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The Cost of Doing Business

Presented by Charles S. Sadler, CHSP

SGMP Interim Executive DirectorSGMP NATIONAL HEADQURTERS

www.sgmp.org

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In Today’s Environment the Cost of Doing Business Can Have Many Influencing Factors

Demand versus supply Scope and size Potential cost Potential profit Cut backs Budget Restraints Energy Costs Policy

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What you will examine today is how to understand each perspective of the planner and supplier in business in relation to budget and costs

How each business partners needs effects the relationship

Understanding each party’s process and position in business

How planner/supplier decisions are made as cost and value as factors

How can a planner and supplier partner for a win/win situation

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Now lets look at how the cost of doing business with the Government can drive policy and decisions with a quick look at the business environment first.

    

http://www.eva.virginia.gov/

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http://www.htrends.com/index.php

ADR Variance

Occupancy Variance

REVPAR Variance

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2008 U.S. Hotel ForecastBy PFK Hospitality Research

Supply +2.6% Demand +0.9% Occupancy -1.6% ADR +4.7% REVPAR +3.0%

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Virginia 2008 Forecast

• Demand +1.5

• Supply +0.9

• ADR +4.6

• OCC % +0.6 (70.7%)

•REVPAR +6.2

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SegmentRoom

DemandRoom Supply

Room Revenue

% Change % Change 2007 2006 % Change % Change 2007 2006 % ChangeUS 1.2 1.2 103.22$ 97.64$ 5.7 7.0 65.0 65.0 0.0Virginia 1.9 1.2 100.23$ 96.43$ 3.9 5.9 64.8 64.3 0.7

Washington DC-MD-VA 1.5 0.9 147.32$ 140.85$ 4.6 6.2 70.7 70.3 0.6

Arlington 2.6 0.8 158.65$ 153.35$ 3.5 6.1 77.1 75.8 1.7

Alexandria -1.4 -0.1 130.11$ 125.85$ 3.4 2.0 69.1 70.1 -1.4

Fairfax/Tysons Corner 1.0 0.7 142.85$ 138.98$ 2.8 3.9 70.2 70.0 0.3

Suburban VA Area 0.4 2.0 100.24$ 93.86$ 6.8 7.3 60.9 61.8 -1.5

I-95 Fredericksburg 0.4 2.0 75.90$ 71.32$ 6.4 6.8 66.2 67.3 -1.6

Dulles Airport Area 0.8 2.7 135.68$ 134.41$ 0.9 1.8 73.4 74.8 -1.9

Norfolk - VA Beach 4.2 1.4 91.99$ 88.65$ 3.8 8.1 64.5 62.7 2.9

Chesapeake / Portsmouth 3.3 1.3 77.27$ 76.21$ 1.4 4.7 74.5 73.0 2.1

Newport News / Hampton 6.0 6.4 69.42$ 68.55$ 1.3 7.4 63.3 63.6 -0.5

Norfolk City -3.4 -0.9 87.42$ 82.61$ 5.8 2.3 66.4 68.1 -2.5

Virginia Beach City 5.0 0.5 110.64$ 105.97$ 4.4 9.6 68.5 65.6 4.4

Williamsburg 7.2 0.0 97.55$ 93.70$ 4.1 11.5 54.5 50.9 7.1

Virginia Area -0.3 1.9 75.63$ 71.85$ 5.3 4.9 57.7 59.0 -2.2

Virginia Area (smaller defined area) -0.8 1.7 74.97$ 72.24$ 3.8 3.0 55.0 56.4 -2.5

Lynchburg MSA -2.0 0.0 68.80$ 64.09$ 7.3 5.2 56.4 57.6 -2.1

Blacksburg/Wytheville -1.6 0.4 71.03$ 65.86$ 7.8 6.2 56.8 57.9 -1.9

Staunton/Harrisonburg 0.1 4.3 69.57$ 65.57$ 6.1 6.2 59.9 62.4 -4.0

Roanoke MSA -0.2 -1.3 73.30$ 70.81$ 3.5 3.3 57.0 56.4 1.1

Charlottesville MSA 2.8 8.1 95.59$ 89.09$ 7.3 10.3 71.4 75.0 -4.8

Richmond - Petersburg 4.5 -0.2 79.93$ 75.79$ 5.5 10.2 65.3 62.3 4.8

Petersburg/Chester 10.3 1.0 67.43$ 64.27$ 4.9 15.7 65.3 59.8 9.2

Richmond Downtown/Airport 2.5 -0.1 101.14$ 94.25$ 7.3 9.9 66.3 64.7 2.5

Richmond North/Glen Allen 4.2 -0.8 79.77$ 76.03$ 4.9 9.4 64.9 61.8 5.0

Richmond West/Midlothian -0.5 -0.8 67.34$ 63.69$ 5.7 5.1 64.8 64.7 0.2

Johnson City - Bristol, TN-VA 1.7 -1.0 73.83$ 70.75$ 4.4 6.1 52.9 51.5 2.7Source: Smith Travel Research - 2007

Average Room Rates (1/01-9/30) Occupancy Percent

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Let’s Hear Your Ideas and Perceptions on the State of Meetings….

    

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Selected State Per Diems

    

City of Richmond Cities of Norfolk & Portsmouth

City of Williamsburg City of Virginia Beach

Chesterfield & Henrico Cities Roanoke & Charlottesville

$115 $94

$70 Oct 1-Mar 31$89 Apr 1- Aug 31$70 Sept 1-Sep 30

$89 $84

$79 Oct 1-Mar 31/Sep 1-30$87 Apr 1- May 31$140 Jun 1-Aug 31

$93

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Starting with the Planner… Before the planner can even put out an RFP there are 4 steps the planner must take to evaluate their potential meeting and the potential cost of doing business.

So break out the pen!

Lets review the 4 steps…

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1. Know its financial goals and limitations. Planners cannot burn through citizen’s tax dollars!

Cover costs Make money

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2. Identify all costs and potential revenues as accurately as possible.

Meeting history Estimates from printers, vendors Hotel sales kit samples (F&B, AV,

meeting room charges, taxes, gratuity) Current per diems Sponsors, grant money, registration

fees Follow any special agency spending or

contracting policies

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3. Plan and format your budget so the logic of how you constructed your budget and registration fee can be clearly understood.

Use a worksheet-one is available at www.sgmp.org members only under Meeting Planners Toolbox

Organize all your expenses under cost centers

Keep notes of how you arrived at potential costs

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4. Determine thebreakeven attendance. Use meeting history if available Know your audience Determine any potential conflicts Be realistic Remember suppliers expect

guarantee counts to be paid for even if they don’t show up!

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Information to PROVIDE Vendors in an RFP:

Background on your organization Your contact information Schedule for the proposal process Criteria for making your decision Basic summary of the project, including

overarching goals and timeline Project’s target market, if applicable

(customers, users, stake holders) Detailed overview of the project

° Primary goal° Secondary goals° Budget° General scope° Time frame° Business requirements° Creative/design requirements° Functional requirements° Content type/Content development needs° Existing technical environment/requirements° Your preferred working relationship requirements

Ongoing support and maintenance requirement

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Information to REQUEST from Vendors in an RFP: Vendor company information

° Company background/history° Quick overview of services and capabilities° Management or key personnel bios° Contact information

Vendor’s proposed solution° Basic summary of the solution° Solution methodology/process• Development plan• List of tasks• Timeline° Details on proposed solution• Original ideas – strategy, creative, etc.• Features and functionality• Options and add-ons• Scalability• Technical requirements° Preliminary design compositions (voluntary)° Proposed budget• Cost of services• Required 3rd party costs• Support and maintenance° List of deliverables° Ownership

Proposed Project Team Vendor references

° Show examples of previous work° Provide client references° List awards/accolades and special certification

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Information on the general components of the Vendor Selection Process: Create Selection Committee & Decision Criteria Finalize Schedule of Events Completion of an RFP Create Initial Target List of Vendors Initial RFP Announcement/Send Submission Deadline 1ST round Proposal Review Narrow Down to Finalists Vendor Finalists Review Selection of Vendor Final Contract Negotiation

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5. Now Planners are Ready to Formulate the Government RFP.

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What will the Supplier be looking for in your RFP? Number of Rooms Rooms to Space Ratio Date and Pattern Catering Revenue Potential Meeting Room Rental Audio Visual Revenue Other Revenue Centers

Why is all this important to Suppliers to evaluate your meeting?

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Lets look at a sample standard meeting package cost per person based on:

Meeting space F&B - Lunch and 2 breaks AV Gratuities

AVERAGE PROFIT WILL ONLY BE 18% FOR THE HOTEL. That’s why it is important for the Supplier to evaluate all the potential revenue for your meeting

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You know what your meeting should cost you, but ever wonder what your meeting costs the hotel?

Labor 31.6% Food 19% Energy Costs 4.2% Benefits 4.2% Cost of Sales 4.5% Management fees 5% Security 2% Admin and Accounting 3% Laundry 2.6% HR and Engineering 1.5% China Glass linen Plants Décor 3.6% Uniforms 1% EQUALS 82% in costs

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Learn Hotel Profit Margins

Beverages 18%-21% Banquets 35%-38% Guest Rooms 70% to 75%

                                                                                         

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How Can Planners be Suppliers Partner in Business? Give accurate information Know your business environment Be flexible with dates Work with Suppliers that understand your business (like SGMP members!) Keep histories of your past groups Don’t let the lowest price for your RFP be the deciding factor. Remember value also should have an equation in your budget Know the difference between your needs, wants and wishes Be realistic when making your budget

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How Can Suppliers be Planners Partner in Business? Understand the RFP process Know your business environment Know your hotel’s profit margins and how to evaluate the

business Be willing to work with per diem rates and menus Be able to offer value added incentives to help planners

keep costs down Be proactive and create government meeting package

based on planners budget Be flexible and offer more than one option on dates Get creative with per diem priced menus

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Shake hands… now you are partners in the cost of doing business.

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SGMP… Where Members and Mission are First!