Declaring that the COVID epidemic has profoundly change the hospitality has quickly become a hackneyed cliché – nonetheless, one that is undeniably true. It will take years before we, as an industry, can fully unravel and appreciate the implications and impact of all these changes for both buyers and sellers of accommodations. Now, as we move from pandemic into the endemic phase of the health crisis, demand is quickly picking up and hotels are returning to full operational capacity, and it may feel as if things are returning to “normal.” But, especially for meetings & events planners trying to book new events, the return is coming with a strong dose of sticker shock.
Planners are starting to voice their frustration with steep price increases and stricter policies that hotels are implementing to recoup losses in the aftermath of the pandemic. “More than 55% of planners polled in the latest Northstar/Cvent Meetings Industry PULSE Survey complain about higher rates and food and beverage prices, and 48% complain about inflexible contract terms.” Hotels are changing the game and that can be doubly challenging to navigate when times are still uncertain.
For planners, trying to assess the impact of Covid on their own operations includes many unknowns. No one can accurately predict how the widespread adoption of Work from Home (WFH) policies will impact attendance at corporate and association events. Similarly, budgets based on historical data may not accommodate new realities. While demand for space is rising and bookings are up, whether attendees will actually show up is yet to be seen.
On the supplier side, there are many other reasons that these changes are being implemented at hotels; to catch you up, here are the top four:
Supply chain issues
Food and beverage costs are increasing partially due to the many supply chain issues that hotels have in sourcing their ingredients. When there is limited supply or limited access to food items, the price that hotels pay for the ingredients goes up as well, so it makes sense that this additional cost would be passed along to the planner and/or client.
Everyone has heard about the Great Resignation: the mass exodus of hotel industry staff during the pandemic, especially in housekeeping or other entry-level positions, which left hotels desperately searching for employees when they reopened. To be able to hire new employees, hotels have had to incentivize them by increasing wages. Combined with the inconsistency in demand, and the resulting inconsistency in revenue, you can understand why hotels need to increase prices.
Lack of certainty
After the inconsistency in demand during the pandemic, hotels are now looking for consistency in revenue. Of course, this results in stricter contract terms; after all, when the hotels go to the effort of hiring staff for an event, sourcing the food and beverages, and all the other work and costs that they invest in an event, they can’t afford to lose that money and investment due to a last-minute cancellation.
Increased borrowing costs
Many hotels are taking out loans to help them to hire staff, improve their properties and acquire the supplies that they need to rebuild their business; unfortunately, interest rates will be increasing this year, making the cost of borrowing go up for them over the long-term.
Even in the face of legitimate justification for price increases, there is still cause for planners to feel optimistic, but they may have to change the way in which they approach their overall sourcing plans. For example, to lower costs, earn extra value-adds, and still take care of your travelers’ health and safety at the same time: consider long-term contracts. By signing a long-term contract with a hotel or hotel chain, planners are giving hotels the kind of predictable revenue that they need to stay afloat, so they will be more willing to negotiate better terms and pricing and throw in some added perks to close the deal. Long-term contracts are a win/win for hotels, planners, and travelers. So, what are you waiting for?!
Sign-up for Vindow’s revolutionary, cloud-based sourcing and market intelligence platform – which makes it fast and easy to create, search, distribute and analyze RFPs for groups of any size or complexity, and generate multiple, competitive bids from the hotels that are best suited to your specific needs – and start booking your first long-term contract now.