May 04, 2021

Social Groups Represent First Piece of Group Demand Comeback

Groups Seek Flexibility, But Runway for Rebooking Is Shortening

Though not as robust as leisure demand, group demand is starting to come back to U.S. hotels.

A necessary component of the business mix for hotels, group demand dropped significantly during the COVID-19 pandemic. Data from STR shows that group demand dropped as much as 94% in a year-over-year comparison with April 2020, and it remains down 84% using the most recent 12-month moving average from March 2021. STR is CoStar's hospitality analytics firm.

However, as vaccination rates grow across the U.S., hoteliers are seeing group business demand starting to increase.

As most group demand currently comes from social, military, educational, religious and fraternal groups, Aimbridge Hospitality is taking a different approach and qualifying group sales leads in a different way than they did prior to the pandemic, Chief Marketing Officer Andrew Jordan said. Weddings and traveling sports teams represent a significant portion of group sales, and the company’s extended-stay vertical is also generating a lot of group demand.

“We’re netting it out differently to make sure that we’re optimizing the space,” he said.

Aimbridge's sales team is organized into eight verticals to focus on specific areas, but to chase the existing group demand, sales reps are crossing vertical lines and getting aggressive in following up on leads, he said.

“The reality is, because the customer demand is coming from very different kinds of businesses, we're chasing that across the different verticals,” he said. “Things that would have had tighter swim lanes by vertical, we're loosening to realize demand where it exists.”

At Prism Hotels & Resorts properties, there has been high demand from youth sports programs, said Allison Handy, senior vice president of sales, marketing and revenue management. That demand is robust as teams rebook or make up for tournaments that were canceled or dramatically decreased in size.

“Teams that might have only played a few tournaments a year in the past are packing a tournament schedule to make sure that their players get exposure and get development to make up for lost time,” she said.

Several state and regional associations also are planning meetings for 2022, she added.

Bookings for weddings have been “off the charts” for the Kessler Collection, Chief Revenue and Marketing Officer Lori Kiel said, noting that weddings are in their own sales category separate from groups.

The collection’s boutique hotels have attracted couples who were looking for smaller, intimate weddings, she said.

The pace of wedding bookings this year is shaping up to rival 2019, she said. The company's hotels typically book about 80 weddings a year — more than one per weekend.

“Right now, we’re starting to see that come back again just like that,” she said.

Aside from weddings, Kessler is also booking groups from pharmaceutical companies and getting some incentive business, Kiel said. Both are smaller in scale than before, indicating those groups are still testing the waters.

Booking Behavior

Prism’s sales prospects are almost equal to 2019, but the difference now is the conversion rate, Handy said. Many groups currently shopping for hotels are still hesitant to book.

One common scenario is working out a deal with a client for a conference later in the year, but the client stops short of accepting and wants to take another 30 days to make sure the event remains on the schedule, she said. In response, Prism sales reps are offering lenient cancellation terms to help clients make a decision while uncertain about the future.

“But even with that, there's a hesitancy on some of the groups to commit wholeheartedly,” she said. “They're shopping or exploring. They still need time, and no offer is going to change that. It's just when their timing feels right.”

With growing demand, however, Prism is getting more aggressive in its pricing and tighter on its concessions, Handy said.

“Based on the level of demand, I have a lot of confidence in not giving away the house anymore,” she said. “That phase is hopefully over with the passage of probably the next month or two.”

Booking windows continue to be mostly short, but some groups are booking further out, Kiel said. An assistant director of sales in Savannah just booked three events for May, but the hotel also has bookings as far out as 2024.

Of the roughly 1,000 sales leads Kessler is pursuing, roughly a third are for 2022 with a handful for 2023, 2024 and beyond, she said.

Over the past year, many group clients chose to rebook later instead of canceling, Kiel said, but it's getting harder to accommodate rebookings as new business takes over the calendar. Kessler now allows groups to rebook just once for a future date.

“We don't want to lose the opportunity to book new because we're having to rebook the old from a year ago,” she said. “This is getting to be a very different yield strategy than you would have ever had before.”

Pent-up demand for weddings is forcing sales reps at Aimbridge properties to get creative with dates and space, Jordan said, adding everyone wants outdoor spaces, particularly at resorts.

In many instances, the hotels can host multiple smaller weddings at the same time, he said.

The groups that are booking are relying on the hotel teams to know the health and safety protocols and plan accordingly, he said.

“They’re very much relying on our property team to understand the local regulations and how to execute against them,” he said. “They’re very flexible when we talk about the social distance requirements, the occupancy limitations.”

Waiting on Corporate

Traditional corporate group travel is picking up only slightly, with requests for proposals focusing on the fourth quarter of 2021 and more in 2022, Jordan said.

“The real behavior that we're seeing is that as companies start working back in their offices again, we anticipate that it's going to trigger the meetings,” he said. “We feel like we're probably on the cusp of that, but we’ve never really seen it quite yet.”

In a discussion with one of her directors of sales in Charlotte, Kiel said she learned Bank of America has pushed up its timeline for having vaccinated employees return to the office part time.

“This is really where we’re going to see group starting to transition — when these big companies that have risk departments are willing to start releasing their people to go back to the offices or to travel,” she said. “That’s when you’re really going to see it start coming in beyond that social component.”

Prism is booking corporate groups in the third and fourth quarters of this year, Handy said. They aren’t large events, mainly 20-person sales teams meetings, 30-person training sessions or product launches.

“They're really bringing only the necessary people, so we're not seeing the 200-, 300-person corporate groups,” she said.

Copyright 2021 CoStar Realty Information Inc. All rights reserved. From By Bryan Wroten, Hotel News Now.

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