|Group sales experts discuss emerging from the recession. From left to right: moderator Dennis Nessler of Hotel Business; Michael Dominquez of MGM; Sloan Dean of Interstate; Mike Conway of Winegardner & Hammons; and Jim Vandevender of The Knowland Group.
NASHVILLE, Tennessee—Group-business prices that were negotiated during the downturn often are blamed for the lack of average-daily-rate growth in the hotel sector. However, even as that business slowly comes off the books, hoteliers are still battling emotions left over from the most recent recession and are finding it difficult to embrace pricing power, according to a panel of group-business experts at last week’s Hotel Data Conference.
At MGM Resorts International, most of the business that was negotiated in 2009 is “flushing out of the system,” said Michael Dominquez, senior VP of global hotel sales at MGM. As that occurs, average rates are starting to rise. Dominquez said analyzing when business was booked is important to making pricing decisions now and moving forward.
“That’s something we don’t analyze enough—how much of that business was on the books and when did we book it?” he said.
However, even as business that was negotiated during the downturn fades away, an emotional attachment to the recession will remain, said Sloan Dean, VP of sales and marketing with Interstate Hotels & Resorts.
“We’ve all had our 401(k) hit hard,” Dean said. “When you’re out there selling, we have to get over the emotional attachment of this deep recession. There’s this anchored emotion point and we’ve got to be able to say, ‘No’ or ask $30 more for the room. That’s an emotion and you’ve got to coach that.
“There’s still this reservation of ‘Are we going to double dip?’” he said.
Dean said travel planners are seeing their airfare and other ancillary costs dramatically rise. When analyzing total spend for a meeting, the hotel industry becomes the avenue for savings, he said.
“Where are they going to get the savings? From hotels,” Dean said.
Jim Vandevender, chief development officer at The Knowland Group, said that as the emotion that was tied to the economic recession subsides, the hotel industry will start seeing group ADR increase a bit.
MGM’s Dominquez said it will start with a change in culture in the sales department.
“For three years we built it into their heads: just get it on the books,” he said. “Now we’re trying to push rate all of a sudden. A large boat turns slowly.”
“We’ve got to change our way of thinking on price,” added Mike Conway, senior VP of marketing with Winegardner & Hammons.
Conway said no other industry outside of the hotel industry sets one price for the entire upcoming year and books meetings at that price. He suggested a more flexible rate structure in which group-business rates can be adjusted according to demand at the hotel level.
“What other industry gives a fixed rate for a whole year?” he asked. “We have to put the pressure on the brands to move to a flexible pricing model. We’ve got to get the prices back up so we can reinvest in our industry.”
Group ADR influences
Outside of business that was negotiated during the downturn, several other factors are contributing to a lag in muted ADR growth, experts said.
The timing of the upcoming Jewish holidays “are killing us,” said Dominquez of MGM, which books 40,000 roomnights a day, including transient and group.
“We’ve got to start to pay attention to what’s driving group demand,” he said.
Dominquez said politicians have hindered and supported the meetings industry at various times during the downturn.
“That (Government Services Administration) scandal will do more damage than anything else in the past year,” he said. “Government overreacts and tries to over-regulate the entire industry.”
However, Dominquez praised President Obama for his support of promoting incoming international travel.
“For as much as we beat up President Obama for his words (discouraging travel to Las Vegas), his organization supporting the visa waiver program and Travel Promotion Act will do more than any drama he created,” he said. “To me, he has a ‘C’ average.”
The upcoming presidential election in the U.S. also has groups hesitant to travel for fear of political uncertainty, the panelists said.
“Once we get through the election—regardless of who wins, we just have to get through the election because everything has stymied a bit,” Dominquez said. “We just felt a tightness in Q2. We’ve got to get over this malaise because it’s just not a pretty environment today.”
There are positive trends occurring in the group space as well, the panelists said.
Group booking windows are lengthening, providing more base business and allowing hotel revenue managers and sales departments to yield more successfully.
“The further we’ve gotten from 2011, the longer we’ve seen booking windows lengthen,” Dominquez said. “2013 should be into the double digits.”
He said MGM’s 2013 budget for group business is “at 2008 levels” with 91% of its business on the books.
“We’re seeing that window expand as well,” Interstate’s Dean said. “Corporate meetings are not necessarily being planned in three to four weeks but rather three to four months ahead of time.”
Dean said Interstate’s hotels also are seeing success prospecting for group business on the social-media platform.
“We have a lot of success going after group business on LinkedIn,” he said. “There’s a tremendous amount of group business you can solicit via LinkedIn. We even have a training process to get (sales employees) fully certified in LinkedIn prospecting.”
The panelists suggested working with meeting planners on flexible meeting dates, even if the planners said their dates are firm in the request for proposal. Conway said some planners might not know they can save significant dollars moving their dates, so it’s important to have that conversation.
The Knowland Group’s Vandevender suggested hoteliers ensure they’re targeting the right clients.
“Make sure you know who you are as a hotel and are targeting the groups you have the best ability to probably capture,” he said. “Don’t waste time on groups that absolutely aren’t going to do it for you. Sell more strategically.”