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Group demand slows, but no need for rate woes
December 7 2012

Committed group roomnights might be flat in North America, but TravelClick’s Rao Avasarala said it’s too early for a knee-jerk reaction in revenue management.

  • Committed group roomnights are flat for the next year, according to TravelClick data.
  • The slowdown could be the result of a momentary pause spurred by the election cycle and fiscal cliff.
  • Group performance dynamics vary by market, TravelClick’s Rao Avasarala said.

NEW YORK—Groups room sales and average-daily-rate-growth might be tapering off in North America, but hoteliers should refrain from jumping the gun on pricing decisions for what could be but a momentary blip on the radar, according to data company TravelClick.

The company on Thursday reported that committed occupancy for the group segment (blocks of hotel rooms reserved for events and conventions), is essentially flat (-0.1%) for the period comprising the fourth quarter of 2012 through the third quarter of 2013; group ADR is up only 1.6%.

But those numbers should be viewed in context, said Rao Avasarala, VP of business intelligence solutions for TravelClick.

“Since the downturn, we’ve seen that in the early part all the way through the first half of 2012, group has really driven a lot of the growth within the hospitality industry,” he said. “Given so much time has gone by since the downturn, part of the reason is obviously it’s thought to sustain those types of growth numbers over such a long period of time. The group segment does not have the ability to sustain the 5(%) to 8% growth numbers we have reported in the past.”

The slowdown also could be more of a speed bump as opposed to the beginning of a rocky road, he said.

“Part of it is also waiting out this last quarter of 2012, which factors in the election period (and the fact that) a lot of businesses and folks are waiting on a resolution for the fiscal cliff,” Avasarala said. “Come the first quarter of 2013, we have to look at the numbers at that point.”

“Given the minor decline that we’re seeing in group, it’s likely premature to jump the gun and take any drastic measures,” he added. “The first step is to see if the declines in new sales that we’re seeing are temporary or if they are an indicator of a drop off in demand.”

Group demand by market
The broader industry averages, which comprise data from 60 participating markets in North America, are not necessarily indicative of group trends within particular cities, Avasarala pointed out.

Looking ahead at the next 12 months in Chicago, for example, “We’re seeing some improvement in the commitments as well as the pace. Chicago is ahead about 2.8% compared to a year ago for group,” he said. The Windy City is also up 6.9% in reservations.

The city is benefitting from new initiatives intended to attract more group business, Avasarala said. “It’s starting to pay off.”

Washington, D.C., on the other hand, is down 2% in commitments and 4% in terms of actual roomnights reserved, according to TravelClick data.

“This is obviously a big group market. The declines are not dramatic. This is where we tend to think, ‘Is this a pause given the last couple of months? Or is this a decline in the overall demand coming into that market?’” Avasarala said.

And finally, New York is showing a small decline of 0.9% in commitments, while actual reservations are down 3% for the year-ahead period.

“Some of this may have been impacted by the recent hurricane because we don’t know to what extent there are long-term effects of that,” Avasarala said.

“Again, the declines are not significant. It may not be a cause for alarm.”

Bright horizon beyond groups
“We are seeing a number of positive signs as well,” Avasarala said.

Committed occupancy, across all segments, for November 2012 through October 2013 is up 1.6% compared with a year ago and ADR is up 3.4% compared with the same time period last year. Revenue per available room is up 6.7%.

The transient segment, individual business and leisure travelers, is the driving force behind the rise in occupancy and ADR. Committed occupancy for this segment is up 4.1% and ADR is up 4.3%, according to TravelClick data.

“All of these things put together still make the industry outlook positive,” Avasarala said. “It’s not overwhelming, but it’s still positive.”

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