How Meeting Planners Can Avoid the Merger Crunch

The hospitality industry is being roiled by some huge recent mergers, and planners are growing increasingly concerned that these consolidations will hit them right in the budget.

The most prominent such move is Marriott International's agreement to purchase Starwood Hotels and Resorts, creating an entity with a combined 1.1 million rooms in 5,500 hotels under 30 brands around the world. But it's not the only one. Hyatt, which was a leading Starwood suitor, is widely presumed to remain interested in acquisitions. Meanwhile, Wyndham Hotel Group last month announced the acquisition of Dolce Hotels and Resorts, a leading hotel conference brand, and French hospitality firm Accor is buying FRHI, owner of the Fairmont, Raffles, and Swissôtel brands.

All of that consolidation has some planners nervous. Among them is Tosi Ufodike, who founded the annual Dare 2 Aspire conference for entrepreneurial women, among other business ventures. "The main thing we're concerned about is [the newly merged companies] maintaining the quality of the hotel, and the prices," she says.

Ufodike will be bringing about 100 attendees to Atlanta in April for the sixth annual Dare 2 Aspire. "We don't want a monopoly where one company controls everything," she notes, "and when there's a whole lot of mergers, we as the customer -- the people who plan the conferences -- sometimes suffer."

Bad Memories
Ufodike is hardly the only meeting professional with concerns. After all, planners had bad experiences after the last round of airline mergers, when the remaining majors started paying less attention to the group-booking niche, something that happened again as once-group-friendly American Airlines was taken over by US Airways Group.

"As a planner who does a lot of sourcing work, I'm already starting to experience impact from the wave of hotel mergers," says Mazda T. Miles, CMM, president of Philadelphia-based Perfection Events. "My takeaway from observing the airline mergers was that as they combined, large bodies of customers that had been loyal to the respective brands, the customers became less 'special' to them.

"That scenario is very possible with the hotel mergers as well," Miles adds. "Negotiating power can indeed get diluted, and standing relationships may suffer as companies reorganize and rethink priorities. While I don't think the service levels at properties will diminish, the negotiating stance may indeed change."

It is this potential loss of longstanding relationships with sales executives in brands' national sales offices (NSOs) and individual hotels that most concerns MaryAnne Bobrow, CAE, CMP, CMM, and president of Citrus Heights, CA-based Bobrow Associates. "Several things are inevitable," she says. "Jobs will be lost as businesses get leaner and meaner, and merged companies eliminate duplicative jobs. For the planners, this means perhaps their favorite NSO will no longer be their ally in booking business."

David Peckinpaugh
Maritz Travel and Experient — David Peckinpaugh Maritz Travel and Experient

This concern is shared by executives at some of the largest meeting planning firms in North America. "How and who this impacts will be very important to us," says David Peckinpaugh, president of St. Louis-based Maritz Travel and third-party planning outfit Experient. "We have had great and deep relationships at Starwood for years, and we have long and deep relationships at Marriott as well. This merger can disrupt those relationships. We are concerned, and we must make sure those deep and wide relationships are protected as changes come."

Peckinpaugh is also concerned about the potential loss of sub-brands. Marriott and Starwood's combined 30 brands include Ritz-Carlton, Renaissance, Westin, Aloft, and many others, and it is feasible a number of those that target the same niche in the traveler demographic could be discontinued. "For me, the No. 1 concern is about choice for our customers," Peckinpaugh says.

Don't Panic Yet
Such concerns are overblown, according to Arne Sorenson, CEO of Marriott International. Speaking at a general session at the Professional Convention Management Association's (PCMA) Convening Leaders conference in Vancouver, British Columbia, earlier this year, Sorenson addressed the questions of competition and size.

"In many respects, each hotel is pricing its own services," Sorenson says. "There is competition within the Marriott portfolio today, there is competition within the Starwood portfolio today, and there will continue to be competition and alternatives that are available to folks. I actually think the size will offer more alternatives to [planners] rather than take away anything from what's available."

And in fact, the biggest meeting planning firms aren't too concerned about the mergers leading to higher prices, at least in the short term.

The current hotel mergers have not limited planners' options or impacted budgets, says Bonnie Boisner, vice president of event management at Minneapolis-based Aimia, adding, "We don't expect mergers to affect budgets beyond the supply and demand in the market."

"Logically, you would think Marriott will gain pricing power," says Mary MacGregor, corporate vice president, event solutions, at Minneapolis-based BI Worldwide (BIW). "But the bigger question around pricing power is what stage we are at regarding the current economic cycle -- the seller's market -- and how will this affect Marriott in the next couple of years. In the long term, as we see more consolidation in the industry, we could certainly see more rate pressure. This is only the beginning of hotel consolidation. But the biggest driver on pricing will be the overall economy." That's a sentiment shared by Peckinpaugh.

As far as losing longstanding sales contacts, Sorenson has stated publicly on several occasions that most of the changes and redundancies will be at the executive level rather than at hotels, so the hotel and regional NSOs and staffs may not be too heavily impacted.

Another point, says Miles, is that it's not good to rely too heavily on existing relationships. "While they are valuable, I focus on building strong, lasting relationships with new internal contacts and strengthening ties with existing contacts so that wherever they land, I have an ally," she notes. "Now is also the time for planners to learn not to play favorites. We need to spread the love among the brands in this sector. I haven't personally experienced much concern about negotiating power because I maintain a balanced hospitality partner portfolio. Since I have a vested interest in most major brands almost equally, I always have options."

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."

Questions or comments? Email [email protected]

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

Airline mergers are cutting off smaller cities

In some ways, the worst impact the wave of major airline mergers will have on the meeting planning industry is in the past. The latest, the 2013-2015 merger of American Airlines and US Airways, has reduced the nine largest U.S. airlines flying in 2005 to just four today: Delta, United, Southwest, and American.

Planners have gotten used to fewer flight options, more crowded planes, and airlines that are increasingly uninterested in servicing the group travel market.

"American Airlines and US Airways had very distinct approaches to the group market, says David Peckinpaugh, president of St. Louis-based Maritz Travel and third-party planning outfit Experient. "American Airlines was very active in the group market; US Airways, not so much."

And so, while Delta and United still maintain dedicated group travel departments, American no longer does. This is no small problem, Peckinpaugh adds, noting that the hours Maritz Travel put into finding and booking flights, and then making hundreds of changes a week, was equal to 15 full-time employees last year. On the other hand, he says, "overall, we are still pretty lucky. Airfares have been fairly consistent."

Getting support from American with the airline blocks needed to move groups to places like the Caribbean has been a struggle of late, says Mary MacGregor, corporate vice president, event solutions, at Minneapolis-based BI Worldwide.

An even bigger problem, however, is making sure that there are enough flights and seats going to the meeting destination under consideration. "Now, more than ever, that will be an important concern -- amongst many concerns -- that needs to be reviewed before a destination is selected," says William Reed, FASAE, CMP, board chair of PCMA, and senior director, meetings and community engagement, of the American Society of Hematology.

This is a growing concern for second-, third-, and fourth-tier cities. "Look at cities like Cleveland, Memphis, and St. Louis. They lost hubs, and that has had a major impact," Peckinpaugh says. "I fly out of St. Louis, and we do not have many direct flights anymore. Accessibility and the reduced number of flights are a concern."

One response that companies and their planners have had to this situation in the past is replacing "the big annual meeting with multiple regional meetings," says Bjorn Hanson, clinical professor at the New York University Preston Robert Tisch Center for Hospitality and Tourism. Peckinpaugh agrees: "A lot of our clients have been moving to holding several smaller regional meetings as opposed to one big national meeting. That plays well for second- and third-tier cities, especially ones that have built up their infrastructure and are serviced by a good low-cost airline -- as long as they stay affordable."

Another response that will become more common among meeting planners -- particularly those considering smaller destinations -- is charter, Hanson predicts. One reason for this, he says, is that there are more charter companies and more charter planes available than in the past. "People picture executive jets and sipping Champagne in big, overstuffed leather chairs, but airlines have been upgrading and updating their equipment, and those old planes that may be 40 years old are just fine, mechanically."