How waiting to discuss rates sweetens negotiations

No question about it, we are in a seller’s market with improvement in occupancy, average daily rate and demand. This will no doubt continue in 2016 and even most of 2017.

But all too often in this business of hospitality sales, we find that we offer rates for groups too far in advance of our securing critical information about the prospect’s needs. In a seller’s market, the idea is to maximize revenue. Of course, in many situations, revenue-management folks advise the sales department on the rates that need to be used in selling to groups. However, there are other reasons for coming up with rates that may be higher, or even lower.

The whole idea behind rate quoting has to do with two issues: How badly does the prospect need your product, and how badly do you need the business? The first rule in selling has to be not to quote rates too early in the discussion with a prospect. The first goal is to find out the needs of the planner, the organization and the attendees. From this, we determine where the revenue will be coming from. Will it be from rooms only, or is there revenue from space, food, beverage, recreation or other activities? 

We also may be able to determine what overall revenue might be generated. We should not be quoting rates or getting into a negotiating session until we understand the whole value of the package. Then, in discussion with a prospect, we figure out how well we meet their specific needs as well as determine how badly they need our product. Are there competitors that may also have the opportunity of booking their business? If not, then we may be in the driver’s seat.

Of course, if competition does come into play, there are other considerations from a selling standpoint. The big issue would be: How important is this business to your property? Do you need the business that badly during that period? Does this group use multiple occupancy? Would they be providing “heavy” type food-and-beverage events? Are attendees the type that may bring additional business to the property on future dates? Would the attendees be providing additional revenue via other outlets?

These are not the only questions that arise. Because of the nature of the group, would there be favorable publicity via media outlets? Is there an opportunity for multiple-year contracts for this business? Could the group (company) generate other individual or even other group business in the future for the property?

The whole idea is not to start talking about or negotiating rates too early in the discussion with prospects. You have more control of the discussion when you know all the needs and opportunities.