09Aug

Why Group Business is so Valuable for Hotels

Author: Ellis Connolly

While transient business often generates the most discussion among hotel owners, group business plays a vital role in your hotel’s success. Meetings generated 300 million room nights in 2016, and nearly $50 billion in spending on guest rooms. Those room nights were equivalent to 25 percent of the total room nights at U.S. hotels as estimated by STR Inc.

Gains & Growth in Group Business

Businesses are increasingly relying on events as revenue drivers. And internationally, the robust meetings and events industry has kicked hotel group business into a solid growth mode. Every year, millions of meeting attendees gather for the purposes of continuing education, obtaining certifications, and developing and maintaining professional connections.

Events Industry Council research revealed that while the number of business meetings only grew 5.4 percent between 2009 and 2017, the number of participants attending those meetings more than quadrupled that rate, with attendee numbers climbing 22.7 percent. This growth is presenting hotels with exciting new revenue opportunities, even beyond the added rooms sales.

Additional increases in hotel profits come as a result of the shifting demographics and expectations among conference attendees. As Millennials comprise larger portions of the groups segment, meetings are shifting away from passive learning scenarios to more experience-based events. Attendees are demanding greater engagement and personalization. They’re also looking to connect with the destinations where the events are held through authentic city experiences. And 81 percent of Millennials are mixing business with pleasure through “bleisure,” extending hotel stays by tacking leisure time onto the end of their business trips.

These shifts in group experiences combined with the fact that conference attendees have budgets beyond what meeting planners have contracted, allow hotels to further enhance profits by capitalizing on additional food and beverage, and ancillary purchases from event participants.

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Challenges in Optimization (& the Great Differentiator)

Although demand for meetings and events has been in a constant growth cycle over recent years, trends in the industry present unique challenges for hotels looking to increase sales in group business. While hotel properties remain the traditional venue of choice for event professionals, demand for nontraditional event venues increased 3.8 percent in 2017. This, combined with a significant increase in competition – the number of U.S. hotels in the development pipeline grew 78 percent from 2012 to 2017 – means that properties hoping to gain a larger share of group business must learn to adapt to this diversified new world.

Group inquiries create operational challenges for hotels as well, requiring interdepartmental coordination between revenue management, sales, and catering in order to achieve optimal results. Further, meetings are changing, they’re being organized faster and more frequently which results in shorter booking windows. Hotels need the ability to respond quickly if they want to win business. And the meeting planner sourcing technology is evolving, with response time and alternative dates playing an increasing role in planners awarding RFPs. 

Many hotels are still using ineffective displacement-based methods when it comes to yielding function space, room rates, and total revenue. They’re leaving a lot of money on the table with this static, “set it and forget it” approach. And in today’s information age, multiple factors and reams of data play a crucial role in gauging demand, maximizing bid and conversion rates, and determining the overall profitability of group business.

Group demand is strong and optimizing group revenue is complex. Moving forward, technology will be the great differentiator. Hotels that leverage science-based systems, data, and analytics will greatly improve underlying processes. They’ll enjoy faster response times, better decision making, and improved revenue performance from their group business.

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