In this latest edition of the Bring It On series, Kristi White is joined by special guest Katie Moro, Vice President, Data Partnerships at TravelClick, An Amadeus Company, in a lively discussion about the future of group business. Listen to the full recording here.
A view of general occupancy, keeping your eye on the long term
Taking a look at overall demand sets the stage for a discussion of group business. Based on Amadeus data collected from the PMS or data warehouses of participating hotels, we can get a view of forward looking as well as historic data segmented by booking channels and market segmentation.
For October, occupancy was at 40% while looking forward to Nov/Dec, the collective transient view for Q4 is 24% occupancy today, which will go up as we move further into November and December. Breaking it down on the transient side, we have 19% of on the books occupancy, 28% retail, 24% discount, and 10-15% negotiated business contributing to transient overall.
It is interesting that the discount channel is predominately OTA opaque – second largest segment from growth perspective according to Amadeus. That appears logical for the short term but from a strategic perspective, it is an interesting trend. Hotels need take business from where we can get it right now. But have a long-term strategy on how you will recover that business from OTAs. Be prepared to switch strategy when recovery picks up and shift back demand to brand.com. Letting OTAs spend the big advertising money to fuel demand and pivot to direct when ready.
Managing today’s short booking window
We are seeing unprecedented booking lead time trends.
- 43% of transient reservations for the last 6 months are booked on the day of arrival (that is double the amount 6 months ago)
- 91% of transient reservations are booked within 30 days of travel… basically everything…
Basically, all transient travel is being booked within 30 days right now. So that is the most critical window for managing rate and occupancy. For holidays, most bookings are coming in the week before, but the 0-3 day booking window is the strongest.
So given these short windows, how should hotels manage rate given the industry mantra of holding rate? You need to align your rate strategy with how travelers are booking. Given these short windows, you can’t plan to discount now and pick up enough rate later to make up for current discounts. It will only get worse. If you are going to discount, keep your lower rates inside of the 30-day booking window. And maintain rate beyond 30 days as close to pre-COVID levels as possible.
The worse case is you may have people that booked further out, cancel and rebook at the lower rate as they get closer to their arrival date. As long as they rebook, it is better to hold on to that business.
This strategy will affect your group business as well. Don’t want to get group on the books for 6-12 months later using today’s low rates.
Takeaway: Don’t discount out beyond 30 days.
Traveler sentiment sends mixed messages
In these times, we want to understand traveler sentiment as it informs decision making and help hoteliers optimize rate. When surveyed, travelers say they care more about cleanliness and health than rate today. But data does not match that story. Traveler do care about price and are makings decisions based on it. Transient travelers are booking in very short windows and using opaque sites… where you don’t even know what hotel you are booking much less their duty of care.
It’s a challenge for hotels because travelers’ actions are not matching their sentiments.
Takeaway: Manage rate to match the booking window and be transparent about new duty of care.
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Primary markets will be the last to recover
Small and tertiary markets are driving the strongest occupancy in the U.S. today. Areas that offer bigger spaces for social distancing destinations such as South Dakota and Colorado have done well, especially over the summer.
For groups, secondary and tertiary cities are doing the best. We see small cities like Knoxville have had up to 800% increase in meetings over in the last 60 days. These markets tend to be cheaper and can attract the drive market, so there is no need for attendees to get on plane.
Takeaway: Target your local businesses for small meetings not requiring travel. Partner with sister hotels in other markets to offer a distributed hybrid meeting solution.
Latest Advice for Hoteliers
- Think differently.
This is not your typical situation. Think outside of the box when creating your strategy. Leverage data to help manage rate across channels and shorter booking windows. Plan for the short term. Have a plan for rate for 30 days, knowing that 0-3 days out is biggest booking window.
- Be transparent.
Put all your updated info on website for the times. That means what amenities are available – from restaurants and the spa to the fitness center and pool. Update information for groups in terms of who you are managing social distancing, how you have changed banquet service, new room configurations, safety protocols and more.
- Take a risk.
Test rates in different markets at different booking windows and see what happens. Update your strategy based on the results. This is a daily exercise not something to fix and forget for weeks or a month at a time. This insight will inform your long-term strategy and help you optimize profitability.
- Start selling.
Data shows there is opportunity in 2021. It might not look like the business we are used to, but there is profitable, repeatable group business to capture. Leverage the data you have in systems such as Knowland and Groups360 to go after it.
- Embrace hospitality.
The best thing we can do as hoteliers is communicate and service our guests. Get back to the basics of giving guests what they need…information and high level of care that they expect. That starts with answering the phones in the sales department, so planners can get the information they need in a timely manner, or they will call the hotel next door.
We agree there is significant pent up demand for group business, with the likelihood of strong rebound for small groups in Q2 2021. Remember, the majority of group meetings are 20-50 attendees. The large 1000+-person events are outliers for the industry. As 2021 continues, we see the pace getting better and better. This is all pending the positive direction of vaccine development and therapeutics than give people the confidence for safe travel. Small groups will dominate through 2021 and in 2022 with citywide conventions with longer planning cycles will return.
Final words. Be transparent. Communicate.
There is opportunity for hotels. We agree that Q2 2021 will reveal significant pent up demand for travel. But hoteliers must start working to capture that demand now.
Use your data to make better decisions. Start selling. Answer your phones!
Join us on November 18 for our next episode of Bring It On with Kristi White, “Hotel Digital Marketing: How to Pivot for Recovery”.