Negotiation Strategies

January 2011

Resorts

by Maria Lenhart

Resorts

Hit the hardest of any hotel segment by perception issues and economic woes, resort hotels are finally seeing an upsurge in demand. According to an assortment of recent hotel forecasts from consultancies such as Smith Travel Research and Pricewaterhouse-Coopers (PwC), hotels, particularly those at the top end of the scale, are poised to make a strong comeback this year and beyond.

PwC’s U.S. lodging forecast predicts "robust growth" this year, with ADR (average daily rate) rising 4.1 percent over 2010 levels. At luxury properties, ADR is predicted to increase by 6.3 percent.

While no one is calling it a seller’s market yet—and rates still remain below their peak levels of several years ago—planners such as Adam Lawhorne, president of Chicago-based Meeting Incentive Experts, are finding more flexibility is required when negotiating for space at high-end resorts these days.

"When it comes to five-star resorts, I’m not seeing higher rates, but less availability, especially during peak periods," he says. "Resorts are definitely recovering from the AIG Effect and more people are going for five-star properties. If you want to meet in Hawaii or the Caribbean during January through May, space is harder to get—although there are dates if you’re flexible."

Mary MacGregor, vice president of account development for BCD Meetings & Incentives in Minneapolis, is also seeing an uptick in resort demand, particularly for the programs she is planning for 2012. She is also seeing rates "creeping back up" at many resort properties.

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"For our clients who are looking at high-end resort destinations during high season, we’re seeing higher rates and much less availability," she says. "We’re in the process of having a different dialogue with our clients than we did in the days when there were so many opportunities to take advantage of because of what our industry had been through."

MacGregor now counsels clients to be more flexible and to "jump on those deals that still do exist. You can still capitalize on good rates, but you have to look further and harder."

New Perceptions
When asked why more organizations are once again choosing resort destinations, planners cite waning concerns over perception, renewed interest in incentive programs and the health and wellness trend as among the key reasons.

Gary Cornwell, COO of Galactic Marketing Incentives in Arlington, Texas, says the perception environment has changed since two years ago when one of his clients cancelled a meeting at a high-profile resort in favor of a low-key property that actually cost more money.

"This kind of thing has gone away," he says. "People are still cautious, but they are no longer ignoring resort destinations."

Some planners observe that perception issues vary widely by industry, with pharmaceutical groups still the most likely to shy away from resorts because of tight regulations governing the pharmaceutical industry.

"Most corporations are not as concerned with image now, so this puts resorts in a better position," says Andjela Kessler, president of Atlanta-based Incentive Travel and Meetings. "We’re especially seeing greater interest in resort meetings from insurance and financial companies, while pharma is still holding back."

Nola Conway, president of Global Destinations Marketing in Beverly Hills, Calif., sees a similar scenario, adding that "technical, real estate and communications groups are shifting back toward resorts now, although pharma companies are still staying away."

Kessler also notes a strong interest in the wellness and recreational opportunities provided by resort hotels.

"We’re seeing growing demand among corporations, especially among younger people, to do incentive programs that are health- and wellness-oriented—so this naturally favors resorts," she says. "I’m especially seeing more interest in golf among younger people—it’s not just the sport of middle-aged people any longer."

Hot Destinations
When it comes to resort destination choices, planners report that some are more difficult to get into than others, with Hawaii and the Caribbean region leading the pack in terms of rebounding occupancies.

For Cornwell, the turnaround in demand became apparent when a resort hotel in the Bahamas declined to bid on an RFP because it was enjoying sold-out occupancies.

"I haven’t experienced anything like this in a long while, so it was a bit of a surprise," he says. "It is definitely more of a challenge for us in Hawaii and the Caribbean these days."

MacGregor reports a similar trend, noting that "we are starting to see Hawaii come back. It had been a soft market for us for the past couple of years because of the cost of flights and the travel time, but now we have more clients looking at Hawaii. The Caribbean is also coming back strong."

Conway is seeing stronger interest in Las Vegas these days, partly because clients who are still concerned with perception issues feel that it is a safer choice than other resort destinations.

"Las Vegas is a resort destination, but it isn’t always perceived that way because it’s also so well known as a place for convention and trade shows," she says. "Some clients feel more comfortable about going there than they would to an elegant resort property known for golf and spa."

Mexico, which has been hurt by negative press over drug crime incidents, is among destinations where resort values remain strong, planners say. Cornwell and Lawhorne are among those who encourage clients to consider Mexico, believing that safety concerns are overblown.

"Beach resort destinations such as Los Cabos, Cancun and Puerto Vallarta are safe destinations, with CVBs and the Mexican Tourism Board making sure they are safe," Lawhorne says. "We recently did a program in Los Cabos for a major overnight shipping company, with the company’s security director coming along to monitor the situation. We got a letter from them afterwards, attesting to the safety of the destination."

According to Lawhorne, groups meeting in Mexico or the Caribbean are increasingly likely to choose from the growing number of all-inclusive resorts geared for the meetings and incentive market. He believes these properties offer both quality and value.

"About 70 percent of our programs in Mexico are now at all-inclusives," he says. "People have thought of them as spring-break hotels, but the reality is that they have five-star dining, ocean views, great activities. Having one price for the program is great."

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