Entrenched Hotel Seller's Market Demands Long-Term Buying Strategies

The latest news from hotel analysts PKF Hospitality Research is that U.S. hotel occupancies and average daily rates will improve through 2016, according to a story in Business Travel News. That requires meeting managers to formulate equally longterm strategies to hold down costs.

According to PKF, U.S. hotel supply growth through 2016 annually will remain below 2% percent, which in turn will lead to higher occupancies. The average room rate, according to the analysts, will rise "in excess of 4 percent" annually over the next two years. For this year, PKF forecasts that U.S. hotels will see a 5.8% jump in revenue per available room -- all from the effects of a 1.6% rise in occupancy and a 4.1% increase in average daily rates.

In the face of this forecast, meeting managers should be formulating buying strategies that will work in the long term as well as the short term. For example:

- Negotiate with preferred suppliers with the longterm in mind, that is, aim for discounts spread out over multiple years (Suppliers will likely want to see evidence of years of patronage in your spend data, so be prepared to give it.);

- Consider shifting meetings from upscale properties to mid-priced hotels to lower your costs;

- Shift market share to chains or hotels willing to keep your rates flat or slightly higher;

- Leverage existing supplier relationships to weather this current supply/demand cycle;

- Add more competition and hotels in your program; while hotels hate to see more properties included in any corporation's preferred hotel program, if rates increase and inventory is tight, you really don't have many other options.

There are plenty of factors to consider when formulating longterm buying strategies, but a protracted seller's market is looming, and it's time to adjust strategies to meet the realities of that market. If anyone else has any other recommendations, please share!

Kevin Iwamoto is vice president of enterprise strategy at StarCite. This post is excerpted with permission from his blog, Strategic Meetings Management.