TravelClick predicts 3.5% increase in Group ADR. Will your hotel capitalize on this?
TravelClick’s NAHR predicts that group ADR is poised to go up 3.5% due to strong pace in third quarter of 2105. Further, group occupancy for the next 12 months is predicted to go up by 1.9%. That’s the average, but some hotels will benefit more and some less. Here’s a few questions to ask yourself to see if you are positioning yourself well to benefit the most.
Are you accepting the right business?
As group demand increases in convention markets, hotels will have to weigh every group lead against future group and transient potential. For example, business that negatively impacts the ratio of guest room to meeting space availability for future sales should be scrutinized more since the revenue potential of meeting space reduces when there aren’t enough guest rooms to match and vice versa. Another factor is overall profitability of the group across guest rooms, F&B, room rental and other ancillary revenue. Evaluating each group on these aspects will help identify good and bad business, but it has to be done in an automated way so you don’t impact speed to market.
Is your group pricing dynamic enough to capitalize on new demand?
Many hotels use a strategy known as MAR (Minimum Acceptable Rate) for pricing groups. MAR is generally derived from transient rates with a discount percentage, so the logic is that since we do good revenue management for transient rooms, it will flow into groups as well. However, groups are not the same as transient and a few factors when not considered can result in significant reduction of revenue and profit.
Groups have many requests from hotels like complimentary rooms, upgrades, staff rooms, etc. In addition some groups come from commissionable channels and some are direct. Pricing everyone the same or can result in up to 15% loss of profit.
Every sales manager loves a large group that fills up rooms, but from a revenue perspective smaller groups give revenue managers the opportunity to incrementally increase rates. In order to maximize revenue, hotels must consider loss of the opportunity to incrementally increase rates for larger groups after every so many rooms. The following chart shows the difference between price increase of $5 every 10 rooms and MAR pricing for a 300 room block.
Are you maximizing total revenue or focusing on guest rooms only?
The focus on ADR in TravelClick’s report is representative of the minimal focus that other revenue areas like meeting space and catering receive in most hotels. Hotels that enforce revenue and profit goals for conference space and catering are much better positioned to take full advantage of the improved pace to add to their bottom lines.
In addition, hotels can also adopt revenue management principles and variable pricing for conference space. As an example, if guest rooms are sold out, meeting space revenue goals could be reduced to enable them to be sold to catering only events. Also, as you get closer to the date, hotels could further reduce F&B minimum and rental to bring in any revenue that’s possible as long as it’s above cost. All this can be done manually, but is cumbersome and an automated pricing tool for conference space will sever hotels well.
Is your speed to market good enough?
As markets get more compressed, meeting planners want to make sure they don’t lose good deals by waiting for every quote to come in and tend to finalize the first quote that meets their budget and other criteria. Hotels need to look at every aspect of their group sales cycle to see how speed to market can be optimized without sacrificing due diligence. The factors discussed in sections above should also be implemented so as to not impact speed to market.
How to fill the gaps?
So, you found some aspects that could be improved, so how do you do it? One solution in the market that can dramatically improve your speed to market while considering all the above factors is GroupRevMax. It’s cloud based and can be implemented in a few days to better position your hotel to take advantage of the group occupancy and ADR growth. Visit their website at www.grouprevmax.com to learn more and set up a free demo.
Original article with TravelClick forecast can be found at http://www.hospitalitynet.org/performance/us/147000409/4070765.html
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