by Leo Jakobson | March 02, 2016

Three Strategies to Deal With Mergers
It's worth noting that having financially secure hotels is good for the meeting planning industry as a whole. "I think back to the days when hotels were not as financially viable," says William Reed, FASAE, CMP, and board chair of PCMA, as well as senior director, meetings and community engagement, of the American Society of Hematology. "They were unable to be as supportive to the meetings industry specifically, so ultimately I think this is good."

"Of course," Reed adds, "officially, when I'm on the other side of a negotiation table, I want them to have less profit. As long as they are making just enough to remain viable, that's okay."

That's a sentiment that is probably shared by all meeting, event, and convention planners. And while consolidation might not generally bode well for meeting buyers and owners, with a disciplined approach to managing events, there are ways planners can turn the situation to their advantage, says Issa Jouaneh, senior vice president and general manager of American Express Meetings & Events.

1) Be Strategic
"Those who are prepared, who understand their spend, and have the ability -- real or perceived -- to influence the timing and location of their meetings and events will have a distinct advantage," Jouaneh says. "By consolidating more of their meetings budget with a single company, organizations have a real opportunity to leverage that understanding to enhance their relationships with hotel partners who have a long-term mindset and value their business."

For both large and small organizations, "meetings and events are critical to business growth and an important investment that organizations make," Jouaneh notes. "Smart planners can not only deliver on those business objectives, but in a changing landscape, offer a competitive advantage against their peers."

That strategy has definite advantages, says PCMA's Reed. "I think there are opportunities that exist now for planners to think about their strategy on consolidated buying for the group," notes Reed, who is responsible for more than 100 meetings and events annually, including the main annual meeting that attracts about 25,000 attendees from all over the globe.

The hotel industry mergers are "an opportunity for the planner who needs multiple hotels in various quality and rate categories for a particular meeting," Reed adds. At the same time, "as the hotel chains grow larger, their threshold, or their definition of who their best customers are, is probably going to grow as well." That has the potential, he says, to put small-to-midsize organizations at a disadvantage. "They might benefit greatly by using third-party meeting planning companies that can leverage collective buying power."

2) Be Flexible
Bjorn Hanson, clinical professor (and former divisional dean) at the New York University Preston Robert Tisch Center for Hospitality and Tourism, says the combined Marriott-Starwood will gain "a little bit" of pricing power at planners' expense. That said, "the changes will be subtle except during very peak times," he says.

But the main reason is not because the merged brands will have a size advantage over planners. "I've seen some analysts talk about how this will transform pricing and there'll be this major player able to control pricing," Hanson notes. "But Marriott has already been the most influential pricing leader in most of the major leading markets. Marriott has the best research of any lodging company, and now will have immensely more data. With that, they'll be better at pricing, and with one less player to affect pricing, there certainly will be, during peak periods, higher prices."

The reason is simple, Hanson says. Marriott will now have even more information about when planners have to go to certain cities, and will be able to predict peak demand even more accurately, and set prices accordingly.

And because hotels are always trying to shift business from peak periods to shoulder periods, and from shoulder-period business to slower periods, "I think during low periods of occupancy and utilization, rates may go down because of the nature of that information," says Hanson.

Thus, Marriott's improved research may actually "create opportunities for the meeting planners that can be flexible and move to another city, or another time," Hanson concludes.

3) Be Informed
A key piece of the puzzle for planners looking for an advantage in the current wave of mergers is understanding that hotel chains like Marriott, Starwood, Hyatt, and Hilton do not actually own many hotels anymore -- they manage them. And as Sorenson notes, it is the owners who set the prices.

"The ownership/chain relationship doesn't really change as a result of these mergers," Reed says. "Each hotel owner will continue to drive pricing."

MacGregor agrees that competition within the same hotel brand is nothing new, "but it will become even more evident as internal Marriott hotels will now be competing against more Marriott-branded properties, just as if they were competing against their outside competition like Hyatt and Hilton. Hotel owners will now be watching the numbers more than ever because you could very easily have two competing hotels located on the same block battling for business yet under the same overall brand."

Reed adds that he is "amazed at the number of meeting professionals who truly don't understand who actually owns the hotels. Perhaps this is another opportunity to shine a light on the structure of hotels and chain brands, so that there's full transparency. Once you understand how everyone makes money, it gives you the ability to navigate through the structure more seamlessly."  

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This article appears in the March 2016 issue of Successful Meetings.