There seems to be a trend for purchasing departments to absorb travel and meeting planning functions, and my company was ahead of the curve by about two years.  My company holds a significant number of events, and consumes over 62,000 total hotel room nights every year.  That's almost 170 years of hotel room nights every year!  What I've discovered over the past two years is that hotel contracts are nearly as difficult and complex to negotiate as some of the biggest IT deals I've done.  Here's an incomplete hodge-podge of miscellaneous tips and traps you might find useful if contracting for hotel space is a significant part of your spend.

Understand Supply and Demand.  According to Smith Travel Research, the "Gartner Group" of the travel industry, hotel supply has actually shrunk vis a vis demand due to limited new construction, and, during the housing boom, conversion of hotel room inventory to residential (condominiums).  At the same time, after the post-9/11 "drop like a stone" dip in hotel room demand, demand has risen far beyond pre-9/11 levels.  As with many other commodities, limited supply + increased demand = higher prices.  In the case of hotels, a lot higher...  However, due to the fuel crisis and airlines meltdown, the hot market for hotels is beginning to soften.  Keep in mind that even though we're coming off of a seller's market when it comes to hotel rooms, but that we're still in the transition to a buyer's market.  In other words, you'll still see some seller's market attitudes out there when you're dealing with hotels.  My recommendation when you come across those attitudes?  Walk, or better yet, run.  Find another chain or hotel to do business with.

Understand that Hotels are Making Up for Lean Years.  After 9/11, hotel revenue was crushed—but as demand increased, hotels made up for those lean years by, in my opinion, gouging their customers.  As evidence, take a look at the nearly 100% rise in hotel stocks as a class from post 9/11 to 2007.  But the gouging goes even beyond greed: It's almost like hotels are vengeful and punishing their customers for the years that travel was down after 9/11.  David Scypinski, SVP, Industry Relations for Starwood Hotels, said in an Association Meetings article, “...in the last two years, your baby got ugly...our hotel doesn't want your business because they've got six or seven other choices that are all better”  I doubt that's entirely true since Starwood's stock has dropped like a rock in the past 12 months, but it does demonstrate the attitudes of some of the hotel chains.  Every dog has it's day... I recommend that when hotel supply and demand flip-flops—and it's coming—you enter into long-term agreements (at low rates) if you have multiple year events so that you can tie in those low rates for years to come.

Avoid Unsophisticated Hotel Sales Staff.  God bless our young folks for being productive and getting jobs right out of college, but those are the folks who are typically doing the "selling" at individual hotels.  Like almost every other commodity, I drafted a contract template for hotels.  When my staff negotiate a contract with a hotel, they're usually dealing with someone on the other side who, one, barely knows what a contract is, and, two, has rarely gotten a customer's contract template.  In other words, we (and you) have to educate each hotel sales person on our contract template, provision by provision, word by word.  There's a couple of issues here.  The first is, customers (us) need to make sure that we're using our own contract templates so that hotels begin to see that as a common practice and train their staff accordingly.  Second, don't deal with lower level sales staff, deal with the hotel's director of sales, GM, or a national sales rep.  Which brings me to my next tip / trap...

Deal with National Sales Staff.  If you're an account of any size, you should be dealing with a national sales rep and not just with the individual properties.  Remember that hotel chains are really just franchises, very much like Subway, but there is a good  (and strong) network of national sales staff that don't report to the individual hotel property owners and instead report to the corporate entity.  Sure, the national sales types are comped for sales, but you can build a level of trust with these folks and not worry about getting hosed (but the degree of trust varys by chain).  For example, with Hilton, I work with David Giger, Senior Director of Sales & Industry Relations, to source deals with individual properties.  I don't want to divulge too much here, but I can say for certain that David advocates for my account.  I have more than one example of insider proof that he's gone head-to-head with individual hotels to advantage my company.

Drive Business to One Chain.  Just like most vendor rationalization advantages, those same advantages apply to the hotel commodity.  I recommend driving your business to one chain wherever possible.  In my two years of dealing with the large hotel chains, Hilton is by far the easiest and fairest to deal with (Strategic).  Hyatt is a close second (Preferred).  Marriott is third, with a wide gap between second and third (Valued).  Starwood is a distant, distant fourth (Opportunistic).  Hilton's Giger, for example, puts me in front of Hilton's executive management whenever I have need or want to be.  And not just for the purpose of schmoozing.  For example, I had a detailed technology question relating to room block management (it's a science), and my Hilton guy engaged me with the Hilton CIO for a very beneficial conversation.  I think that conversation saved my company over $100K, and kept me from going in a wrong direction.  That's a great example of a partnership and why I prefer to do business with Hilton—the other chains should sit up and take notes from Hilton and Giger when it comes to account management.

Negotiate a "Corporate" Contract Template.  There's a hotel industry best-practices group, the Accepted Practices Exchange or "APEX" (an initiative of the Convention Industry Council), that has been trying to develop a contract template for years.  In other words, it ain't going to happen through APEX, and that became obvious to me even two years ago.  In fact, I think they've given up on the effort.  The current practice is that almost all customers operate off of hotel paper.  Just like every other commodity, that should be a cardinal no-no for purchasing professionals.  I took a different tact.  Instead of negotiating my contract template property-by-property, I approached the chains to develop a "corporate" blessed contract template.  Since the chains are primarily franchises, the individual properties don't have to accept my corporate contract template; however, most do, and this has made my staff's life much easier.  I have corporate contract templates formally in place with Hilton and Hyatt, and I have an informal one with Marriott (I did have one with them, but some time after it was completed, some new lawyer was trying to show her "value" and retro-actively destroyed the arrangement).  Starwood kicked and howled at the idea of putting together a "corporate" contract, killing the idea by putting the Freddy Kreuger of hotel attorneys on the job.  Somehow, my contract template being 100% favorable to Starwood seemed to obviate the purpose of the template.  Maybe it was just me...

Don't Fall in Love with a Location / Hotel.  Just like houses and cars, don't let your company fall in love with a location or a property.  When considering where to place an event, consider multiple different locations.  Does your meeting really have to be in Tampa, or can it be in St. Petersburg?  When you're locked to a location, does your meeting really need to be at Hotel XYZ?  Be creative, like Gaylord, and search out second- and third-tier locations.  Who would have thought Grapevine, Texas?  But what a great place to go.

Don't Think Size / Volume is Advantage.  It does make sense to drive business to one chain, but if you have a city-wide, you're going to get gouged—eventually.  Look at CES contemplating getting out of Las Vegas and the National Association of Home Builders pulling out of Atlanta.  Those cities rewarded that large group business by price gouging.  My biggest event is 10,000 attendees, which is considered on the large size from an industry point-of-view, and the size works against me.  You can avoid being gouged by having a broader rotation of cities for your large events.  Unfortunately, for CES and NAHB, there are only a few cities that can handle those sized groups—and those cities know it.

Pro-actively Mitigate Attrition.  Attrition has been around for a few years now, and I can understand, sort of, the hotel's business rationale for it.  What I don't understand is that, more and more, hotels want you to hit exact numbers and they hit you with major financial penalties if you're off a little in your room pick up.  Attrition is a highly debated subject, so I'm not going to say too much about it here.  Though, I may blog later on how to successfully negotiate attrition provisions or to make it disappear entirely.  What I will say is that there are some simple things you can do outside of a contract to mitigate attrition.  Examples: Require attendees to register for the event first before they're permitted to register for housing.  Regardless of hotel policy, require attendees to pay a hotel cancellation fee.  Require sub-blocks to justify significant year-over-year changes in requested block size.  Pass on attrition damages to offending sub-blocks.  One thing to NOT do is under-estimate your block in the contract, with the hopes / intention of getting the hotel to increase the block as the rooms pick up.  The following quote, again from Starwood's Scypinski, sums up why you shouldn't do that, “In many cases, we're capping blocks to what groups asked for.  If groups need more rooms, they're going to have to pay a premium to get them.”

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