I’m sure I am not the only person who has thought (or perhaps even blogged) about this but after a recent bout of hotel negotiations for a forthcoming event it got me thinking about the topic...again!
Owing to the recession brands (clients) have reduced budgets causing agencies / organiser’s to cut spending, which in turn has resulted in suppliers from AV through to stands to cut their costs. On the venue side the majority have realised they need to reduce their prices, or at least provide more flexible terms, payment schedules, etc but for some reasons hotels seem to have bucked the general trend of the market.
One of the main issues with hotels, even before the recession, is the existence of the ‘bedroom guarantee’ rule. For those not aware of this rule it basically means that whoever is contracting for the event space has to guarantee a certain number of bedrooms per night and if they do not reach this figure they have to pay for the remainder. In short it adds a potentially large extra cost, which can of course be damaging to the overall budget. This rule / condition is still in place for all large and medium bookings despite it being clearly evident throughout the industry that delegates, sponsors, organisers and clients alike are staying less nights at each event. I appreciate they require some commitment but when 300 rooms over a 2 night show are requested when only a max of 165 have been used in the past I start to doubt if they are living in the real world.
About two years ago, when the recession really kicked in, I had a succession of meetings with a variety of hotel chains – including Hilton, Park Plaza and Park Inn to name three. In these meetings I explained the need for more flexibility and indeed the hotel representatives said that they understood in the current climate they would need to be more understanding and flexible to each and every client; needless to say this new flexible / understanding approach has not exactly been evident.
In fact, if anything, hotels have become stricter and less flexible in the wake of the economic downturn and subsequent recession. The problem, for organisers and clients, is that hotels, especially in London (and other major capitals), are still extremely busy so there is no need for them to have to reduce their demands. Tourism, despite the worldwide recession, is still booming in London – December 2010 excluded, owing to the weather. They know the power lies with them and as a result I suppose the question is - why should they reduce their costs, conditions, etc? Would organisers reduce their stand prices if they knew sponsors would pay them regardless?! The answer is of course no, as is proven time and time again by the market dominating shows currently taking place.
However that aside I still wonder – do hotels even know there has been a recession?! As mentioned a recent bout of negotiations with a number of hotels in Prague suggests not in Europe and I know from recent experience the same applies within London as well. Bedroom rates are still high, terms are still firmly in the hotels favour (one exception is the sliding scale minimum numbers clause Park Plaza has introduced) and conference rates (both room hire and DDR) have remained roughly where they were during peak times.
As an events organiser I understand first hand how vital the hotel industry is to the market and that they provide some of the best (in terms of space not excitement) facilities around. For that reason I appreciate and in fact accept that they need to look after their own business properly to ensure that they still meet targets, etc. However, what bugs me is that they do not seem realise how important the events industry is to their business. Hotels, especially the top brands, seem to think that clients will continue to bring the business to them regardless of costs charged and terms imposed. Surely a hotel should be able to realise that a piece of business guaranteeing 100 bedrooms per night rather than 200 is better than no business at all.
Personally it is the continuing existence of the bedroom term that is the most infuriating but consistently high DDRs, increased minimum numbers at the main hotels and high build charges (even when there is no other event taking place) also suggest hotels are oblivious to the financial climate surrounding the events (and the majority of other) markets. Of course peak season events will result in higher costs; of course events running in 5* hotels rather than 3* hotels will have higher costs but why are these higher costs not substantially lower than pre-recession? Even when presented with like for like quotes hotels continue to keep their rates at their preferred rather than realistic levels.
Moving forward sadly even with the threat of a double-dip recession it is unlikely to see hotels changing their attitudes. Regardless of opinions of individuals like myself they – the main hotel chains – have a working model, which continues to produce solid to spectacular profits. Perhaps if organisers start to suggest / clients start to request alternative venues, i.e. conference centres, it may force hotels to alter their approach – sadly, given the strength of the hotel accommodation sector, this is unlikely.
The recession has hit our market hard and in fairness it has impacted regional hotels as well as organisers, brands (clients) and suppliers. Chain hotels within large capital cities appear to be unaffected and, as suggested already, are almost performing better than pre-recession. Do they know there has been a recession – it appears unlikely; do they know we are still recovering from the recession (and perhaps heading towards another one) – unfortunately and disappointingly this appears equally unlikely.
http://www.connectevents.co.uk/
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