This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies.  Find out more here  Close
Hoteliers court government demand
September 6 2013

Hoteliers are fighting each other over an ever-shrinking pie of government demand.

  • Government group is forecast to be just 2% of Marriott’s business in 2013.
  • IHG tries to be as visible as possible within the government sector.
  • Government transient hasn’t yet slowed to a stop, sources said.

REPORT FROM THE U.S.—As government business continues to erode, hotel company executives are finding they must fight even harder to retain this critical segment of business.

During the company’s second-quarter earnings conference call last month, Marriott International’s President and CEO Arne Sorenson said his company’s business in Washington, D.C.—Ground Zero for government travel—saw declines during the quarter. Revenue per available room at company-operated hotels in downtown Washington fell by 1% while RevPAR at suburban hotels fell by 5%.

The dropoff in business at Marriott hotels in Washington was so severe in fact, that excluding the greater D.C. market, company-operated RevPAR would have been 6.5%, rather than the 5.3% it ended up being.

Sorenson said he expects government groups will represent just 2% of the company’s overall business during 2013. During the second quarter, government groups were 5% of Marriott’s business.

With the size of the government group pie shrinking, hoteliers are employing a number of different strategies to try to court government demand.

Looking local
Going after local government groups has proven to be one solution hoteliers have employed.

Larry Magor, managing director of the 1,001-room Omni Dallas Hotel in Texas, said his convention center hotel focuses on trying to attain local government business because the sourcing tends to be a little less complicated. Magor said he views government business as “fill-in” business for his property.

“We try to aggressively go after it in need periods,” he said.

Mike Fegley, VP of global sales, Americas, for InterContinental Hotels Group, agreed government group business is in decline across the industry. He said IHG saw an immediate impact of groups canceling once the sequester took hold.

Still, he said local government group average daily rate has been up every month of 2013.

“Hopefully, we’re still getting a bigger piece of a smaller pie,” Fegley said. “This is business we really like and seek.”

Fegley said IHG tries to be as visible as possible within the government market in order to keep the company’s brands top of mind with decision makers.

IHG’s operation of hotels on U.S. military installations certainly has increased the company’s government visibility. Plans called for IHG to operate a total of 15,000 rooms on 42 bases. /Article/8536/Army-taps-Lend-Lease-IHG-for-privatization

“There’s no question about it, we’re a leader there with our Army program,” Fegley said. “We do an awful lot of business there.”

Bang for the buck
Sandy Taylor, director of worldwide sales for corporate, government and travel agency programs at Best Western International, said government travelers want to get as much value for their money as possible.

“Government travelers are looking to maximize their travel dollar—more so than the corporate traveler—so value-added amenities are more important now than ever before,” which includes complimentary high speed Internet access that Best Western offers, she said in an email.

Taylor also said government travelers are extending their trips.

“The government traveler is now having to give thought to accomplishing as much as possible in fewer trips, but staying longer,” she said.

There’s a definite delineation between government group and transient, Taylor said. Groups and meetings business has “stalled for the time being” with “unnecessary” meetings being shelved.

“Transient, on the other hand, has slowed but not stopped,” Taylor said. “The government is learning to ‘travel smarter.’”

Sorenson also noted the differentiation between the two segments of business. “Where possible, hotels compensated for the group shortfalls by growing more transient business,” he said, during the company’s earnings call.

Best Western’s Taylor said the uncertainty surrounding government business will remain in 2014 and expects that sequestration will remain effect through 2015.

Sorenson also said the government malaise will continue for some time. “I wouldn’t expect an overnight change in the dynamic of government demand broadly.”

Said IHG’s Fegley: “The hotel industry is very healthy right now, but there are still too many empty rooms out there.”

Login or enter a name   Post Your Comment  Check to follow this thread via email alerts (must be logged in)
(4000 characters max)

Comments that include links or URLs will be removed to avoid instances of spam. Also, comments that include profanity, lewdness, personal attacks, solicitations or advertising, or other similarly inappropriate or offensive comments or material will be removed from the site. You are fully responsible for the content you post. The opinions expressed in comments do not necessarily reflect the opinions of Hotel News Now or its parent company, STR and its affiliated companies. Please report any violations to our editorial staff

Baha Mar faces major challenges, high stakes
Purpose-built soft brands on the rise
Post-CEO exit, Starwood urges unit growth
Why Lightstone bet $1b on fledgling Moxy
The threat most hoteliers are ignoring
The workhorse brands
Mama Shelter brand a family affair
Video: IHIF 2015 Day One recap
Video: IHIF 2015 Day Two recap
Video: IHIF 2015 Day Three recap
Hilton's Holthouser talks economy segment
Hunter Conference Day Two: Back to reality
Banks put onus on due diligence and management
Video: Hunter Conference Day Two recap
Deal flow to ebb in 2015
The threat most hoteliers are ignoring
US hotel renovations list
Contact Us
Hotel News Now
18500 Lake Rd.
Suite 310
Rocky River, Ohio 44116
Copyright © 2004 - 2015 Hotel News Now, a division of STR, Inc. All Rights Reserved.   Privacy