Getting the right group business in your hotel at the right time for the right rate requires a holistic approach from your entire hotel operations team. In the current environment, inefficiencies in formulating group rates and quoting them to potential guests has hotels leaving a lot of money on the table.
A 2018 report from Kalibri Labs put numbers to the group business opportunity for hotels in the United States. Of the estimated $300 billion consumers spent on groups and meetings last year, $140 billion of that revenue went to hotels. More than one-fifth of that total, or $30 billion, came from rooms revenue, with spending on food and beverage, transportation, and audio-visual making up the balance.
Customer acquisition costs for groups and meetings business are on the rise, the Kalibri report found. Costs across many different intermediaries rose to $4 billion in 2017, Kalibri reported, and that total is projected to rise to between $8 billion and $10 billion by 2022.
Standing in the way of these opportunities for hotels are vexing challenges, particularly a fundamental misalignment between a typical property’s different teams. Revenue managers are in charge of maximizing profitability for the property, driving ADR while still converting bookings. However, the sales managers who are in charge of securing group and negotiated business often are paid to maximize the number of contracts they can close and the room nights booked under group rates.
Even though hotels like to think that each department is really working toward the same goal of making the hotel the most money, there are often different incentives.
The following departments should be aligned on your group strategy:
- Sales: Accept groups at the right rates.
- Operations: Schedule labor and staff according to demand and committed bookings.
- Marketing: Drive demand in need periods when group business would help profitability.
- Revenue: Empower the sales team with data-driven forecasts and real-time group quotations.
Another challenge to optimizing group business is that hotel departments often are relying on reports from a combination of different data sources. One team may be pulling numbers from the property management system, analyzing the data in a spreadsheet, then sending it over to a different team. The second team likely has been working with different numbers from the RMS or some other system. By the time people are actually looking at the same information to make a decision, the data is outdated.
Modern Group Optimization Strategies
In many cases, hotels will begin looking at their group business in November for the following year. Contracted business or groups on the books will be noted, and the hotel’s forecast, often prepared by the revenue manager, will be layered on top.
From here, sales and marketing should work closely with the revenue manager to identify prospects. Look at group booking pace over the past three to five years and try to recognize trends as well as where there are gaps. Perhaps your strategy needs to evolve to remain competitive or gain back share. This is where marketing has the opportunity to contribute their plans to make up that business.
Best practices to drive group business:
- The revenue team and director of sales should work together to form an action plan to determine optimal group mix of business.
- Update on a bi-weekly basis need periods with the sales team.
- Attend business review meetings with sales to guide them in pricing.
- Keep the group pricing relevant so that the sales team can convert business.
Instead of waiting until November each year, the revenue manager should be creating a forecast at the end of every month, looking ahead to the next month and the next year.
When RFPs come through the sales office — generated by a meeting planner, a housing bureau, a wedding, etc. — they’re typically loaded into some sort of sales software. Next, that piece of business would be brought up for a group business review. These meetings happen on a daily basis, at least, wherein sales, marketing and revenue teams analyze group leads to ensure they’re the right fit for the property.
Today, hotel sales and revenue teams are using modern tools to turn those discussions into a live group quotation. Software analyzes demand patterns, takes into account current transient rates and other data, and recommends a rate at which each group makes sense.
With new tools, hotels are able to focus more on response time, and operators understand that at the end of the day they must empower their sales and revenue folks with the right recommendations. Instead of just saying “yes” or “no,” hotel sales people today are more able to negotiate group business on the go.