As the hospitality industry adjusts and shifts, expectations across the board are also shifting. People may be traveling again, but leisure travel only makes up a fraction of a hotel’s profit. Indeed, as that leisure demand normalizes, group business is foundational and remains a key profit driver. With the recovery of group and its strong growth across all segments, we are in a period where group business is the most reliable revenue stream hoteliers have today, through 2024 and likely beyond. It will ensure their revenue base remains steady during fluctuations in rate and business travel.
Meetings are not only back, but strong (at about 92 percent of pre-pandemic levels for Q2 2023), and July meeting and event volume increased by an impressive 22 percent over last year. The foundation for bolstering hotel profitability is building a 2024 commercial strategy that ensures group business growth. The industry’s pace of recovery, especially from a group and event perspective, has intensified more quickly than anticipated. Those in the industry who have become complacent, thinking leisure travel will carry them through, will be in for a shock. If group business isn’t a core focus for hotel leaders now, it should be.
Group Business Leads as Revenue Stabilizer—But Change is Here to Stay
We know that meetings and events provide a stabilizing revenue base, and when supported by increased rates, both actualized group room revenue and event activity increase. Since early 2022, the trend of increased group business has provided a strong basis for optimism, particularly regarding forward-looking occupancy and revenue in 2H2023 through 2024 and beyond.
Hoteliers are building on the foundation of group business booked further in advance while identifying opportunities to capture shorter-term transient demand. Corporate meetings continually outperform other segments, accounting for 62 percent of events held during the second quarter of 2023. Therefore, having a better understanding of the makeup of and growth in group segments and sub-segments will allow for a broader sales base.
Looking outside the usual suspect industries to better understand which sub segments show significant growth over 2019 will provide a broader playing field. For example, sports entertainment saw a 75 percent increase, and urban infrastructure grew 50 percent over 2019.
Events are smaller and longer. 2Q2023 numbers are self-evident. The smallest meetings (<25 people) have grown as a percent of events, up nine percent of volume. Meetings with 200 attendees or less continue to dominate, holding 70 percent of meeting volume. There was slight growth across all segments of 200 plus, partly due to the seasonality of larger spring/early summer events and conferences. Single-day event volume share continues to be down eight percent from 2019, while two- to three-day events are up 19 percent and four- to seven-day events are up 43 percent.
These metrics show us that changing customer buying patterns and hotel sales models impact how events are booked and implemented, and hotels must evolve to compete. Finally, hotel sales teams are smaller and will stay that way for the near future, so technology tools to elevate and sustain performance are becoming critical. By leveraging technology and tapping into the data provided, hoteliers empower sales with actionable insights that allow them to win events and create a firm foundation. The technology that identifies these types of growth metrics is essential in growing group business.
Using Technology to Enhance Your Commercial Strategy
Hotel leaders must operate with a focus on profit contribution and growing asset value. This strategy depends on the tactical combination of revenue management and sales, elevating a commercial strategy framework. To enable this strategy, today’s hoteliers rely on advanced technology, such as revenue management software, to gain the insight needed for success. Savvy revenue managers know that to make the critical shift, they must also include technology that aligns with and boosts group sales strategies.
To ensure a successful commercial strategy, technology partners must have the ability to access data quickly, boosting efficiency while increasing profitability. Partnering with data providers to produce actionable insights will ensure your hotel can gain ground within and, more importantly, beyond your traditional target accounts. Doing so will allow you to answer yes to the following questions about your sales team:
- Do they understand the total account revenue opportunity for group in your market for space, rooms, and F&B revenue? Not to mention potential corporate business from group accounts as well?
- Do they know how to leverage instant booking solutions for the smallest events that allow them to focus on top accounts?
- Are they providing unique catering offerings to groups that differentiate your venue, such as local F&B for team events that provide Instagram-able moments?
- Do they have the know-how or the technology to help them dive into high-growth segments that have not been your traditional targets?
Technology partnerships should help sales teams protect and grow group revenue by delivering actionable insights from a sea of data and, in turn, help them make better decisions today and into the future.
Working Together Through Change
We have had to change our mindset in the past several years. We’ve been challenged in ways we never thought possible. We know that labor challenges will continue, and the pace of change is a blocker for change management. Mix in the evolving guest expectations, and some less experienced leaders may turn tail and run.
The industry we all love, the industry that we care for, continues to be tested by technology. Technology providers must be mindful that their reputations rest on how successful their customers are in embracing and gaining maximum value from what they offer. In fact, in order for these partnerships to work, we, as technologists, must ensure our customers are included in the conversation. Doing so will better equip us with the understanding to design and deliver solutions and insights that support the desired outcome of the business.
That is a tall order, but if we all embrace these responsibilities, we can do better and be better when it comes to “coopetition,” integration, and activation of profitable hotel operations. The age of GroupThink is here. The time is now when hoteliers consider the efficiency and foundational importance of group business in establishing and maintaining the base on which we build.
Jeff Bzdawka is CEO of Knowland.