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FLASHBACK ARTICLE FROM NOVEMBER 2009
At first, this may sound a little twisted. However, the end result is what matters.
While my children were sleeping I opened a box of Lucky Charms and proceeded to remove 80 marshmallows each day. As the mornings passed I anticipated their craving for the colorful red box with the smiling leprechaun. 6 days passed and nearly 480 marshmallows later and a curiously frustrated voice arose from the kitchen table inquiring as to why there are not as many “charms” in the Lucky Charms.
I smiled, walked over to my youngest, hugged him, and told him he had learned an important life lesson. There will always be someone ready, willing, and able to steal the “charms” in whatever he does. You have to be watchful of your “charms” to ensure your “charms” are there when you need them.
Six years ago, if you had taken a snapshot of your market…it would have looked much different than today. Talk to the veterans of the industry and after the bravado subsides, they’ll admit that the entire landscape has changed. Every sector of the MDJ industry has been touched by technology that has changed the course of the MDJ industry.
Over the past few weeks I’ve called 100 MDJ’s and 100 reception halls. 50 DJs that I know…50 that I didn’t and likewise with reception halls. Stretching from New York to San Diego, Seattle to Florida, and Winnepeg to Texas. What I found interesting is the conditioned response that I received from both DJs and reception halls that I did not know…was nearly identical. Wherein, the initial responses were that incoming inquiry calls were great, business has never been better, the current holiday party season is full and 2010 looks to be a banner year. However when pressed for specific data nearly 70% admitted fewer calls and less bookings and 2010 isn’t going to measure up. Whereas the group that I know personally reported that calls have been steady to slower than usual. Holiday parties for the majority are slim to none and 2010 looks bleak. Curiously, DJs reported more holiday parties on average than the reception halls.
So let’s run with the remote possibility that both sets of DJs are telling the truth. That the DJs that have lost their holiday parties lost them to those DJs that are claiming a banner year. Where are those events being held? What rate is being charged? Is the banner year for the $200 DJ who raised their rate to $400 really a success story in the bigger picture when it falls dismally short of producing a livable wage?
The Wyndham Hotel Group, Parsippany, NJ reported that its third-quarter 2009 revenue per available room (RevPAR) decreased 17%, compared to the same period last year. The Group has approximately 7,000 hotels across its 11 brands.
PKF Hospitality Research has been tracking the accuracy of hotel budgets since the late 1990s. PKF reports that budgeting for 2010 will be extraordinarily tough for US hoteliers. Current year market conditions continue to deteriorate each month, thus creating an environment of pessimism. Adding that most hotels will not meet their budgeted performance marks in 2009. In a June 2009 survey conducted by PKF-HR, 86 percent of the 407 managers surveyed stated that their property will perform worse than their budget for the year.
PKF Hospitality Research also found that 70 percent to 80 percent of a hotel’s performance is systemically linked to the local economy. The very same economy that produces revenue which is the basis for the incoming holiday party and wedding inquiries.
In a report released by (STR) Smith Travel Research, Hendersonville, TN the year to date performance has fallen lower than previous estimates for all three key metrics returning a decrease (-18.1 ) percent YTD for 2009.
The report parallels the woes of the MDJ industry in so many ways. The report indicates that “savvy meeting planners are leveraging the abundance of available space and the shorter booking lead times.” The report also indicated that “Overwhelmingly, the answer from the survey participants was that pricing decisions were based primarily on the volume of unsold inventory for the dates in question. Interestingly, the second and third most important factors influencing the rate quoting decision were customer-driven: maintaining good relationships existing with clients and factoring in what the client is willing to pay. The often-heard mantra of “My competitors are forcing me to cut my room rates” came in a close fourth, followed by what the prospect paid the last time they had a meeting at the venue under consideration.”
All of these current losses are in reference to previous losses referenced by previous losses. So the current loss is at a much lower point than in the past. PKF Hospitality Research also noted that there is nothing in the current economy to suggest that we’ve hit bottom.
Looking back at MSNBC articles from December 2008 for comparison: “According to the workplace consulting firm Challenger, Gray & Christmas Inc. one in five companies is scuttling or scaling down its year-end bash. A nearly identical finding echoed from by search firm Battalia Winston Amrop. Towers Perrin, a consulting firm conducted a separate survey which found that 58 percent of businesses planned to scale back the annual soiree in order to save money.” Did MDJs really have a banner year for holiday parties in 2008? Or, were the claims of busy calendars more of the bravado and hype that MDJs fling and ultimately begin to buy into themselves. Whenever there is a lull in phone traffic…you’ll see a lull in events. If your phone traffic is slow…your competitor’s phone traffic is probably slow too. After all, if the hospitality business were truly booming, why would CNN Money report that “hoteliers are bleeding cash and defaulting on loans?”
Again I ask, where are all these alleged events being held?
The hotel industry and MDJ industry share another ideological parallel when it comes to pricing and discounting at the pressure of supply and demand. Wherein some chains slash their rates with GUSTO whereas, other chains are adding value-added perks to maintain their current rate. Curiously, some hotel marketing executives insist that it will be harder to raise rates during the good times if they cut prices now. The advantage that the hotel industry has over the MDJ industry is in the ability to calculate how much competition exists in relation to the demand. Whereas MDJs, generally speaking, don’t have a clue.
MDJs are traveling further today than ever before is search of events. A recent example occurred less than a mile from my office at one of the area’s most exclusive golf courses. Areas DJs in Fargo and myself fielded an inquiry for a 40th birthday party. All local DJs and I were passed over for the event because they reportedly found a $400 DJ to handle the event. Here’s the kicker! The DJ traveled from Rapid City, SD to Fargo, ND which is around 585 miles – ONE WAY. To dispel any conjectures…NO the DJ did not know the birthday person. Where is the civic responsibility of the catering manager who recently relocated to the area from Rapid City that brought with a cheap mindset value of DJs and exerted that effect on the local marketplace economy?
So as we head into the holiday party season, there is potential for last-minute bookings. As we look headlong into the future wedding season of 2010, there is potential for last-minute bookings. The fundamental questions are at what cost…and how much more competition from markets that are hundreds of miles away?
It’s sad that we can’t reset the economy as easily as buying a new box of Lucky Charms. Rest assured that the majority of MDJs will denounce the handwriting on the wall as rubbish because they are not pro-active business owners. They are reactionary opportunistic squatters that are not smart enough to stop digging themselves a deeper financial hole financing a future that may never come, due to an ever-increasing supply of MDJs and an ever-decreasing demand for the services we provide.
The question remains: Who’s stealing the charms from your Lucky Charms?
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You can reach Dude Walker at email@example.com.