Driving Conference Attendance
By Todd Ryan Director of Sales & Marketing, Sheraton Phoenix Downtown Hotel | September 22, 2013
Attrition... the most despised work in the hospitality industry. Talking about attrition is never a comfortable conversation and frequently considered a taboo topic that nobody likes to talk about. Attrition clauses are usually part of hotel contracts and used to ensure that organizations fulfill their contracted obligations. Usually, attrition fees are applied when a conference or a group cannot fill the agreed upon percentage of contracted rooms. I cannot tell you how many different articles I have read or trainings I have attended related to the topic. Some advice is correct and some is incorrect. In my experience, most hotels do not worry about conference attendance until the conversation turns toward attrition.
Some hotels do not discuss or take attrition into consideration unless it is for a large group or conference. Consider the impact group or conference attendance can have on a hotel of any size. If the average attrition percentage for any given hotel is 80%, that means there is a 20% potential variance in business levels at the time of contract. Furthermore, if the group does not meet this obligation, that variance gets event greater. Assume that a group contracts 1,000 rooms for four nights totaling 4,000 room nights. Eighty percent attrition means the hotel must hold and commit to 1,000 rooms each night but a group may only use 800. The remaining 200 rooms over the course of four nights can be a substantial amount of revenue loss for a hotel if they are unable to resell those rooms within a last-minute window of opportunity.
It is important to understand attrition and how to calculate the damages. At the same time, I would ask any hotelier or planner alike if they would invest in an operation that has an unknown of 20% or greater. If the contracted event is a mandatory meeting, a planner generally knows what the final count will look like. There will be a variance and a group may still hold more rooms than they will actualize, but a mandatory meeting allows hotels to better forecast the future outlook. What happens for meetings that are not mandatory, or for first-time meetings, or for meetings based on membership turnout?
It feels that most hotels do not consider attendance until they start their 90-day forecast process and then start to analyze the trends, if there are any trends. From my past hotel experience, I do not recall many people in inquiring about what a group is or is not doing to ensure rooms are booked and utilized. The advent of electronic response sites have altered the way sellers interact with customers and the information that is exchanged. When was the last time you or a seller you knew "challenged" an RFP to determine why a planner needs the amount of rooms or space requested? I am not saying it never happens, but due to the need for rapid responses some of these questions are not asked until it is too late, when the ugly 'attrition' word is uttered during contract negotiations or, worse, afterwards.
Why Should a Hotel Care?
Revenue is at stake. The hotel has a signed contract and is expecting a minimum amount of revenue. Reacting to attrition –or the cause of attrition– means forward-looking activities are now in jeopardy. Time spent on attrition collections could instead be focused on booking groups or meetings that would lead to future revenue. Additionally, with a lack of projected group or conference attendees, the hotel will not be able to obtain the ancillary revenue from a variety of sources within the hotel or on its premise. There plenty of reasons to ensure conference attendance occurs as planned. Quite honestly, conversations seeking large sums of money are not comfortable. If the hotel has a vested interest in attendance, take more interest and ask more questions from the first moment the RFP is received or when the hotel receives notification it's been short-listed.