developed, or will be developed in the next cyclical expansion of the economy.”

  • Hotels in major financial centers will see a short-term increase in meetings business from accounting firms, legal firms, and other companies that provide services related to the financial crisis. But in the long term, the weakness on Wall Street will have a negative impact on meetings business in these markets, particularly New York.

  • Room rates will flatten and in some markets, decline. Hotel occupancy “is likely to weaken through the balance of 2008 and in 2009, and the relative attractiveness of group meetings will increase substantially for most hotels.”

  • Very short-term booking of meetings, similar to what happened after 9/11, will once again become the norm.

  • In another parallel to the post-9/11 economy, as meetings become more important to the hotel’s marketing mix, hotel salespeople will have freer rein to negotiate without following the dictates of the revenue manager. “Hotels will place less reliance on revenue management models and more on good old-fashioned group sales and marketing efforts,” says Hennessey.