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April 16, 2019
Feature
Mark Haley, Hoare

Don’t get us wrong! These tools have improved immensely, and the technology has kept pace with evolution from the IBM S/36 to the PC to the browser to the cloud. But the processes haven’t really changed much: The hotel sales executive gets an inquiry, assesses the value of the group in room nights, arrival/departure pattern, seasonality, other sources of demand for the same dates, volume of food and beverage (F&B) and other revenue sources, and either offers proposed rates or suggests a different set of dates and space that will fill a gap for the hotel.

Some things have changed significantly, however. On the technology side, we’ve seen the emergence of lead referral/RFP sites and services. On the business model side, hotels are feeling costs from third-party intermediaries looking to be paid commissions by the venues to costs previously borne by the host of the event. Let’s drill down on both of those for a moment before we explore the sources of potential disruption.
 
Most of us with experience in full-service and luxury hotels — mid-scale also — are very familiar with the trusted warhorses of hotel sales and catering (S&C) automation, generally some variation of Delphi or Opera S&C, Newmarket International having acquired most of the other meaningful2 competitors over the years. We’re so familiar with these tools because we are, in general, using them the same way we did when the earliest versions of Delphi appeared in the 1980s. We’ll identify some opportunities to disrupt the old, familiar patterns we’ve been using for close to 40 years. 
 
Lead Referral/RFP Sites
These aren’t new per se, arising perhaps 20 years ago, but included here as a significant factor in accelerating the inquiry/response process and changing the daily experience of thousands of hotel sales professionals. Led by products such as MeetingBroker (Amadeus Hospitality – formerly Newmarket International) and Cvent, these sites allow a meeting planner to create a single RFP for their event and send it out to many hotels, 10 at a time. 
 
Wow! Sounds great! An online tool that attracts leads from people in a buy mode and sends them to my hotels! But consider what happens in the hotel, when the sales office gets flooded with RFPs. Some of them might not be relevant to the hotel … 10 rooms for a youth soccer team’s away game might not be a fit for a five-star resort, although the kids would enjoy the pool. But whether or not the RFP is relevant, the requests still need to be assigned and evaluated for response – or not. In short, RFP referral sites often seem to create more work than the opportunities presented – at least to the sales admin given the tasks of assigning, routing and managing them
 
Intermediaries 
The lead referral sites described above are great, especially for the meeting planner, whether it’s a hockey mom, a professional meeting planner from a huge national trade association or someone in-between who just needs to organize a couple meetings a year for their boss. And even better than being a useful resource to the meeting planner, professional or otherwise, they’re free!
 
Of course, nothing in life is free. If the meeting planner isn’t paying for this service, then they’re the product. And who’s the buyer, with the “privilege” of paying? That would be the hotels and other venues represented in the lead referral network.
 
RFP sites are just one aspect of intermediation in the groups and meetings business. Another important one: Direct commissions to third-party meeting planners based on a percentage of revenue, typically for providing services to the host that the host corporation or association itself once shouldered. Sometimes the third-party planner rebates a portion of the commission to the host organization. Yet other components of intermediary costs include convention and visitor’s bureau (CVB)/Housing Bureau and reservations systems providers for citywide conventions. Add the costs of simply servicing the event and the total proportion of revenue that leaves the hotel becomes immense, before we pay a single room attendant or banquet server. This revenue leak represents an immense squeeze on operating income.
 
In a 2018 study2, Kalibri Labs estimated that 43 percent of group rooms revenue was driven by commissionable third parties. That’s out of a total U.S. group rooms market believed to be $30 billion, suggesting that commissions alone are $1.3 billion. Add in other sources of third-party costs and it grows to between $3 billion and $4 billion. The bad news? By 2022, just three short years from now, Kalibri estimates 63 percent of group rooms revenue will be intermediated, for a total cost to the hotel industry of $8 billion to $10 billion. 
 
If the current scenario and worse, the trends, aren’t sustainable, the market is highly susceptible to disruption. What are today’s potential sources of disruption? Or are the intermediaries doing the disruption and the hotels paying for it, like in transient segments?
 
Online Booking – Hotelier Perspectives
Most observers agree that the major change needed in group sales today is moving the search, shop, book and purchase process for smaller groups and meetings completely online. “In the Mandarin Oriental segment, every group and guest expects deeply attentive personal service,” said Monika Nerger, global CIO of Mandarin Oriental Hotel Group. “One way we can continue to deliver this level of service in the future will be the automation of the booking process for certain meeting categories, freeing up our colleagues to execute superbly.”
 
Kalibri’s Green agreed. “We need to go end-to-end, not automate the pieces of the process,” she said. “The front-end got automated, but not the whole process, which has made things worse.”
 
Andrew Rubinacci, senior vice president of revenue and distribution for Omni Hotels & Resorts is also on board. “The disruption opportunity is in moving the group/meeting process online. Our customers want it, but we aren’t set up to deliver it,” he said.
 
Our experts also agreed that doing groups and meetings online in real time is difficult. 
Some challenges are technical. Participating hotels need a connected source for meeting room inventory and rates, catering pricing and sleeping room rates, such as a Delphi, Opera S&C or one of several proprietary sales systems developed by brands. But not all hotels have such a system. Fewer still have an integration to a groups booking engine.
 
 
Then there’s the challenge of creating a user experience that’s both intuitive for the meeting planner and capable of producing output detailed enough to create an effective banquet event order and accurate invoice. 
 
The inventory and pricing logic has to be as sensitive and attuned as the sales director’s judgment when it comes to accepting the group that fills the house on the soft Monday, but displaces strong transient demand on Tuesday and Wednesday. And invoicing means payment, which introduces additional issues relative to PCI compliance: security, logging, access rights, etc. These are all solvable and well-understood problems, but still obstacles.
 
Other challenges are business model and governance-related. If hotels don’t open enough dates to the site operator, whether it’s brand.com or a third-party, the site loses value. If the site has several venues of varying segments and value propositions, a meeting planner that doesn’t know exactly what they’re buying could get confused. Does the site operator prioritize sort order based on fees paid, ownership, meeting planner priorities or other variables? Who governs these decisions?
 
One important business model gaining popularity is the hotel-friendly approach of flat-fee pricing. Rather than using transaction fee or commission-based pricing, most players in the nascent online booking market are looking for flat fees to deliver a predictable, penalty-free cost for the hotel to use these services. We applaud this pricing strategy.
 
On another business model level, “… most of the major brands are franchises, with income driven by franchisee gross room revenue,” said Omni’s Rubinacci. “So the big brands may not be so incentivized to invest in the back-end sales and catering technology required to drive the catering and meeting room revenue.” Having said that, Rubinacci agrees with others that every hotel group wants online group booking.
 
Just because it’s difficult doesn’t mean brands and third parties aren’t making valiant efforts to realize the dream. Marriott International offers real-time group booking online, but only for select properties. Presumably these have the requisite back-end S&C system and connectivity to guest room inventory. Hilton Hotels offered on-line booking for smaller groups in the past but are now supporting only search and RFP functions in near real-time. The full proposal follows, presumably generated by a sales manager.
 
Online Booking – 
From the Vendor Perspective 
And then we have third-party players, some offering white label services to hotel brands, others creating a marketplace more like a transient OTA. These include Groupize, BookingTek, iVvy, HotelPlanner and, of course, the dominant vendor in hotel S&C, Amadeus Hospitality.
 
These vendor partners generally agree with the hotelier perspectives cited earlier, that online booking is the opportunity and that it is difficult. “The biggest leap will be from RFP to actual online booking for small meetings and events,” said Ahmad (Joe) Youssef, executive vice president of business strategy and marketing at Amadeus Hospitality.
 
 “And I can tell you right now, the reason it will eventually happen is because clients are demanding it … .,”3 added Cvent CEO Reggie Agarwal.

Lauren Hall, iVvy’s CEO, said, “One particularly challenging aspect is all the complex negotiations around accepting a piece of business: transient displacement, day-of-week booking patterns, season, F&B contribution and many more implicit business rules. Then there is automating the whole ‘Can you move your dates to these three nights instead?’ capability.” 
 
Booking Tek’s Matthew Stubbs highlighted another. “Everyone thought the booking journey for groups was too complex. It isn’t easy to figure out an intuitive booking flow for meetings,” he said.
 
Hotels and vendors, agree that online bookings change the game primarily for smaller and simpler groups and meetings. Larger, more complex events with lots of F&B, various types of meetings, sessions and exhibits and other events as part of the meeting will continue to rely on the rich, iterative exchange of information between meeting planner and sales professional. But a 20-rooms, one meeting room, two-day event with continental breakfast and a large TV monitor? These are doable.
 
“Our MeetingBroker platform processed over 1.2 million definite bookings last year,” said Amadeus’ Youssef. “Over 780,000 of them were small meetings. Amadeus will deliver automated real-time booking of small meetings agnostically, with supply-side inventory from any source and no requirement for any specific sales and catering system.”
 
Online Booking – 
Meeting Planner Adoption
Many see another challenge: Getting the meeting planner to actually use a wholly on-line platform. Kalibri Labs’ research indicates otherwise. “Our research makes it clear meeting planners want to be more self-service. They would love to book it online and not use the old process,” Green said.
 
iVvy’s Forss cites personal experience as a parent shopping for room blocks for youth hockey teams. She said she did her research from 7-10 at night, not during working hours for hotel sales staff. 
 
BookingTek’s Stubbs said meeting planners who repeated bookings online book larger meetings. He added that lead times sped up from 1 to 2 months out to inside the month or even inside the week.
 
One factor that will keep the dialog between planner and sales manager front and center for some meetings: The stakes are higher for business meetings. “Your boss is involved. It is her meeting. It has to go well and the planner wants to talk to someone in the hotel that owns making the meeting successful,” said Omni’s Rubinacci.
 
Another compelling force cited in driving adoption? The rise of millennials in the workforce. If the meeting planner is a millennial digital native, they expect everything to be done online, in real-time, any time of the day. 
 
Other Disruption Opportunities
Speaking of mobile devices, Tripleseat touts a fully mobile-enabled S&C platform. Its application lets sales managers use their phones to book business from anywhere, from checking space, sending contracts and editing BEOs, all from their phones,” said CEO Jonathan Morse. Allowing sales executives to keep event planning moving forward from anywhere on their smartphones accelerates the business cycle.
 
Another way to speed things up is simply to make the sales 
professional more efficient by giving them targeted, qualified leads. 
 
“One need is better search tools to shorten the list of candidate hotels to match the property characteristics with the meeting planner needs,” Green said.
 
iVvy’s Hall cites the ability to qualify the inquiry before shopping hotels, thus shifting the burden of qualifying the lead to the meeting planner instead of the sales manager. She said pre-qualifying inquiries helps boost conversion rates by 48 percent. By screening out irrelevant inquiries, only the most likely opportunities require response. She added that 75 percent of converted leads go to one of the first five hotels that respond. 
 
Tripleseat’s Morse agreed. “Faster response equals much higher win factor.”
 
Well-known transient CRM services provider Clairvoyix is taking a different tack on making group salespeople more efficient by delivering better leads. Leveraging its experience in CRM and email marketing for transients, the company is providing the group segment with relevant, targeted, and personalized email and social media messages to qualified meeting planners.
 
“It is more efficient for the meeting planner and for the hotel salesperson for the planner to receive a relevant email and respond to it, qualifying themselves as a good lead,” Clairvoyix CEO Mike Schmitt said. Clairvoyix is developing algorithms and AI capabilities to further speed responses to inquiries and identify what attributes of a meeting planner’s response suggest a higher conversion rate. Schmitt said, “Sales people want to spend their time on qualified leads, not identifying them, and these types of solutions will do just that.” 
 
While Tripleseat was maturing from servicing restaurant private dining rooms into a hotel sales and catering system, it found that people selling the hotel restaurant space and the meeting space were in different silos, with different supervision and goals. So the company built a system to accommodate both sets of user roles with appropriate controls on what inventory they could see and sell. 
 
BookingTek, in collaboration with client Crowne Plaza Hotels has another twist on real-time bookings. Crowne Plaza has been doing brandwide makeovers of the hotel lobbies, creating workspaces in the lobby. The idea is that a guest or the developer that works in a cube in the office building across the street can come into the lobby, walk up to a tablet outside the small workspace and rent the room on the fly for a quick meeting, and order some AV or F&B as required. 
 
We’ve focused on some visible sources of disruption and disruptors in the hotel sales and catering space, most notably the promise and potential of real-time online booking for groups and meetings, at least the smaller, simpler ones. That doesn’t mean there aren’t less-visible threats to the established order out there. We’ll never know what Google or Amazon might be planning, but here’s one potential disruptor to keep your eyes on: AirBnB just announced the acquisition of Denmark’s Gaest … a platform for renting meeting spaces!

©2019 Hospitality Upgrade 
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