Yes, the hotel industry is in the driver's seat, and those shell-shocked show managers who haven't downshifted need to drop it into low if they expect to secure rooms for their events. The glory days of the 1980s and early '90s -- resplendent with over-built inventory, owners more interested in tax breaks than profits and Monty Hall-like sales managers -- are gone.

Demand aplenty

The upscale, full-service and convention hotels are, in a phrase, supply-challenged.

"The hotel business is very good right now: The economy is strong, the interest from trade shows is good, and companies are spending money," says Fred Shea, Vice President Sales Operations for Hyatt Hotels Corp., Chicago. "That's true in most markets throughout the country, but especially in the biggest trade show venues. There doesn't seem to be anything in the industry -- especially on the groups side -- that shows signs of slowing down."

All of which is good if your job happens to be selling hotel rooms. When you're a show manager, though, those elements signal significant challenges.

"It's a sellers' market right now," notes Chuck Schwartz, Managing Director of PGI, Las Vegas, and the 1999 IAEM Chairman of the Board. "That means high rates and a squeeze on room blocks -- even at some headquarter hotels."

Some, particularly those on the hotel side of the fence, argue that conditions are changing. "I don't think it's the traditional sellers' market that we've seen in the past four years," says Susan Hodapp, Brand Director of Marriott Hotels, Resorts & Suites, Washington, D.C. "The current situation calls for more give-and-take, and we're smarter about what each others' needs are and what it takes to satisfy both parties."

Others say second-tier city inventories aren't as tight as big-time venues. And occupancy levels are actually softening, even in busy cities like New York.

Each of those arguments has its merits, but as Dr. Lalia Rach of New York University (NYU) points out, it's a matter of perspective. "Yes, you may be seeing a slowdown, but you have to look at it in context," says the Associate Dean of NYU's Center for Hospitality, Tourism & Travel. "It may be true that January '99 in New York City wasn't as good as January '98, but that means it went from mythical proportions to very good, from occupancy-level percentages in the 90s and high 80s, to the mid-80s."

Looking back

You might excuse hoteliers if they appear a bit smug these days. After all, they're well aware of that rocky feeling that hard times bring. Anyone who hasn't joined the industry in the "golden era" of the last few years can easily remember when hotels chased show managers for group business rather than vice versa.

"I remember 10 years ago when they were courting us," says Lawson Hockman, Chief Operating Officer for the Washington, D.C.-based Environmental Industries Associations and Chairman of the IAEM Hotel Relations Task Force. "Now, of course, the shoe's on the other foot, but we've got to reach a balance that works for both sides no matter what the business cycle happens to be."

The hotel industry's most recent dark days started in the mid to late '80s and lasted through about 1991. A huge surplus in rooms flooded the market then, making group bargains as easy to come by as second helpings at an Embassy Suites' breakfast buffet. Furthermore, before the 1986 federal tax law changes, many hotel owners were more concerned with legal loopholes that provided incentives for money-losing deals than with profits, so the pressures on management performance were nothing like they are now. And the traveling public didn't represent the same level of demand that it does today.

"Back then, there wasn't the control of expenses we see today," recalls Rach. "There wasn't the understanding of economies of scale, and there wasn't the level of Wall Street interest we see now."

Indeed, nearly two years ago, only 19 public hotel companies and five lodging-related Real Estate Investment Trusts (REITs) were traded on Wall Street, according to the American Hotel & Motel Association in Washington, D.C. Today, more than 42 companies and 14 REITs have a stock market presence.

"I'd say '91 was the best year of the buyers' market," says Dave Scypinski, Vice President of Industry Relations at Hilton Hotels Corp., Washington, D.C. "From '91 to '93, we saw the overabundance of inventory absorbed, and then '95, '96 and '97 were probably the best years of the current boom."

Wave, not ripple

Although that three-year period was remarkable, today's hotel roller coaster hasn't gained any significant downward speed. Business is still good.

And the hotel industry sees a continued strong market, particularly in those segments and cities that serve large shows. Although industrywide occupancy levels have fallen from nearly 74 percent in 1997 to 72.8 percent in 1998 and an expected 72.3 this year, according to industry research firm PKF Consulting, convention hotel occupancy in 1999 is expected to grow by 1.3 percent. Some industry research firms, like Smith Travel Research and PricewaterhouseCoopers, report lower occupancy levels, 64.6 percent in 1997, 64.1 percent in 1998 and 63.5 percent this year. The discrepancy in numbers may be explained by methodology, PKF surveys hotels with an average of 220 rooms, while Smith Travel and PricewaterhouseCoopers survey a broader base of hotels.

In the past, hoteliers reacted to falling occupancy levels by lowering room rates. Now, however, they're raising prices, a practice that has rewarded them with unprecedented profitability over the last several years.

"The demand remains high, and the strong economy has allowed the hotels to raise rates without turning away customers," notes Gary Carr, PKF Director of Communications, San Francisco. PKF reports that the industry's average daily room rate (ADR) for 1998 was $112.96, up 6.8 percent from 1997. This year, the ADR was expected to grow 4.9 percent to $118.52, while convention and full-service hotels are showing the highest rate growth at 7.3 and 8 percent respectively.

"The demand has dramatically outstripped the supply in most top show cities," says Steve Pitt, Executive Director of the National Automobile Dealers Association (NADA), McClean, VA, which organizes meetings and shows requiring anywhere from 20 to 12,000 hotel rooms. "It's reached the point where many hotel salespeople are basically order takers. One of their biggest challenges now is how to selectively and nicely tell clients 'no.' "

The rate-raising strategy is paying off, according to the Pricewaterhouse-Coopers' Lodging Research Network. The group projected 1998 industry profits of $17.6 billion, growing to $19.2 billion in 1999 and $21 billion in 2000.

Profits like these make investors -- including those unfamiliar with the hospitality side of the hotel industry -- take notice. As Scypinski says, "In a lot of cases, the hotel business is no longer the hotel business; it's the real estate business." Ownership changes in hotels have been dramatic, and new players or players newly committed to profits have emerged.

"Owners today are extremely, extremely savvy; they watch every nickel and dime; and they may be very involved in the day-to-day management of the properties as well," notes Paul Gottwald, Vice President of Corporate Sales for Starwood Hotels & Resorts, the White Plains, NY, owner and management company of properties, such as Westin, Sheraton and The Luxury Group. "The average man or woman on the street thinks hotel management companies own all of their hotels, but oftentimes we're not the ones calling the shots."

The stock market, too, drives performance demands for publicly traded hotel operations. "Actually, right now, Wall Street is pushing the pressure in a way that's more acute than what we feel from owners," says Scypinski. "Our management is under constant scrutiny from the analysts and stockholders for everything we do and don't do to make our properties profitable."

Survival tactics

So hotels are making money faster than you can say "room service." Room demand is high, and show managers find themselves contending with the high-rolling corporate and leisure markets, which are willing to pay dearly for rooms. What can you do so your show weathers the current sellers' market?

To survive, you'll have to understand current market conditions, rethink old ways of fulfilling your hotel needs, determine exactly what you have to sell and remember that every sellers' market eventually comes to an end. For many show managers, that's a tall order.

Start by dropping your ideas of what you think the going rates should be. Replace them with reality. "It's not much different than buying a car," notes Hilton's Scypinski. "You go to four or five dealers and find the price for the car you want is $35,000. If you can do a little better than that through negotiating, then you've gotten a good deal."

Knowing your show and what it means to a hotel in terms of specific revenue is more important today than ever. "It goes back to good business fundamentals," explains NYU's Rach. "Do you have the black-and-white statistical analysis of the business you bring to the hotel? Do you have the consumer demographics and the financial figures that make your case? That's what business demands today."

Obviously, you must view your room block numbers with the cold objectivity of a discerning hotel sales manager. What's your pickup pattern? What was your last show's slippage? How many actual peak night rooms can you deliver? How much revenue did your show generate in food and beverage?

It's a good idea to verify that your show's numbers are accurate in the International Association for Convention and Visitors Bureaus (IACVB) CINET database, which contains profiles on more than 20,000 meetings and expositions. Prospective cities and hotels use these reports -- which include information about your show's history, including attendance, pickups, room-flow patterns, food-and-beverage functions, square footage, etc. -- to evaluate your show and set their pricing. Organizers can request a free copy of show profiles [Contact: IACVB, (202) 296-7888].

If your internal room-tracking system leaves anything to be desired -- and your last contracted hotel failed to produce workable figures as well -- consider hiring an independent auditing agency for your next event. The hotel occupancy verification reports produced by such groups as Expomark, an Audit Bureau of Circulation subsidiary, can provide clean numbers and a degree of credibility that you may not be bringing to the table.

Additionally, you may have to sacrifice "how-we've-always-done-it" thinking in the name of a better negotiating position. Could you, for example, opt for a mid- or low-season time slot? "The high-demand times of the year for large events are something like 12 weeks tops," notes Marriott's Hodapp. "That leaves the other 40 weeks when you can almost own nontraditional times. And properties can offer better, more flexible packages to help event planners manage that change."

Similarly, you could work in a Sunday instead of a Tuesday move-in date. Convince your group to use more of the hotel's food-and-beverage department than normal. Is there a hotel image-enhancing facet to your event? You don't have to deliver the Super Bowl or the Republican National Convention to sell your show's cache.

In other words, anything you can do to enhance your bargaining position with a hotel that has plenty of other prospects will serve you well. "I have to sell my business to the hotels now, even though our track record is miles long," says NADA's Pitt. "I don't like that, particularly because it takes so much time, but that's what we're dealing with today."

The car dealers association is also willing to book far into the future, as much as six to 10 years out, in order to gain a negotiating advantage. Extending your planning time, says Hyatt's Shea, can be a great advantage when working with crowded hotels. "In general, a good rule of thumb would be to book at least a year further out than you normally have been," he says. "Even though the show industry has a history of booking far in advance, it just gives us that much better chance of accommodating them with the dates they want."

Finally, never underestimate the value of networking and strengthening relationships with hoteliers. The better you know them and know their business, the easier time you'll have finding and negotiating for the room blocks you need. "You've always got to have empathy and understanding for the hotel's point of view," says EIA's Hockman. "Every national chain now has a regional hotel rep. Take them out to lunch and find out what they expect and need."

Future view

The hotel business' immediate future looks strong. Despite additional show-related inventory coming on in cities, such as Las Vegas, many venues will remain low in supply and high in demand. Industry experts see business through 2000 or 2001 as strong. "Barring some sort of upheaval in the overall economy, I think things will stay this way at least for the next couple of years," says Hilton's Scypinski. "The industry may not continue with record occupancies, but 76 to 78 percent in group sales looks realistic for us."

Should the market continue in its present fashion, you'll have to work hard to make your room-block visions become reality. But a big-picture, long-range view of the situation could end up serving you best in the long run.

"No matter what the situation, whether we're in a buyers' or sellers' market, you have to develop the hotel relationships and negotiate arrangements that will work well for everyone," says Pitt. "Things may be tough for show managers now and easier for the hotel side, but that will begin to change with the next business cycle. What won't change is how well you're able to work together so that everyone wins every time out."

Michael J. Flynn and Linda Kephart Flynn, a Kansas City, MO-based team that writes about hotels regionally, nationally and internationally, find the lodging industry's mixture of commerce and accommodation endlessly fascinating.

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