Lead Times for Group Bookings Can Be as Short as Within a Week
Group business is coming back to hotels in the U.S., but groups booking rooms are waiting longer to make the decision — sometimes within a week of their arrival.
Small, social and corporate groups — all distinct parts of this demand segment — are coming back at varying degrees, but one thing they have in common is that their booking windows are much shorter than they were before the pandemic.
Benchmark Pyramid Luxury & Lifestyle’s properties have had a surge in group demand after two years of nearly no demand, Chief Commercial Officer Eric Gavin said. Many of these groups are coming in at the last minute, likely the result of employees working together for the first time in a long time as well as the new hybrid work environments.
Though that does create some logistical challenges, it means more business for hotels.
“The need to get people back together has really driven what we're seeing as an uptick in bookings overall,” he said. “When we look at our group activity compared to the same period in 2019, we're actually ahead of 2019 revenues, which is extremely encouraging for us as a portfolio.
“When we look ahead to 2023, our pace is equally as strong and ahead of any historical record that we have.”
Throughout the pandemic, any groups that did book essentially had a wide-open calendar from which to choose dates, but that’s not necessarily the case anymore.
Jennifer Maxwell, regional director of sales at Raines Company, said companies are calling to book meeting space and rooms for the next week but the availability may not be there. Flexibility to accommodate alternative dates is also limited due to competition for bookings, she said.
“We trained all the corporate people that there's rooms open, so they can book whenever,” she said. “Now we're having to kind of adjust that.”
In the Year, In the Week
Gavin said some larger corporate groups have been booking within a 60-day window, but at some resorts and with smaller groups, that's happening in the month for the month.
“We always track in the year, for the year, but in the month, for the month has accelerated for those last-minute, smaller regional-type meetings,” he said.
The larger group bookings have a longer lead time, which has helped to fill up room blocks at Benchmark Pyramid Luxury & Lifestyle’s hotels in the second and third quarters of 2023, he said.
Bookings for association meetings are starting to return to a typical 12- to 18-month lead time, which is encouraging, he said. Coming out of the pandemic, those groups had been booking within three to four months because they were only just starting to reengage and get people traveling again.
Linda Price-Topp, vice president of sales at Marcus Hotels & Resorts, said corporate group bookings a year or two out are lighter than they have been pre-pandemic.
“We have less birds in hand, if you will, going into next year, and [less] business on the books for ’24 as well,” she said.
Groups that would have booked a year out are booking three to four months out, said Linda Gulrajani, vice president of revenue strategy and distribution at Marcus Hotels & Resorts. The sales leads coming in now are for the next 30, 60 or 90 days for 100 to 300 rooms.
“What we’re seeing is that because of COVID, everybody got off cycle,” she said. “They either pushed business that they had on the books, or they canceled business, so now they’re catching up.”
Though booking windows vary among all groups, generally the mid-size corporate events are still coming in more last-minute, similar to social events, said Kathy Hood, senior vice president of sales and revenue for Davidson Hotels and Davidson Resorts, via email. Bookings from larger corporate accounts and association meetings generally have more lead time. Convention center hotels are book groups for 2024, 2025 and 2026, she said.
There has been a significant shift to shorter lead times for meetings as the years has progressed, she said. One online provider reports that more than 50% of the RFPs coming in now from groups are for reservations through the end of the first quarter of 2023.
“That’s significantly higher than past trends, but overall RFP demand has risen to — or above — 2019 levels and may be an indicator that planners are catching up with postponed events,” she said.
The No. 1 complaint meeting planners are sharing is that nobody is calling them back, Price-Topp said. They’re sending out inquiries and leaving messages that take days to receive responses.
“We are all of the mindset to get back to the customer as soon as possible,” she said.
Internally referred to as speed to market, the plan is to make sure there’s always someone managing the inbox and getting back to leads within 24 hours, she said. Sales works closely with revenue managers to get pricing right, and the response time is critical.
Maxwell said sales strategies must be flexible enough to pivot quickly as needed.
“We like to have a base for all dates if we can, but we only do a certain percentage of our hotels, leaving room for the transient and any last-minute groups. Then for any of these last-minute groups, it’s a case-by-case basis,” she said. “We are flexible about the rooms, but it’s got to be at the right rate to fit within what we need to do here.”
Maxwell said she received a call for a corporate group that needed 20 rooms for 11 nights starting the next day. The group had actually booked with a different hotel but stayed only one night after being unhappy with the cleanliness of the property. Though not a typical situation for last-minute group bookings, it highlights the need to be able to adjust quickly.
“I was able to secure the rooms, which was a pretty quick turnaround for a large corporate group the day prior,” she said.
To capture this last-minute group demand, the sales and revenue management disciplines must work closely together, Hood said. They have had to manage the shift from less availability for groups at urban and suburban hotels before the pandemic to more availability over the past 18 months and now back again as weekday business travel ramps back up.
At the same time, weekends were generally a softer demand period for these hotels before the pandemic, but the surge in leisure demand in some locations focused on weekends, creating a much more restrictive environment for groups from a revenue management perspective, she said.
“As time marched forward, we are slowly moving back toward pre-pandemic management of our group business,” she said. “The big challenge is determining when that shift has occurred or will occur so we are prepared well in advance to shift our segmentation to maximize our total revenues.”
As long as there’s space at the hotel and the business makes sense, last-minute group bookings are an opportunity, Gulrajani said. It can be challenging on the operations side to figure out staffing, but hotel teams have learned to be flexible and more efficient with labor. That can also mean getting creative with packages, such as offering meals with the booking to create efficiencies in the kitchen.
Opportunities from compression — when occupancy exceeds 90% and hotels can drive rates — vary by market and day of the week, she said. Weekday occupancy is still ramping up in many markets, so that’s where the biggest opportunities lie.
“I do think that there’s opportunity to push on rate with group midweek,” Gulrajani said. “The more group we layer in, the more compression there is for transient, so I think it all kind of works together to help us optimize our total revenue.”
Throughout the pandemic, leisure demand kept hotels afloat, Gavin said. The demand trends among groups are creating compression in some markets, such as in San Antonio, Texas, at the company’s La Cantera Resort & Spa, where group room nights were the highest ever in October.
“It just shows you the amount of demand is there, but it’s creating compression, which is obviously driving up the price point, so it is more expensive,” he said. “We’re seeing the rate growth now in the group segment whereas previously it was all in the leisure travel segment.”
Return to Normal
Group demand booking patterns are going to normalize over time, Gavin said. The hotel industry went two years without traditional meetings, and now corporations are trying to fit all of them into the next 12 to 18 months. It’s going to take going through the 2023 calendar year to get back to normal cycles.
“As we look at ’24 and ’25, I think you’ll see some of those cycles normalize,” he said.
New work models — particularly work-from-home and other hybrid models — are going to require more companies to bring employees together to strategize, network and bond, which will help to boost group demand for hotels, he said. However, much of that business is also likely to be last-minute, at least for now.
Last-minute and in-the-year-for-the-year group bookings will continue throughout next year, Price-Topp said. adding that’s a reflection on concerns over inflation and a possible recession.
“We're seeing groups inquire about the space and availability, but they're not quite ready to make a decision, just sort of testing the waters — and then boom, they're ready, and they want to go really short term,” she said. “I think we're going see another year of that behavior.”
The last-minute bookings will continue until hoteliers can retrain meeting planners and corporate bookers, Maxwell said. The other issue could be that many people who filled these roles during the pandemic left, so those newly in the jobs aren’t as familiar with past practices. This will require more conversations and resetting strategies.
“With COVID, everything has been available, so they think they can still wait until the last minute,” she said. “One day it’s going to have to go back to normal. I just don’t know if it’s going to be next year.”
Copyright 2022 CoStar Group. All rights reserved. From https://www.costar.com. By Bryan Wroten, Hotel News Now.