Hotel executives with brands and real estate investment trusts are seeing a positive trend in the pace of group bookings, citing help from reduced commission rates, positive macro trends and more.
REPORT FROM THE U.S.—Executives on second-quarter earnings calls expressed high confidence in the pace of group bookings, and some even said it’s their strongest segment and they expect it to continue into 2019.
Here’s a look at comments made by public hotel company executives on their conference calls with investors and analysts.
Arne Sorenson, president and CEO, Marriott International
“In North America, we continue to see strength in leisure and corporate demand, particularly in the energy, retail and professional-services sectors. Systemwide (revenue per available room) in North America increased 3.1% in the second quarter with RevPAR at luxury hotels up nearly 4%. Transient RevPAR rose 2.5% in the quarter with higher room rates associated with group compression. Group RevPAR rose 4.5%, reflecting the shift in Easter holiday. Group attendance trends improved while food-and-beverage revenue rose nearly 5%.
“Group pace for comp and non-comp hotels for 2018 is up at a mid-single-digit rate. For comp hotels alone, pace is up at a low single-digit rate. Given today's very high occupancy rates, we expect transient RevPAR will grow faster than group in the near term. At the same time year to date, our group revenue bookings for all future periods is up over 17%. RevPAR growth exceeded 5% in the quarter in New Orleans, Orlando, South Florida, San Francisco and Houston and increased at a double-digit rate in Toronto and Vancouver. RevPAR in New York rose nearly 4% with higher retail and special corporate demand, particularly from tech companies and higher international arrivals.”
“Our group bookings in the first quarter for all future periods were very, very strong. One of the reasons, perhaps the most significant reason for that was our reduced commission rates took effect 1 April. And so, with the number of group intermediaries, they were accelerating their efforts to make sure they were booking before lower commission rates impacted them. I think similarly when you look across the industry you've had a number of other companies decide that they would reduce group commissions, too, none of those lower group commission levels are in place yet, and I think they will be rolling in for some other companies effective in the fall or the first of the year. And so that will have a little bit of a dynamic to the way group business is booked. Having said that, I think, many of the end consumers for group business are maybe not ambivalent about what the group commission levels are, but they're going to be much more interested in where they should hold their meeting, both in terms of services and facilities and we think we'll continue to compete very well in that space.”
Chris Nassetta, president and CEO, Hilton
“Group position remains up in the mid-single digits for the full year and into 2019, and booking pace in the quarter for all future periods was up in the low double digits. Positive macro trends continue to support favorable industry fundamentals with forecasts calling for economic growth in every major region of the world through 2019.
“Leisure and corporate transient each grew roughly 3% in the quarter, and group RevPAR meaningfully outpaced expectations, increasing high single digits year over year in the quarter.
“I think for the second half of the year for the full year, you will ultimately see group outperform all segments. It will probably go: group, leisure transient, business transient. So group will be the outperformer. It has been in the first half of the year. I think it will be in the second half of the year.”
Jim Murren, chairman and CEO, MGM Resorts International
“I have to say, though, in the other channels we're seeing in this current quarter, the longer-term convention block, our FIT and casino blocks all came in or are coming in as expected. The combination of the comparison and the less than expected in the year for the quarter, small-group business means that we believe that our RevPAR in the third quarter will be down here in Las Vegas between 5% and 7%. That would mean our revenues would be down between 8% and 10%.
“Based on what we've been seeing and based on a strong level of conservatism for the balance of the year, we now expect that our strip revenues and EBITDA to be both down low single digits and our margins to be around 29% or 30% if you exclude Park MGM. Now, it's early but we're starting to see much better pace trends later (in) the fourth quarter, which we can get into, particularly on the group side. And as we look out into 2019, we have been building a very solid base of convention business. In fact, our production in the second quarter for future periods was up double digits … and we also see a very healthy backdrop in driving some of our group destination demand.”
James Risoleo, president and CEO, Host Hotels & Resorts
“As we look into the second half of the year, our group booking pace is very strong with group revenues up 4.7%. The fourth quarter of this year remains the strongest group quarter with group revenue 5.4% ahead of last year. With approximately 95% of our group revenues on the books for 2018 and occupancies at all-time highs, we continue to see the booking window extend.
“Group booking pace in the quarter for all future periods is up 22%, and group booking pace in the quarter for 2019 is up 10%. … I'll point to the outsized performance we had at corporate group in the second quarter. It was up almost 15%, and we saw strong spend with food and beverage, and A/V revenues. And we are hopeful we're going to continue to see that trend continue over the balance of the year. We may not get a full 15% for the rest of the year, but we still anticipate corporate group to be up. And we also are hopeful that we're going to see corporate group continue to come back to our hotels in 2019.”
Mark Brugger, president and CEO, DiamondRock Hospitality
“In this quarter, we saw group leading the way as one of the strongest segments. So, when group is stronger you’re going to get more (spend) out of the room, (and) it has been a pretty good trend for us (since) we’re obviously a fairly small portfolio. So, ours will go up and that won’t necessarily correspond every quarter with the industry average. But the anecdotal evidence, again (our) properties have been positive on the outer room spend, but quarter-to-quarter it has a little bit on the type of groups that we’re booking.”