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New demand trends force marketers to adapt
June 25 2013

A shift from group to transient business and new consumer buying behaviors are forcing hotel marketers to reevaluate their strategies, said experts during HSMAI’s Revenue Optimization Conference.

Highlights
  • The hotel industry recovery has been led by transient business; group business is still down significantly from the prior peak.
  • There is a possibility that group travelers are going around room blocks and finding rooms on their own through transient channels.
  • Transient rate increases since the downturn have lagged, according to data from STR.
By Jason Q. Freed
News Editor
jfreed@HotelNewsNow.com

MINNEAPOLIS—Hoteliers must adapt to evolving demand trends, such as a shift from group to transient business and new consumer buying behaviors, according to a panel of experts on the opening session of the Hospitality Sales and Marketing Association International’s 10th Revenue Optimization Conference.

“There is a lot of change happening in how we market to travelers,” said Glen Harvell, Marriott International’s VP of ecommerce. “There is less group demand and more transient demand. ‘Metamediaries’ are playing a part in that.

“The need to change is there, and we do need to look beyond the data and at our customers.”

Jan Freitag, senior VP of global development for STR, parent company of HotelNewsNow.com, set the tone by reiterating the fact that the hotel-industry recovery has been led by transient business. Group business is still down significantly from the prior peak.

“Where are the groups?” he said. “Has group buying power gone away? What does that mean for price? Is there a new normal for group business?”

Tim Hart, executive VP of business intelligence at TravelClick, echoed Freitag’s concerns and added to his questions, saying the group story “has unfolded a bit over the past year” and it’s not looking good until the first few months of 2014.

“Will leisure demand more and more drive performance in our generation? Probably yes,” Hart said. “Economically, the more (better-off) worldwide traveling public may shift the balance of importance to leisure more and more.”

Outside of the strength of leisure travel, there are several potential factors as to why group demand is down. One is the possibility that group travelers are going around room blocks and finding rooms on their own through transient channels. Hoteliers are seeing more and more group demand bleed off that way, the panelists agreed.

However, Freitag said he doesn’t suspect enough of that is occurring to shift the needle. There is indeed a real resurgence in transient travel, he said. “What we used to call a group maybe we don’t call group anymore,” he said.

Hart said there may be a shift in buying behavior in the travel community. People who typically would have bought at group rates now buy as individuals. How often that occurs is “a bit murky in the numbers,” he said, vowing to study the trend more closely in the near future.

“We need to look at the methodology as to how group is brought to the table,” Harvell said. “How do we simplify and drive value better for the people who are booking groups? The whole notion of group and why people come together is evolving and changing. How do we make our physical properties much more conducive to the new types of groups that are emerging, and how do we make it seamless to book?”

Pricing power
Even though healthy transient business is leading to demand records in the U.S., rate increases since the downturn have lagged, according to data from STR.

Tip-toeing around the sensitive issue of pushing rate, Freitag said that although average daily rate is at its highest ever, growth has flat lined at around 4.5% year over year each year since May 2009.

“The supply/demand metrics were the best we’ll see in our generation,” Freitag said. “When we look back at this time, we’ll say, ‘Uh, we had this opportunity, and we didn’t take advantage of it.’ 4.5% is good, but it’s not great.”

Freitag said the hotel industry is selling roughly 24% more rooms today than it did at the prior peak, “but we’re not charging anything more.”

“The train has left the station, and we’ve all settled on 4%,” he said.

Connecting to the customer
Beyond using supply and demand data to make decisions at the property level, panelists suggested the industry needs to make advancements in the area of guest demographic data.

With relevant guest data, hoteliers can ensure they have the best content to attract eyeballs, Harvell said.

“It’s kind of a pathway to a transaction,” he said. “(Online travel agencies), to their credit, have made it more about merchandising travel.”

Hart agreed, saying “it is really important to understand the customers.” So much of a hotel’s profitability is driven by how guests book, he said, that hoteliers should have a deep understanding of their customers in the context of the products they offer.

“The great news is: yes, it’s a challenge, but it will provide us new merchandising capability in the future for sure,” Harvell said. “If we aren’t thinking about this and thinking about how we have to react as an industry, we’d be foolish.

“How do we, in terms of infrastructure, get a better understanding of how these channels affect profitability?”

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