Looking Back at Q1 2017 Group Trend Review

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July 06, 2017
HSMAI
Jim VanDevender - jvandevender@knowland.com

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In April 2017, STR reported that the previous month marked the hospitality industry’s 85th uninterrupted month for year-over-year increases in RevPAR for the U.S. hotel industry.

In addition to profit growing, other indicators are still telling a positive story even though the double-digit increases seem to be waning. Occupancy increased to 68 percent due to 2.6 percent growth and the average daily rate (ADR) went up to $127.79, marking a 2.4 percent bump. 
 
Hotel sales teams are finally enjoying some sources of group-related big data, but more has been needed. The reason behind the need for deeper data is simple: Meetings are big business. The U.S. Department of Labor’s Bureau of Labor Statistics reported in 2014 that there were more than 100,000 meeting planners in the U.S. In addition, it noted employment of meeting, convention and event planners is projected to grow 10 percent from 2014 to 2024, faster than the average for all occupations. 
 
Additionally, demand, especially in the group market, is still strong. An active hotel construction pipeline, however, weighs on most U.S. markets, especially among upper upscale and upscale hotels. The boom in new hotels will have a direct impact on performance indicators on both the transient and group side. Reports indicate that there are 194,455 guest rooms among 1,481 new hotels that are in the construction stage. That is not the end of the increased threat of additional competition: 4,775 hotels are now under contract in the U.S. As a result, all the new supply entering the market will impact occupancy levels and pricing. ADRs will see fluctuation as hoteliers are forced to negotiate harder for meetings being booked. 
 
With all these rooms to fill and ADR targets to hit, there are many hotels dependent upon meetings business to help accomplish those goals. Big data on group activity, previously not accessible, has recently been made available to answer questions about actualized meeting trends such as:
• What markets see the most meetings and events?
• What markets have seen the biggest increase in group market share?
• What industry segments produce the most opportunity?
• Are there differences in results when looking at chain scale segmentation? 
 
The industry has only recently been able to answer these questions because of the increase in available market and brandwide meetings data. Additionally, new technology is pulling insights from data, enabling meeting trend analysis, predictive analytics and predictive forecasting. The industry has enjoyed consistent reporting of some basic performance indicators for years (like occupancy levels) but the actual drivers of the results have been frustratingly absent for hoteliers who are demanding more and more data analytics in these areas to further extend benchmarking and create more strategic sales and marketing processes. Recent and ongoing consolidation in the hotel industry means that larger companies have an ever-widening competitive advantage in mining their own past groups and meetings activity to understand the market and identify potential future opportunities. But even the largest enterprises do not see the entire market. In-house data only reflects business a hotel has won, or has seen and ignored/lost, but not the business that goes to competitors that the hotel never saw. And with recent growth of the hotel construction pipeline, this challenge will become more pronounced as hotels face even more new competitors.
 
Knowland, a meeting data company that has been collecting actualized group booking information since 2004, recently examined Q1 2017 group activity in 130 U.S. markets by analyzing the meetings and events that took place at 3,272 hotels in those markets. The results were compared to the same period of time in 2016 and 2015. 
 
The first quarter in all the sample years showed a consistent number of meetings and events held in the U.S. in these markets that were examined. A total of 123,314 events were held in 2017 during January, February and March compared to 127,300 in 2016 and 125,037 in 2015.* The number of meetings held in 2017 was slightly less than in Q1 2016. This may be an indication of slowing of demand, or alternatively, merely the appearance of slowdown being projected by the hotel construction pipeline increasing supply in the market. 
 
An interesting aspect of these results was that 2017 mirrored 2015 in that event activity was relatively static up until mid-February when there was a sudden spike in increased meetings through the end of March. In comparison, Q1 2016 showed a far different picture as to pace with a very steady trajectory of the number of events being held from the first week of January through the end of the quarter. 
 
The study ranked the U.S. markets that enjoyed the most actualized number of group meetings and events. The top five destinations closely mirror markets that also are consistently found at the top of the list for highest occupancy. Chicago, Washington, D.C., Boston, Los Angeles and Atlanta saw the most actualized events across all major group segments (corporate, association, SMERF and government).  

 
Corporate events, unsurprisingly, dominated the total number of events in every major market. Association groups were the next highest performer, followed by SMERF (social, military, educational, religious and fraternal) and government. Past studies by Knowland indicated that the type of hotel did have an impact on this order. A similar study in 2016 found that when resort properties were isolated and analyzed separately, SMERF meetings changed positions with events held by associations and were the second biggest contributor behind corporate meetings.
 
A deeper dive into the corporate segment in the top five corporate markets revealed the specific industries that chose these metropolitan areas. Technology, education/training, health care, manufacturing and banking/finance groups drove the most meeting activity. Segmentation in this detail allows hotels to re-evaluate areas such as deployment for account acquisition. Data mining in the group area to this degree facilitates knowledge discovery for predictive rather than purely descriptive purposes, which is especially helpful considering the new supply pouring into many markets.
 
Other markets emerged when looking at which cities had the biggest increases in the growth of most actualized meetings. Philadelphia, Las Vegas, Seattle, Newark (N.J.), and Fort Worth were the top growth markets. Several of these cities support the theory of group displacement, suggesting that certain organizations who had been utilizing markets like New York and Chicago prior to the recent healthy economy moved to markets with lower ADRs, seeking rate relief and availability.
 
The subsets producing these increases came from the same categories found in the top five cities, further suggesting that portions of these industries are looking for more advantageous pricing or better availability options. There were slightly higher event increases in the areas of manufacturing, financial and insurance with negligible increases in technology. 
 
Meeting planners like upper upscale brands when it comes to their groups and meetings. Upper upscale properties saw the most actualized meetings and events in Q1 with upscale coming in second and independents third. The only segment that saw an increase in the number of events held when compared to Q1 2016 was in the independent category. It is interesting to note that upscale properties are the chain scale that will be seeing a large share of the new competition being built with an additional 62,083 guestrooms in the construction phase about to enter the market.
 
The Knowland report also examined the amount of meeting space utilized by groups. By far, smaller meetings outnumbered larger conferences and events. More than 50 percent of meetings held in Q1 utilized 1,000 square feet or less for their largest meeting room required. Q1 of 2016 had the most meetings in this size category, however, and Q1 of 2017 saw more in the same time period than in 2015. 
 
Many of these meetings had the possibility to fit in smaller hotels in the same markets. Much of the new hotel construction activity is adding more properties in this smaller size category and some meeting planners are responding favorably. In a recent interview with Knowland, meeting planner Jill Burke agreed that she preferred placing her programs at these smaller select-service hotels. Burke works for a non-profit foundation, but her planner resume includes independent consulting for major global companies as well as small a la carte planning services, planning meetings for multibillion dollar agribusiness cooperatives, and other management positions for third-party solution organizations.
 
Burke said, "I liked that if we were the only group in the hotel, we got all the attention. Even if we were one of five (in a larger hotel), it felt like the staff was spread thin. The person assigned to you at a bigger venue may 
still have another group. You can tell they're bouncing between you and someone else."
 
As hotels maneuver through a robust construction pipeline and glaring increases in competition, hotel sales teams and the above property groups that support them will use new group data analytics to shed a welcome light on the previously dark corners of the group market. And the paths to achieving forecasted occupancy, ADRs and RevPar goals will be a bit easier to see.

Jim VanDevender is the chief marketing officer with Knowland. He can be reached for comment at jvandevender@knowland.com.


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