While group demand is not as high was it was before the recession, hoteliers are reporting that revenue from group demand is better than expected.
REPORT FROM THE U.S.—Group demand is a core part of hotel companies’ business, though it has been a shadow of its former self during the recession and recovery. The good news is several CEOs from hotel companies report group demand, specifically corporate group demand, appears to be on its way back.
Marriott International President and CEO Arne Sorenson said during his company’s first-quarter earnings call that recent group trends are encouraging. While the company had expected lower group business during Q1, group revenue per available room came in flat compared to the previous year, he said, due to better-than-expected attendance at meetings and stronger group business.
Patrick Grismer, CFO at Hyatt Hotels Corporation, said during his company’s call that Hyatt is well-positioned on group business for the year.
“As we look ahead, pace for all years is up with now 53% of our targeted 2019 U.S. group business already on the books at the end of the quarter,” he said.
While this sounds like great news for the U.S. hotel industry, the common adage that hotels are a street-corner business remains true, in that what’s up for one hotel or market might not be for another.
At Hospitality Ventures Management Group’s properties, group revenue is up, both for year-to-date actuals and pace, but most of the lift is coming from average daily rate, said Cory Chambers, the firm’s VP and chief revenue officer.
“Group occupancy is fairly flat for us on the whole with rate being up slightly,” he said. “It is market by market. Some are certainly experiencing more upside than others.”
Demand is up as a whole, he said, but the new supply coming in is keeping occupancy rates flat.
“That’s one of the (factors) holding things relatively in check,” he said.
Primary markets are performing better in terms of group business, Chambers said, and oil and gas markets are coming back slowly. Most of the group business lift is coming in on the corporate side, he said, adding that HVMG generally has a 50-50 mix of corporate and leisure group business.
Paramount Hotel Group saw group pace pick up by early- to mid-March, President Ethan Kramer said, and bookings grew stronger moving into the second quarter.
“The unique part in each case is that every property gained their business from various segments, not necessarily traditional to their model,” he said. “We believe the improvement can be attributed to a few factors, including our sales teams have started to establish themselves, grassroots sales efforts (making) local prospecting and outside calls a focal point, a stronger corporate push moving into Q2 delivering more leads, pushing the brand for more opportunities and working diligently on improving conversions.”
Remaining nimble and countering market challenges have been important to improving conversions and continuing growth on the group side, Kramer said.
Overall, results are mixed and vary by market, he said. Markets that had significant supply growth are more competitive, but rather than lowering rates during peak season, Paramount drove more business-transient demand and other higher-rated group demand in the market to better fit the model, he said.
“As an aggregate, our hotels are flat year to date, but that is a plus as we have seen significant new inventory in many markets,” he said.
Most of the markets where Prism Hotels & Resorts operates generated strong group demand during the first two quarters of 2018, SVP of Sales & Marketing Allison Handy said. Summer demand, however, is shaping up a bit slower, particularly on the corporate side, she said.
“I’m attributing this to the higher leisure demand we’re seeing from more summer trips, as well as companies looking to avoid summer meetings/travel to ensure participation and employee satisfaction,” she said. “Could this be the very early signs of a millennial impact to the job force and meetings schedule? Not sure, but I’m keeping my eye on it.”
Group pace is up so far this year, and last year was up compared to the previous year as well, Handy said. It’s a robust group market, and while Prism has grown accustomed to the short-term booking cycle, the company is also seeing 12- to 24-month demand increasing at many of its larger hotels.
It’s all a balancing act, Chambers said. Midweek bookings—Tuesdays and Wednesdays specifically—are all about rate and stay pattern, he said. For the shoulder nights of Sundays and Thursdays, the focus is on occupancy and lifting, he said.
“There’s still plenty of occupancy opportunity on shoulder nights,” he said.
Booking out groups for future stays has allowed HVMG’s hotels to fill in where it’s needed and price based on the demand, Chambers said.
Paramount Hotel Group is making a more targeted and diligent effort in the most basic parts of its sales processes, Kramer said.
Promotions are sometimes necessary and are easy to roll out, he said, but there are some simple steps to improve on them. Prospecting, looking at historical booking reviews, making outside sales calls, responding faster and stepping out of comfort zones can add new opportunities, he said.
It’s important to understand displacement and not give up on a piece of business just because it isn’t the norm, he said.
“Our hotels work well with revenue management to dissect pieces of business and get to a point where we can convert into definite bookings,” Kramer said. “The recipe is not complex, but if you wait for the phone to ring, you will not do well, so we really push our teams to hunt.”
Even though demand has been robust, Prism pushes its sales team to constantly gain insight from peers to make sure the company has all the market knowledge and data it needs in the event of a demand shift, Handy said.
The company also is assuming the need to increase transient mix during the summer and has increased its digital marketing spend in markets where it expects exposure, she said.
Prism COO Mark Van Amerongen has a mantra, he said: “Life is good when you make your numbers; you can’t make your numbers without a strong group base.”
That won’t change anytime soon, as long as the company is over-vigilant about maximizing revenue from its group base to optimize every room every day, Handy said.