GLOBAL REPORT—Two weeks before the Democratic National Convention came to Charlotte, North Carolina, in early September, the organizing committee released 270 of the 1,000 rooms it had contracted from SREE Hotels, the city's largest hotel operator, with 13 properties. Because the original room block represented 80% of SREE's inventory, the sudden availability created an acute challenge for President and CEO Vinay Patel and his team.
"Rather than panicking, we did two things," he said.
The first was to immediately reach out to everyone who had inquired earlier about rooms, including regular business clients. The second was to remain committed to the integrity of their rates and a four-night minimum.
"We didn't want to put ourselves in a situation where we peaked on a night or two and then lost the rest of them," Patel said. "So, we maintained a strategy of asking for four nights, while looking at our rates and at what our competition was doing. But we didn't start dropping our pricing just to get occupancy."
That's because Patel had done his homework by talking to friends in Denver who could tell him what exactly had happened four years ago when the Democratic convention was held there.
"You have to do that kind of research to be prepared," Patel said. "We based our pricing and terms on the feedback I got from my friends in Denver."
SREE then targeted niche audiences such as Secret Service agents and media people who had not yet booked rooms, as well as non-convention related leisure and transient business customers.
The strategy worked. SREE was able to back-fill almost all of its rooms for at least three of the four nights and achieve an average daily rate that was about 10% better than what it would have been if all of the blocked rooms had been picked up by the DNC.
Same situation, different result
Mike Conway, senior VP of marketing at Cincinnati-based Winegardner & Hammons, which owns or manages 30 U.S. properties, faced similar circumstances at the Republican National Convention in Tampa, Florida—with the additional complication of an approaching hurricane.
One week out, the Republican National Committee released half of the 55 rooms it had blocked at W&H's 220-room Marriott Clearwater Beach property a half-hour from the convention venue.
Fortunately, Conway said, the company had a plan in place. "We had decided that if we didn't see specific patterns of pick-up that we would open up our other channels," he said.
Those included Marriott International's branded channels, government per-diem customers and online travel agencies, combined with a reduction in the minimum number of room nights required. "We were able to fill the rooms, but not at the rates we were anticipating," Conway said. "Our ADR came in about 10% below what it would have been if all the RNC rooms had been picked up."
Michael Dominguez, senior VP of corporate sales at MGM Resorts International, wrestled with more unusual and daunting circumstances in late August when a UFC championship fight scheduled for 1 September at Mandalay Bay was cancelled. On a moment's notice, MGM Resorts had a large block of rooms available at multiple properties.
"When you have that sort of thing happen for a major event, you're not going to replace it in the group market, especially when it's being cancelled within a seven-day window," Dominguez said. "In Las Vegas, the challenge is never selling the rooms. It's selling them at the right rates and mix that we need."
MGM Resorts opened key channels including OTAs and leisure travel agents, as well as other leisure networks. Decision-making was determined by historical data. "We know the booking patterns within those channels and how many rooms we can push in a seven-day window or a three-day window," Dominguez said. "So we looked at that data to tell us which channels would give us the greatest success."
A critical consideration, he noted, was being as aggressive as possible with rates, based on carefully balancing available intelligence against risk.
An Olympic shortcoming
Many London hoteliers learned a harsh lesson this year when the bonanza they expected from the Summer Olympics failed to materialize. After requesting about one-third of the city's 100,000-plus rooms, the organizing committee released about 15% of their block—but in three stages, going back to January, which should have given hoteliers plenty of time to book them.
However, because they had anticipated unrealistically high rates and demanded length-of-stay restrictions that stifled demand, many hoteliers ended up holding the bag by the time the event happened, said Seamus MacCormaic, the London-based senior director of market management in Northern Europe for Hotels.com
Hotels.com had a plan in place for helping its clients that dated back to last year and included extensive research on prior Olympics in Beijing, Vancouver and Sydney.
Based on the data they had collected, Hotels.com worked with hotels to create aggressive last-minute promotions and support them with aggressive consumer-oriented public relations initiatives.
Even so, however, two weeks before the opening ceremonies, ADR had fallen behind what it was for the same period a year ago. And even though last-minute demand picked up, many hotels fell well short of a sell-out.
The overarching reality, said Sloan Dean, VP of sales and marketing at Interstate Hotels & Resorts, is that times have changed and hotels must adapt.
An old pre-recession strategy based on assumptions about demand and compression is no longer viable, Dean said. "The day of selling a large hotel within a few days or a week of a major citywide event is largely a thing of the past, at least for the next couple of years until we see more economic recovery and low supply growth," he said.
Dean's advice: Rather than wait until the last minute and then assess availabilities and channel options, take a more pre-emptive upfront approach to hedge bets and reduce risk.