This economy has made all of us anxious participants in a seismic shift in the meetings marketplace, in which a hotel’s ability to deliver value and its quality of customer collaboration is more critical than ever. Reciprocally, the willingness of customers to actually perform under the terms of legacy booking agreements is greatly at risk, as has been painfully exhibited by the record pace of group cancellations and massive deterioration of trust between hotels and the groups under contract.
The damaging effects of this deterioration are visible to all participants. These effects are manifested by the exceptional group value offers, blanket forgiveness of attrition and cancellation performance guarantees, and the generous and frequent hotel renegotiations of existing contracts that mimic “mark-to-market” tactics in the banking world.
An unintended consequence of this market turmoil is that while this deep recession has originated more value-oriented offers to customers, it has created greater long term impediments to a hotel’s ability to provide the very quality of collaboration and service delivery that customers still expect from their meeting and incentive venues. As greater values are offered and as rates and terms become more generous against the mountain of fixed-term debt carried by owners, less value will actually be delivered to groups, leading to hotel-client conflicts in expectations. Groups actually will get exactly what they paid for.
And without enforceable attrition and cancellation assurances from customers, hotels are forced to reduce staff, understaff events, take gambles on the actual group numbers that may materialize, and eliminate some of the training that is required in a business that regularly experiences annual turnover of 25-33% of its hourly employees.
Another practical consequence of group bookings that are made without enforceable cancellation or attrition thresholds is that absent these guarantees, hotels are incentivized to overbook, move or reduce assigned meeting space, book through the group dates, or even completely remove a group from the hotel if a more valuable group comes along at a later date.
This is the definition of Planner and Hotel insecurity.
The long-term risks of continuing on this path are significant for hotels and meeting planners. Marketplace confusion, rampant group cancellations, perpetual renegotiation of numerous contract terms, and increased time compression of the Booking-Planning-Operations cycle are among the likely unintended consequences of the Grand Bazaar that we operate in today.
The meetings industry must adapt to and acquire tools to deal with this new reality, and the sad state of the economy will force all participants to cope with these trends for the next several years. The meeting business is an economic laggard, a trailing indicator of the macro-economy, and long after unemployment rates, business investment, and lending begin to improve, the survival practices we adopt now will stay with us as the legacy of this era.
Normally, the saying is caveat emptor, or Buyer Beware. Better we should pause to consider caveat pactum fides.
Beware your own Contract Promises. They may actually come true.
The damaging effects of this deterioration are visible to all participants. These effects are manifested by the exceptional group value offers, blanket forgiveness of attrition and cancellation performance guarantees, and the generous and frequent hotel renegotiations of existing contracts that mimic “mark-to-market” tactics in the banking world.
An unintended consequence of this market turmoil is that while this deep recession has originated more value-oriented offers to customers, it has created greater long term impediments to a hotel’s ability to provide the very quality of collaboration and service delivery that customers still expect from their meeting and incentive venues. As greater values are offered and as rates and terms become more generous against the mountain of fixed-term debt carried by owners, less value will actually be delivered to groups, leading to hotel-client conflicts in expectations. Groups actually will get exactly what they paid for.
And without enforceable attrition and cancellation assurances from customers, hotels are forced to reduce staff, understaff events, take gambles on the actual group numbers that may materialize, and eliminate some of the training that is required in a business that regularly experiences annual turnover of 25-33% of its hourly employees.
Another practical consequence of group bookings that are made without enforceable cancellation or attrition thresholds is that absent these guarantees, hotels are incentivized to overbook, move or reduce assigned meeting space, book through the group dates, or even completely remove a group from the hotel if a more valuable group comes along at a later date.
This is the definition of Planner and Hotel insecurity.
The long-term risks of continuing on this path are significant for hotels and meeting planners. Marketplace confusion, rampant group cancellations, perpetual renegotiation of numerous contract terms, and increased time compression of the Booking-Planning-Operations cycle are among the likely unintended consequences of the Grand Bazaar that we operate in today.
The meetings industry must adapt to and acquire tools to deal with this new reality, and the sad state of the economy will force all participants to cope with these trends for the next several years. The meeting business is an economic laggard, a trailing indicator of the macro-economy, and long after unemployment rates, business investment, and lending begin to improve, the survival practices we adopt now will stay with us as the legacy of this era.
Normally, the saying is caveat emptor, or Buyer Beware. Better we should pause to consider caveat pactum fides.
Beware your own Contract Promises. They may actually come true.
RGE Monitor Economic Summary with Comments:
