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Are You Ready for Groups Again?

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October 01, 2013
Distribution - Groups
Tim Coleman

Group travel has been missing in action since 2008, but some forecasts indicate that it is time for a rebound. However, at a recent conference, even TravelClick and Smith Travel Research experts had differing views on how soon and how large the downturn was or the rebound will be. The real question to ask now is, will you be ready when the groups come back? As with any skill, group revenue management will atrophy in times of non-use, so it is timely to review this business segment for your hotel.

Unlike the transient market for hotel rooms, the group market has totally different factors at play. The first factor to address is you hotel’s relation to the group market. Some properties were built exclusively for conventions and large group meetings others are transient oriented with no meeting space, but very few hotels can afford to disregard the group market altogether. Even if you have no group business, chances are that one of your direct competitors caters to groups. This, in itself, can have a major impact on your business because a group may fill your competitor’s rooms, even in an off peak time of the year. If you do not recognize this situation, you will be lowering rates to compete for business from a neighboring hotel that had no room for it in the first place. This would be a huge, but avoidable, revenue management mistake that costs your property dearly.

If a property is primarily a transient hotel that does not seek out group business it may be able to find a good fit for some group business when the transient segment is weak, and should be passively interested in groups for when the opportunity is right. For example, even if you do not have good meeting or function room space, you may be able to sell excess sleeping rooms to a group that is overflowing from a nearby hotel.

Then there are properties that seek to be a significant group market player filling over 35 percent of their rooms with groups and have significant meeting, conventions and banquet rooms to keep busy with a large catering kitchen and staff.

Regardless of where your property sits on this continuum from convention to transient, when group business comes back, you must be prepared. That preparation should include an historical perspective and a thorough understanding of the nuances of the group booking process.

First, a review of how the downturn came about, so you can better recognize the reversal. The industry was well into the disappearance of the group segment in 2008 before many properties realized it and started reacting appropriately. So, it would be beneficial to pay at least some attention to the evolution of the group business downturn.

The initial pullback was difficult to perceive, because it did not consist of groups and meeting planners canceling their events. Instead, the conferences were still held and the individual attendees continued to travel to them; but they truncated their stays from, perhaps four days down to two or three. Then, shortly thereafter, companies began tightening their belts and restricting attendance to only one employee per convention. So, the first sign of the downturn was not the obvious loss of new group bookings, but the more subtle reduction of occupied rooms per conference.  Even as group room nights were disappearing, group space for future conventions was still being requested by the organizers.
The second step involved not only shorter length of stays but also fewer attendees coming to all conventions as businesses reduced most business and meetings travel. This was a more visible sign of the downturn since it showed up before the convention actually started. This highlighted the need for sound attrition policies and constant communication with group organizers prior to the actual attendee booking periods. Group attendee software programs, like Passkey, were very instrumental for early detection of this trend.

The final step in the downturn was illustrated by the groups themselves cancelling and, finally, new meetings stopped being created. Even social, military, educational, religious, and fraternal business was way off. Ironically, one of the segments that still had money to spend on conventions was the entity that prints its own money, the Federal Government. Unfortunately, several of those conventions gave group travel a bad name, even though some in the hotel industry recognized the obvious hyperbole in the news accounts.

Switching our attention to an understanding of the basic steps in the group booking process, and we develop guidelines for group sales efforts. For starters, the group process is much more complicated and takes much longer than the transient booking process. Even though group booking patterns are getting shorter, many group commitments still take place years in advance of the actual stay dates.

The group booking process involves many steps over this extended period of time, and before even starting one must determine the best mix of transient and group business for a property. At the very least, calculate the maximum number of rooms you are willing to sell to the group market in any period of time. At a minimum, this can be accomplished by assessing the demand for higher rated segments and only selling the excess rooms to groups. After the maximum group level is set, the process is best viewed as a funnel which is wide at the top, where all the prospects come in, and narrow at the bottom, where all the attendees check out. The nine distinct stages in the funnel are prospect, tentative room block, definite room block, group wash, attendee booking window, cancellation and attrition period, the meeting itself and finally checkout and reconciliation. 

The prospect stage is when you discuss the initial group needs and search in your inventory to determine if you even have enough room for the group on the dates needed. If you do, a tentative group block of rooms is set aside temporarily for the group. During this stage the group requirements are further refined and a contract should be sent outlining these provissions, including attrition allowances, and the property capabilities. When the client returns the signed contract with appropriate deposits and deadlines for attendee bookings, the group becomes a definite booking in the property management system.

Next, the group wash stage occurs, where the hotel shapes the group block in the PMS to the number of rooms and dates that the hotel estimates will be used. This is an important step that seeks to balance the contracted number of rooms against protecting the hotel’s ability to sell rooms if the group attendees fall short or do not book the exact same pattern set aside by the group organizer. This group wash stage actually continues right up to attendee checkout.

Next, the attendee booking window needs to be properly established to balance a broad window for attendee bookings against an early cutoff to provide rooms for the transient segment. During this period, the group wash analysis should take place weekly. For example, if the group block envisions every one staying for the last night of the convention, the attendee bookings usually will be clear evidence if that is going to happen.

At the same time the booking window is open, the contract usually allows the group a cancellation and attrition window to better estimate their needs and cancel a percentage of rooms without having to pay 100 percent of the cost for them. This clause can actually be helpful for the property since their group done outside the contract and created a liability if the whole group materializes as per the contract.

After all these steps, the group can finally have their convention and check out; but the hotel needs to still do the reconciliation and billing for the group. This important stage should include a recap of what went right and wrong so future improvements can be made. Keeping all these stages in mind and implementing each is key. Now bring on the groups! 
Tim Coleman is the former chairman of the HSMAI Revenue Management Special Interest Group Advisory Board.

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