Mr. Arenas

Meetings & Conventions

The End of the RFP: Is the RFP Process for Day Meetings History?

By John Arenas, Chief Executive Officer, Worktopia

Until now, customers seeking short lead time meetings have had to fax, phone and email and then wait for manual responses to RFPs. But planners increasingly want the freedom to book meeting space, catering, audio visual and guest rooms for small groups on the Internet. For hotels, letting customers view live proposals and book small meetings on-line can drive market share and customer satisfaction, while reducing administration, sales and marketing costs. John Arenas provides tips on how to offer your availability of free-to-sell, inventory directly to buyers 24 hours a day, seven days a week for incremental revenue. RFP. RIP?.

Is the RFP Process for Day Meetings History?

Is it possible that the RFP, familiar as a favorite old pair of shoes, may soon have walked its last mile? Before we get too nostalgic and maybe fearful at the passing of an era of people-doing-business-with-people, let's consider what can be gained by hotels, planners and customers in bringing booking of small corporate groups on-line.

It wasn't so long ago that hotels received letters in the mail such as the following: "Dear Sir or Madame, I should like to reserve a guest room at your hotel for the second week of June this year. Kindly reply, at your earliest convenience, with your room rates and availability". Imagine trying to sell room-nights with a process like that today.

Unfortunately, that's the kind of process that most meeting planners still use for arranging day-meetings and small corporate events. Although dressed up in email, voicemail or electronic RFP submissions, the basic process is unchanged. Planners must call or write to hotels, asking them to kindly respond with rates and availability on preferred dates, and then hope for a timely reply. Not to mention having to repeat this archaic process with several properties at a time for each meeting. How can this be true in the age of instant-everything? Although most large, complex meetings will always require the intense human interaction associated with the RFP submission process, requests for smaller meetings continue to be processed with the same time-consuming RFP process, which is simply not an efficient way for a sales and catering team to respond.

That's all about to change for the meetings industry, where 2/3 of all meetings are for under 50 participants. According to a recent PhocusWright, Inc. white paper entitled "Groups and Meeting Market Redefined", the on-line marketplace for procuring small meetings is finally coming of age. With new market entrants, advances in technology within the industry, and dissatisfaction with business as usual, hotels and planners are coming together and a new, online marketplace is being formed. Just ask HEDNA (The Hotel Electronic Distribution Network Association), a non profit trade association that is charting a course for on-line collaboration among hotels, technology vendors, meeting planners, on-line agencies and global distribution channels. According to Edward Perry, Director of eCommerce for World Hotels and chairman of the HEDNA subcommittee on Groups and Meetings, "We envision a community that has integrated inventory and instant availability access from the supplier to allow end-consumer, travel agents and meeting planners to shop their properties on a 24/7 basis." Evidence of this new marketplace can be seen in the recent launch of on-line meeting booking initiatives at Hilton, Starwood and Hyatt, along with new services that automate booking for small meetings like the collaboration among Sabre, Worktopia, Travelocity and Groople to give planners the power to book room blocks, meeting space, catering and equipment all in a single online session.

What's to gain?

Industry research now shows that of the $175B in meeting related revenue, 2/3 of all corporate meetings are for fewer than 50 participants. These types of meetings are often recurring, regional "drive-to" meetings, generally requiring one or two meeting rooms for the day, simple catering, AV/Internet, 10-15 room-nights and are booked 4 to 6 weeks ahead. If small meetings make up 2/3 of all meetings but only 20% of all meetings revenue, there's still $35B in small meetings revenue that can migrate on line.

Incremental Revenue and Market Share Shift

With meeting room occupancies generally below the 50% level for most full service hotels, small meetings business is perfect for filling short term availability, boosting catering revenue, while adding room-nights. With the typical small meeting generating $4,000 to $6,000 of total revenue, and recurring several times per year in the same city, automating the sales process becomes important. Adding just a handful of regular, small meeting customers can mean hundreds of thousands in recurring revenue. Conversely, failing to give customers the ability to easily book such meetings can mean loss of existing small meeting business.

Consider the pharmaceutical company division that holds over 8,000 training and recruiting meetings a year. These are typically short lead time meetings for under 50 attendees, requiring simple catering for lunch and breaks, along with AV equipment and a few room-nights. The pharmaceutical company with this amount of small meeting volume can manage and measure its meetings activity much more efficiently through on line booking tools rather than with the RFP process. Hotels offering only an RFP or telephone as a buying tool are likely to feel their market share shift away for these types of meetings.

Leverage Existing Web-Marketing and Lower Sales Costs

With a limited sales resource and an emphasis on larger, long lead time meetings, most full service hotels would benefit from an automated sales process to handle smaller inquiries. Planners, who also prefer to focus their efforts on larger meetings, are more likely to buy small meetings from hotels that provide time-efficient, web-based booking tools. Today hotels are driving a growing percentage of room-nights through booking engines on their web-sites. This is a result of a significant effort and investment in web site optimization, key word marketing and directing users to their sites. However, today, most of these hotel sites only offer a telephone number, RFP submission form or email address to group or meeting customers. An on-line booking engine for meetings can leverage the hotel's existing web-marketing investment and therefore convert more site visits to revenue. It can also take customers farther down the sales process, allowing them to complete their research, see a proposal, and hold the space or electronically sign a contract and submit the required deposit. With such a booking engine in place on its web-site, the hotel staff does not have to qualify the inquiry, draft a proposal, or follow up by telephone with availability information. This allows the hotel sales team to focus on qualified leads, follow up with special ways to customize the meeting, and add the personal touch that defines that particular property.

What are the Challenges?

It should be acknowledged that there is an "Automation Sweet Spot" for meetings. According to HEDNA's 2006 white paper "On Line Group and Meeting Planning", meetings for 10-50 participants will be the first to migrate away from RFP toward on-line booking. Due to the complexity of providing quotes for larger meetings and technological limitations that restrict a planner's ability to book large room blocks and meeting space in real time, HEDNA's research indicates small meetings are best suited to on line booking.

An early challenge for on-line meeting booking is the need for revenue management. Since hotels optimize revenue by making sure they are competitive in attracting the most profitable business, they are careful not to allow smaller or less profitable meetings get in the way of booking larger, more profitable business. Therefore, in order to allow on line bookings for small meetings, hotels must be able to offer only that inventory of rooms and meeting space that is "free to sell". Since the larger meetings typically have lead times in excess of three months, and most hotels don't have a sales capacity dedicated to attract short lead time meetings, offering the ability to book meeting space and small group room-nights within a 6 to 8 week lead time, preserves the hotel's ability to optimize its revenue. Determining in advance what is "free to sell" can be achieved by setting an automated "booking limits" whereby a specific on line booking request is allowed only if it meets certain revenue criteria such as; minimum total revenue, number of room nights per attendee, or some other metric that ensures accepting the booking will be consistent with the hotel's revenue management goals. By predetermining the kind of small, short lead time meeting business a hotel will accept, the on-line booking of such meetings can take place 24 hours a day.

Collaboration among various industry participants is progressing, with global distribution channels, reservation system software vendors, hotels, meeting planners and corporate end users all working to bring on line booking of small meetings to fruition. Group booking services, like Worktopia, Groople, Group Travel Planet are working to bring group meeting booking capability on line, while the Global Distribution Systems (GDS's) are working to add on line group/meeting booking capability to their corporate travel planning tools and on line travel agencies. At the same time, meeting brokers and travel management companies are adding this capability to better serve their client's small meeting needs. Data switching companies, that provide onward distribution of rate and availability information for thousands of hotels, are also working to create solutions and standards for passing these booking requests and confirmations. Although industry-wide technology standards are not yet firmly in place, the Open Travel Alliance (OTA), which develops open specifications to support electronic exchange, is now working to set standards that will speed adoption and create opportunity for accelerated migration toward on line booking of small meetings.

With over $175 billion in US meetings business and 2/3 of all meetings being for under 50 participants, the economic and technological forces have converged to move small meeting bookings on line. Whether a hotel is a small independent property at a resort, a city center conference hotel, or a limited service hotel in small market, on line booking of small meetings will mean a more efficient sales process, better customer service and better competitive positioning to those who are first to embrace on line meeting booking and say goodbye to the RFP for small meetings.

Founder of Worktopia, John Arenas has more than 20 years experience in commercial real estate. As chairman and CEO of STRATIS Business Center, Inc., Mr. Arenas brought the 1997 start up to a merger with Regus Business Centres (RGU: London Stock Exchange). STRATIS investors realized an eight-fold return. Prior experience includes tenure as a commercial real estate lender for Citigroup and project engineer for Turner Corporation. Mr. Arenas holds a B.S. degree in civil engineering from Rutgers and a Masters degree in business administration from the University of Michigan. Mr. Arenas can be contacted at 914-468-0812 or john.arenas@worktopia.com Extended Bio...

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