Growth in group and meeting demand, paired with minimal new construction of meetings-focused hotels, has left meeting planners in a pinch, and hoteliers holding all the cards.
REPORT FROM THE U.S.—Meeting planners are having a tougher time these days when booking events in hotels, due to the current high levels of overall lodging demand, as well as ongoing growth in the group demand segment. For hoteliers, meanwhile, the challenge is booking those meetings when the hotel actually needs the business, at rates that revenue managers will approve.
It’s a situation that’s only been exacerbated by the minimal recent new supply in the large, full-service, meetings-oriented hotel sector. Planners are now needing to fit increasing amounts of groups in the same number of hotels, which in many cases may already be flooded with higher-rated transient demand. And since it would theoretically take years to build more meetings-focused hotels, the status quo isn’t likely to change soon.
“Over the last five years, with the steady increase in demand for meetings and conventions, and the implementation of revenue management, the No. 1 challenge we face daily is availability of dates and obtaining bids for our client’s future events,” said meeting planner Connie Bergeron, president of Site Selection Solutions.
“While one cannot blame developers for opting for the lower development costs and higher profit margins of limited-service properties, the slowing of opening of full-service with meeting space hotels makes the competition for dates and space harder to work around, and rates are substantially more aggressive.”
The pipeline pinch
A primary factor driving the strong demand at large, meetings-oriented hotels is the minimal new supply the segment has seen in recent years, as the industry continues to predominantly build limited- and select-service hotels.
According to data from STR, parent company of Hotel News Now, the number of openings of full-service hotels with 50,000 square feet of meeting space or more hovered around two each year between 2011 and 2017 (with zero in 2012, three in 2015 and two each for the remaining years).
In a noticeable uptick, six large meetings hotels are projected to open in 2018, and five are slated for 2019, but experts say there’s still room for growth. The lack of suitable product continues to be especially acute in secondary and tertiary markets, which are often the only viable choices at times when the major markets are fully booked.
“It pushes what we do out further to find different destinations,” said Sam Canova, SVP of global meeting services for Meeting Sites Resource. “Instead of searching 12 properties, we have to open it up to 25 or 30 properties, because we can’t find availability. We’d love to see some larger hotels with great meeting space and lots of sleeping rooms.”
The constraints of cost and availability have gotten so difficult to manage that some organizers are searching several markets for a meeting destination, even when booking many months ahead.
“We had a very difficult time finding availability within our budget for September of this year, and we started sourcing that in November or December of last year,” said Heather Dameron, manager of event strategy and recruiting for Journeys. “We probably had to re-source cities three or four times, because we couldn’t find something suitable that was within our budget that we were excited about. I ended up having to go to a third party, because we were having so much trouble. They had trouble, too, so it made me feel a little better.”
While a massive surge in construction of large, meetings-focused hotels is unlikely in the near future, hoteliers do agree the market appears ready for some new product. That need could lead to changes in the way hotels are designed or meetings destinations are defined.
“I don’t think you’re going to see a mad rush away from one style of hotel to the other,” said Eric Gavin, SVP of sales and marketing for Benchmark Hospitality. “But I do think you’ll see more willingness to create the spaces that are necessary for meetings, and maybe not trying to get the extra five or six rooms out of that space.”
For meeting planners, casting a wider geographical net is only part of the solution. Another tactic is to plan and book group travel further in advance, when the rooms are still available. That approach makes it easier on both the planner and the hotel, which can then revenue manage accordingly, sources said.
“I like having groups book a little further out, establishing that base, particularly if it’s for good patterns,” said Jennifer Driscoll, VP of revenue management for McNeill Hotels. “When groups book further out, and the convention hotels get that group base on the books, it compresses the market and also helps with transient.”
Some of the onus also falls on hotels, however, to be more active in promoting the dates and periods in which the additional group business is welcome or needed at a property. This way, hotels can fill holes in demand with group guests, provided meeting planners are willing to be flexible regarding dates.
“Planners and organizers are locked into day of week and date patterns, and there is more activity on peak dates now, but there are typically options where a group can fit,” said Kathy Hood, SVP of sales and revenue management for Davidson Hotels & Resorts. “As an industry, we still don’t do as good a job as we could in promoting those need dates and periods to the masses, with the goal of ultimately shifting patterns when demand does start to peak. Hoteliers should stop saying ‘no’ and offer alternatives, rather than just turning away business.”
An unclear future
Experts say it’s tough to predict just how much more group demand will grow in the next few years, and how many new large meetings hotels will be present in the future construction pipeline, due to the current stage of the lodging cycle. The industry is still enjoying peak demand and profitability levels, but it’s only logical—based on history—to assume that eventually, there will be a period of decline.
“Specific companies that are used to developing these big boxes in larger markets could probably convince themselves that today is a good day to start building, given that there’s so little new competition, and financing is cheap,” said Jan Freitag, SVP with STR. “But keep in mind that the U.S. hotel industry is now in its (103rd) month of RevPAR expansion. It’s been growing for eight years plus, and everyone’s waiting for things to go south. Do you really want to be the one whose hotel is half-done in the recession? That’s why people are probably a little skittish.”
Should the lodging industry head into a downturn, meeting planners are hoping the relationships they’ve built with various hotel companies will bear fruit, as group demand can be a valuable source of business in tough times. However, it is now—with the industry still booming—that the relationship between hotels and meeting planners is truly put to the test.
“There’s a long-term relationship,” Freitag said. “The hotels need to work with the meeting planners, and the meeting planners need to work with the hotels, and know that they’re going to be there for each other, no matter which side has the upper hand. It’s a symbiotic relationship. Both parties are going to be here in the upturn and the downturn.”