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Shifts in Revenue Culture, Technology Needed to Optimize Group Bookings

Hoteliers gathered at RSS 2018 acknowledged that the group business side of the revenue equation remains as important as ever, but the sales process for securing contracted and negotiated bookings often lags behind advancements made for the transient side in modern Revenue Strategy.

As with most of the important advancements made to hotel revenue strategy, the way to optimize group bookings requires investments in new technology as well as a culture change away from standard, siloed approaches, RSS attendees said.

Marriott International’s Vice President of Distribution, Alexander Pyhan, advocated for these strategy shifts, even downplaying his hotel company’s bold move earlier this year to negotiate far lower commissions for third-party distributors like meeting planners and travel agents.

“We believe the group space is subject to great innovation,” Pyhan said. “Somebody who is able to address the process chain from contracting to sourcing to transportation and A/V requirements, payment and these kinds of things, that’s the kind of digital player that will prevail in this space. It will create great value for the hotels and the customers in this space.”

Pyhan’s fellow panelist, Brian Berry, Senior Vice President of Sales and Data Analytics for Cvent, said the hotel industry has been reluctant to change common strategies in the group business space.

“What have we done in the sales process to really respond to the change in RFP volume?” Berry said. “A lot of things still hearken back to 1995 models. The essential functions of our sales teams are to maintain customer and account relationships, respond to leads and close business, and to prospect. It’s that prospecting piece that’s becoming more and more difficult to do through non-digital means.”

He called on hotel brands to take a hard look at how they organize their sales teams to make the process more efficient as group bookings becomes more digitized.

“Add to that a couple trends,” Berry said. “We see groups continually getting smaller, and that’s probably not surprising. I think as we came out of the last recession, companies became very good at retaining the level of scrutiny and controls around travel. So where they used to send four attendees, now they send three. Where a group was once four nights, it’s now three nights.”

The volume of requests for proposal has also increased, he noted. 

“So as a hotelier,” Berry said, “I’m getting more inquiries and for smaller groups, which requires considerably more mindshare and thought to place correctly to maintain those occupancy levels. There are a lot of revenue management implications. If I previously had a nice 200-room group for three nights for a block, in the future I’m going to need four or five groups to fill that same pattern. That’s going to cause a change in how we set up our revenue management model and how we price and how we sell.”

The largest implication for hotel revenue management would be in digital marketing, he said. 

“By and large, hotels spend 10% on the leisure market; on the group space, we spend about 4% on marketing,” Berry said. “That’s the biggest trend we’re anticipating over the next 10 years.”

The Distribution Landscape for Group Bookings

While hotels should of course refine their sales processes to efficiently secure group business from RFP all the way through a group’s stay, they shouldn’t ignore ways that distributors, including online travel agencies, can help, Berry said.

In distribution for group business, just like for transient business, hotels benefit from a wide range of distributors that make customers aware of and accessible to properties that could not market to that many people on their own, he said.

“Never in any cycle have we ever achieved the kind of occupancy levels that we’re achieving today,” Berry said. “Some of it is the revenue management systems and capabilities we have, but a lot of it is the distribution landscape. We simply provide our inventory to a broader set of customers than we’ve ever been able to reach, and that allows hotels to run 80%-plus on an annual basis. And the same is happening with group.”

Again, as with distributors like OTAs on the transient side, hotels need to get better at collecting data from customers, even if those guests come to them from a third-party partner. Procuring guest data from on-property spending is what ultimately empowers hotels to enhance the guest experience and inform a more effective Revenue Strategy, Berry said.

“One of the key elements of the relationship is having the data around the customer,” he said. “When we talk about Google owning our customers, what is Google really in the business of? Data collection. As hoteliers, that’s what we should seek in this relationship with our customers.”

Setting Up Your Revenue Team to Win Group Bookings

Sales executive at hotels are always motivated to close as much group business as possible, hoteliers acknowledged, but they must be better aligned with revenue management in order to maximize profitability.

“It wasn’t that long ago where often you’d see revenue reporting into the director of sales and marketing,” Gary Hawkins, Vice President of Revenue Strategy for Sydell Group, said during another RSS panel. “That always seemed backwards to me. Not that it’s about territory or ego, but I sort of view a sales team as another distribution channel. Somebody with a holistic view of the business should say, ‘OK, I really need group here, so I’m going to turn it on,’ in the same way I would look at needing Expedia over here.” 

His fellow panelist Andrew Jordan, Chief Marketing Officer for Interstate Hotels & Resorts, agreed, though he conceded that the sales department can be incentivized on closing as much group business as possible, regardless of ADR, which is of utmost importance to a revenue strategist. 

“If the director of sales is in charge, and the revenue manager says the hotel doesn’t really need this group right now, that director will say, ‘But that’s how I’m getting paid,’” Jordan said. “That’s a pretty significant thing to overhaul.” 

Leticia Proctor, Senior Vice President of Sales, Revenue Management and Digital Strategies for PM Hotel Group, agreed that it was “paramount” for sales and revenue to work together and for whichever person oversees the entire property’s Revenue Strategy to have profitability as the main objective.

“We’re always aligned to ensure that everyone knows their role, but doesn’t necessarily stay in their lane,” she said. “Revenue management definitely has much more inventory control at the end of the day, but sales drives not only that group component but also the preferred accounts and that national-account or local-account relationship.” 

The optimal business mix between group and transient bookings will depend on the situation for every individual stay date, she said. 

“There may be one day where I need to drive the ADR and push the group [occupancy] down,” Proctor said, “but there may be other days where I have to have that group base accelerated to get to the overall target and sacrifice ADR. It has to work in tandem, and we have to understand what’s most important to get to the objective.”

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The Duetto Content Team is made up of some of the brightest minds in the hospitality space. Through a mix of blogs, videos, whitepapers, social media posts, email campaigns and more, we focus on developing brand and product awareness, lead generation, engagement and more.

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