A Tangled Web: The Internet and Attrition

John Smith receives the registration packet for his annual industry convention. He takes a look at the hotel rates, says to himself, "I can do better than this" and proceeds to book a substantially lower rate on line with a few clicks of his mouse.

This scene is being played out on personal computers all over the country and its impact on association meetings is staggering. Room pickups are down, attrition is up and, as a result, an ever-increasing number of associations are being forced to pay sizeable attrition fees. How sizeable? One association (not a Conferon client) that met in the southwest this past year owed $3.4 million in attrition damages to the hotels in the city.

Furthermore, a recent Conferon survey of five of the largest hotel chains in the nation revealed that one out of five association-type citywide meetings were forced to pay attrition liability in 2002…and those same hotel chains all believe the situation will be worse this year. The reason is two-fold. First, we are in a recession, and as long as we are in a recession, there will be a surplus of guest rooms. And as long as there is a surplus of guest rooms, hotels will want to sell those rooms to individual business travelers or anyone else. And the best way to do that is through the Internet. Second, 100 percent of the attendees who booked on line last year are expected to do so again this year and no doubt share that information with other members.

The bottom line: Attrition liability is the fastest-growing challenge facing association meetings in 2003 and beyond. Consequently, association meeting planners are more reluctant to sign hotel contracts that contain attrition clauses. Some are getting away with this practice in the short run due to the desperation of some hotels to get meetings on the books. But many hotels have confided in Conferon that they will most likely make the rules much stricter once they get back into a seller’s market. (Currently, most hotels allow 20 percent attrition, but don’t count on the target number staying as low as 80 percent.)

What’s the solution? Meeting planners, hotels, and convention and visitors bureaus need to work together aggressively to motivate people to stay inside the block. One strategy is to eliminate the "early bird" registration fee, raise the registration fee by $100 to $150 and offer a discount of $100 to $150 to everyone who stays in the block. Revenue generated by the increased fee - paid only by attendees who choose to go outside the block - could then be placed in a "rainy day" fund to cover future attrition liability or to cover the cost of meeting cancellation insurance. To add even more value to staying inside the block, hotels could offer attendees perks such as food and beverage discounts, health club discounts, increased hotel points or frequent flyer miles, etc. Even if attendees used the Internet to book the hotels at a lower rate, it still beats the income lost when the guest room is reserved at a competitor.

Another idea floating around the industry is to ask hotels to sponsor, in a small way, the shuttle bus system for citywide events. In return, only attendees with room keys from hotels in the group block would be allowed to board the buses. (Currently, people staying outside the block are walking over to hotels on the bus route and essentially riding for free.) In order for this strategy to work, however, the hotels would need to provide unique room keys (at no cost to the association) that identify guests as members of the group. A room key costs far less than $1 to customize, so it is a worthwhile investment for hotels to make if it would help motivate attendees to stay at properties in the block.

Clearly, this is not solely an association meeting planner’s problem. It is an industry-wide problem that must be addressed on an industry-wide level. Conferon will be leading the charge to develop a solution for its clients and working with other industry leaders to create a series of options that will serve our entire industry.

Bruce Harris, CMP, is the president and CEO of Conferon.