October 26, 2022

Changing Behaviors Give US Hoteliers Optimism About Group Demand Recovery

High Demand Gives Hoteliers Leverage in Negotiating Room Blocks

Hoteliers across the U.S. are looking ahead to the next phase of group travel recovery with optimism, though some questions still remain around certain demand segments.

Executives of publicly traded hotel companies and real estate investment trusts in the second quarter of 2022 predicted bright spots for group travel recovery through the remainder of the year.

And during the recent 2022 Lodging Conference, Chip Ohlsson, executive vice president and chief development officer for Wyndham Hotels & Resorts, said he anticipates a boom in group travel is on the horizon.

With the new year approaching, Hotel News Now checked in with hoteliers on where their optimism stands today, which groups are traveling and projections for the future of the group segment.

Island Hospitality

Mark George, senior vice president of sales and marketing at hotel management company Island Hospitality, said there's plenty of conversation around there being a boom in group demand, and his company is "waist deep in that."

So far this year, Island Hospitality has achieved a more than 100% increase in group production from 2021, he said.

George said that a natural slowdown in group travel will occur as it gets closer to the holidays, but the segment will ramp back up in January.

"There's no reason to believe, in the way we budgeted for next year, all the conversations we're having as far as pricing is concerned, that it doesn't continue into 2023," he said. "In fact, my national sales team, who handles a lot of tour travel, corporate group, weddings [is] inundated. I approve leads six, seven, eight times a day."

George said the top three group demand segments cropping up across his company's portfolio are social, sports and corporate.

"Corporate is the one that we didn't necessarily see as being robust but it's the No. 1 ... [a] 240% increase in production over the prior year," he said.

Within the corporate group travel segment, George is noticing a pickup in company retreats. Employers are also using these retreats as opportunities to come together and talk about lessening the environmental impact and supporting local businesses.

Because of such high demand from group travelers now, he said "the hotel is in great negotiating position."

George is finding that groups are more open to splitting up and booking at two different properties, whereas in the past that was never an option.

"You never would have gotten that out of somebody, it was 'Nope, put them all on the same floor, in the same hotel, same rate,'" he said.

Twenty Four Seven Hotels

Hannah Huse, vice president of sales and marketing at investment, development and management company Twenty Four Seven Hotels, said her company's portfolio of hotels is achieving more consistent demand from social and sports groups in 2022.

"There's still corporate accounts that are being cautious with business transient," she said, adding that looming rate increases by the Federal Reserve are a factor, too. "We'll continue to see gradual improvement in our mix of sales, but not without a proactive approach at educating our customers ... about the why behind our pricing."

In terms of corporate travel, she said most of the major brands had rollover pricing from 2019, and this is the first year her team is having to negotiate and readdress it.

Huse said sports and social blocks this year are increasing over 2019 levels in terms of requests for proposals and pickup.

"What's interesting still, going back to the corporate mix ... in quarter three of this year, 45% of our group business booked came from group corporate. In 2019, it was 53%. We're still down about 8% in corporate but we're seeing the return of training, conferences and project opportunities," she said.

Bookings, however, are still short-term at around 90 days or less, she said. Most of what's added on the books are in the month for the month.

Huse said guests will also need to be reeducated on why they should book room nights in advance.

"Our guests have been accustomed to [thinking] they can get in last minute when they need to ... that's going to change," she said.

Huse said a source of demand that Twenty Four Seven Hotels' collegiate market hotels continue to benefit from is university housing blocks, which weren't seen prior to the COVID-19 pandemic.

"That I thought would be a shorter-term solution. But we continue to get student housing, even into 2023, to accommodate regulations and demand for students on campus without dorms," she added.

For Twenty Four Seven Hotels, Huse said the definition of group travel hasn't changed. The 10-room minimum is still the rule of thumb. For extended-stay group base, it's still five rooms for five or more nights.

"In terms of what we're projecting and how we're budgeting for 2023, we are adding more into our budgets but building in that ramp. So quarter one will be higher than 2022; we'll continue to increase that projected group throughout the year," she said.

Hospitality Ventures Management Group

Kim Brooks-Martin, corporate director of sales strategy and development at Hospitality Ventures Management Group, said hotels in HVMG's portfolio are experiencing a "very healthy recovery" in group business.

By 2024, her team fully expects that hotels in the top 25 markets will be "beyond recovered and into the next phase of what group activity is going to look like for the future," she said.

Wedding bookings, for example, "have gone off the charts," she added. It's now back to the point where wedding groups are booking a year out, which is the more traditional method. In the past few years, these groups were booking "next week, next month, next six months," she said.

This will also be the first year since the onset of the pandemic that group travel around holiday events resumes, she said, and many of HVMG's hotels are focusing on that demand segment this year.

A big question mark, however, remains with the return of association business. While associations are coming back, they are at the mercy of their ability to attract sufficient attendance, Brooks-Martin said.

The sweet spot now in terms of group size ranges from 15 to 50 rooms, she added. Her team is not yet seeing that 100-200 person attendance yet.

Brooks-Martin said it's important for the hotel industry to reach out to small and midsize companies. Previously, those companies might have been put on the back burner.

"Small and midsize companies far greater than the top 100s have been the ones that have really initiated the recovery," she said. "I've certainly urged our field to not only applaud but to develop [those relationships]."

In terms of booking windows around corporate groups, HVMG is not yet booking the next two years' annual events or next fall's events.

"I think it's two-fold. Nobody knows what the future holds, and when you're expected to sign a contract, there's a lot involved," she said. "As long as hotels are further developing the relationship with those planners who are making new commitments, there will be those rebookings."

Copyright 2022 CoStar Group. All rights reserved. From https://www.costar.com. By Dana Miller, Hotel News Now.

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