Simple Meetings. Why Do We Need RFPs?

Why are we still using RFPs to book simple meetings, when we could be using a completely automated touchless system?

 

Have you ever considered why it takes the same effort and number of days to book a simple meeting as it does a complex meeting?  It is because we are still using RFPs to buy simple meetings, and if we did not, but instead were able to use a touchless system to buy simple meetings, the whole process could take under 30 minutes.

 

By touchless system, I am referring to technology that requires no human interaction other than that of the buyer – in other words a system that can search for available inventory from all suppliers, present it for comparison, book it, and allow the buyer to contract and pay for it online.  Simple meetings, which I define as fewer than 50 attendees, low risk/visibility, with no offsites or production, really should lend themselves to this sort of treatment.

 

Is it any wonder that according to American Express Meetings & Events it takes 8+ days on average to book a simple meeting?  The booking process is just as onerous as for a complex meeting, because of the need for an RFP.

 

The RFP booking process looks like this:

 

(1) Develop eRFP (2) Issue eRFP (3) Compare Results (4) Confirm Availability (5) Negotiate (6) Sign Contract (7) Pay Deposit (8) Final Payment

 

However, if we could use a touchless system to book a simple meeting, the process would instead take under 30 minutes and look like this:

 

(1) Shop (2) Compare (3) Click “Agree” to Contract (4) Pay

 

Below I present the benefits to the industry of having a touchless system, and highlight the obstacles to developing such a system, as well as potential solutions.

 

Benefits

Three parties to the transaction, buyers, sellers, and agencies, would benefit greatly from such a system.

 

Benefits for buyers include:

  • Shortening of the procurement cycle from several days to under 30 minutes
  • Reduced time investment during the procurement process
  • Reduced agency costs

 

Benefits for sellers include:

  • Fewer eRFPs to be managed by the sales team
  • Reduced hotel sales team’s efforts on low margin events

 

Benefits for agencies include:

  • Elimination of the RFP process for simple meetings, which can lead to a reduction in resources required to book simple meetings, thereby allowing sourcing and planning resources to engage in events where they can truly add value

 

The one loser would be meetings technology providers, who would suffer due to fewer RFPs being issued.

 

Downside for meetings technology providers:

  • Fewer RFPs issued translates to lower revenues, unless the provider develops a touchless system and makes up the shortfall through transaction fees

 

Next, I will discuss the factors preventing us from arriving at a state of touchless nirvana.

 

Obstacles to a Touchless Solution

There has been progress in this area over the past few years, but the last three steps toward truly touchless bookings, i.e., inventory exposure, standardized contract terms and conditions, as well as online payment, have yet to be solved.

 

1. Inventory Exposure – this is a very sensitive topic for hoteliers, as it goes right to their livelihood.  In fact, to understand the dynamics of Meetings sales it is critical to understand the revenue contribution and operating profit of each service sold by hotels:

Service

Revenue Contribution

Profit

Guest Rooms

70-80%

75-80%

Food and Beverage

10-25%

25-60%

Meeting Space

1%

80%

 

This table clearly shows that guest room sales are the key revenue driver for a hotel, and we can conclude from the table that meeting space is offered in support of guest rooms, and not the other way around.

 

Given two meetings of the same size, one with guest rooms, and one with just meeting space, the hotel will always prefer the meeting with guest rooms.  And this explains why hotels have not been willing to expose their meeting space inventory to touchless booking systems without proper yield management.

 

To resolve this issue so that a touchless system would be able to access this information for booking purposes, hoteliers would need to link their guest room, meeting space and catering systems at the property level, apply yield management methodologies to the combined systems, and then allow this information to be viewed publicly.  I contend that the savings hoteliers would realize from eliminating the RFP process from their sales cycle for simple meetings would soon cover the costs of this investment.

 

2. Standardized Contracting – the clickthrough contract required by a touchless system is by necessity one-size fits all (similar to any terms of service agreement you agree/disagree to when buying online), since any changes to the terms and conditions would require human intervention.  This means the concerns of corporate legal departments, which might take issue with the legal T&Cs and liability clauses, and the concerns of corporate procurement departments, which might not always accept cancellation & attrition penalties and general business clauses, must be addressed in order for a touchless system to work.

 

One way to resolve this issue is for an industry body, such as APEX (Accepted Practices EXchange) or HEDNA (Hotel Electronic Distribution Network Association), to develop standardized contract language in conjunction with corporate clients and hoteliers that would be acceptable to the majority of customers and hotel chains.

 

3. Online Payment – the methodologies for paying for travel services online are well established, but meetings are different in that they often require a deposit, and due to cancellations, they often require refunds.

 

I suggest that no deposit be required, other than through being guaranteed by a card number, just like transient room nights, and that cancellations leading to refunds be handled through the standard refund process of a corporate card, much like an air ticket refund.

 

Let’s take a quick look at the current state of the industry and how close we are to a touchless system.

 

Current State

Currently there are three methodologies available to book simple meetings, and they are (1) manually – by phone or email, (2) an eRFP, as discussed above, and (3) emerging solutions, which I will discuss in more detail below.

 

The manual and eRFP methodologies are very inefficient for simple meetings.

 

The manual process requires endless, sometimes asynchronous, contact between the parties, and this phone tag lengthens the procurement process.  The manual process also requires the construction of side-by-side comparison matrices, so the shopping results can be shared with others – a process that is automated with eRFPs.

 

According to information provided by American Express Meetings & Events, eRFP-based procurement also suffers inefficiencies, including:  (1) delayed responses from hoteliers, and (2) drawn out negotiations of contracts and addenda.

 

  • On average the American Express Meetings & Events procurement staff chase 2-3 hotels 55% of the time, making it difficult to meet their standard service level agreement of providing responses to customers within 72 hours
  • Additionally, the American Express Meetings & Events procurement staff report that at least 50% of the time hotels take more than five business days to negotiate hotel contracts and addenda, which extends the end-to-end procurement process to eight business days or more

 

We also know, from a flurry of articles in the trade press in May 2012, some hoteliers are finding that eRFPs for simple meetings are clogging up the inboxes of their sales managers, and would probably welcome the relief a touchless system could provide.  See Chris Davis’ article “E-RFP Eruption: Shifting Meeting Sourcing Strategies As Online Leads Swamp Hoteliers” for a discussion of this topic.

 

Emerging Solutions

A number of providers are attempting to address the need for a simple meeting solution, including StarCite, Lanyon, Cvent, Worktopia and Hilton.  Following is a quick synopsis of the capabilities of each at time of publication.

StarCite – as of late 2012, the StarCite system is able to present venue availability, pricing and amenities for guest rooms and meeting space, as well as food & beverage and ancillary services packages and pricing.

 

Lanyon – collects client small meetings RFP data during the creation of a preferred hotel program and stores it in an online portal.  Meeting owners can then search the portal for appropriate destinations, request that the hotel confirm availability, and accept the booking.

 

Cvent – once the customer enters a small meeting criterion (size or budget) into the meeting request form, they are presented with their company’s pre-negotiated meeting packages, which they can peruse and then select.  Selection of a property triggers an email to the property to confirm availability, and once confirmed, the contracting is handled offline.

 

Worktopia – once launched in the fall of 2013, the Worktopia system will allow buyers to shop for and compare ‘bookable’ inventory online.  Once buyers select their venue, they will be able to review the property’s terms and conditions and pay for the booked items while online.  This system will not require an RFP, but rather will conduct a real-time inventory search of guest rooms, meeting space, and even F&B bundles there are ‘bookable’ through hotel proprietary systems.  Buyers will review the T&Cs online and pay by entering card information, much like a transient hotel booking.  The card will then be ROCed at the close of the event at the venue.  In the case of cancellation or attrition penalties, or refunds, the card on file will be charged or credited.  When finished, the system will allow for the loading of corporate properties and rates.  According to Brandon Strauss, president of Worktopia, “The system is currently in the final stages of development with both major and secondary chains, and will be launched with beta companies in time for GBTA Convention 2013.”

 

Hilton – the e-Events solution is the manifestation of an end-to-end touchless system that does not require an RFP, and can search and book in real time available guest room and meeting space inventory, as well as food & beverage, and allow the buyer to contract and pay for it all online.  While it does not allow for the comparison of multiple properties in a side-by-side matrix, it does everything else as I described in my introduction.  The only potential downside I can see for corporate clients is whether the terms & conditions in the clickthrough agreement will be acceptable, as they do prefer the property to the buyer.  Another issue is the question of content aggregation versus a single supplier system.  Corporations typically have multiple hotel suppliers, and Hilton’s system by definition limits search to Hilton properties.  A vendor neutral system would aggregate inventory from multiple chains and present it in the same system.  At the very least, the Hilton system has proved that hotels can make the inventory available; the question remains whether they will agree to make inventory available outside their own proprietary systems.

 

So are we there yet?  We are certainly getting closer, but I believe the industry would benefit from a solution that aggregates content from all hoteliers, rather than providing availability and booking of a single supplier.  I also believe that a neutral industry group must develop the language of a mutually acceptable clickthrough contract, or too many corporate legal and procurement departments will reject these solutions as nonviable for their organizations.  Not mentioned above, but still very important, is the need for an approval process so these systems do not enable purchases above the signature authority level of the user.  This would require the meeting budget holder to acknowledge they have the appropriate signature authority.

 

Summary

Despite the fact that simple meetings have fewer requirements, meetings hosts, their agents, and hoteliers, follow a similar process in sourcing them as they do larger, more complex events.  Simplifying the sourcing process for simple meetings would reduce the time and effort required of all stakeholders, and decrease procurement and sales costs. The RFP itself makes the transaction unnecessarily complicated and cumbersome for these meetings, and a direct and touchless procurement solution would eliminate many of these inefficiencies and introduce a number of benefits to all parties.

 

Now, who will take up the challenge?

 

Thanks for joining me for this important topic.  I encourage you to share your thoughts on today’s topic in the comments area below, and let me know if you think I’ve missed anything.

 

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