Group Business: Three Steps to Success
By Brenda Fields Founder, Fields & Company | July 10, 2011
Group business has historically represented a significant portion of revenues for hotels. Revenues encompass rooms, food and beverage, and all ancillary revenues, and a drop in this segment can have a tremendous impact on a property's profitability. Group business began to plunge in January 2009, when this segment dropped 5.4 million roomnights from the previous year (per STR data). The group average rate for hotels in the United States hit its peak during 2008 at $105.37. Group average rates have dropped since, at an annual average of $103.93 during 2009 and below $100.00 through 2010, according to STR.
"The occupancy in a lot of major cities is improving or had improved. What has not jumped back up yet is the ADR," stated Deborah Sexton, President and CEO
of the Professional Convention Management Association.
As a response to this drop, most group properties significantly reduced rates to attract any group business and undercut their competition to gain back this market. But did that strategy work? All data points to the fact that this strategy did not work to reverse the downward trend or, in any meaningful way, impact business. In many cases, long-term group rates were significantly below market value as business picked up.
Are there other strategies that could cost effectively impact this segment of the business even in a struggling economy? This article will address some tips for your sales staff to penetrate this market regardless of market conditions to ensure that your property(s) is positioned for profitability.
1. Product Knowledge: Know your Product AND your Competitors
Do you know the fable about the three blind men and the elephant? The fable goes like this. Three blind men had never seen an elephant so they each touched the elephant to try to understand what it was. One man held the trunk. The second man held the tail. And the third man felt the side. When they compared notes, they each had a different version of what an elephant was like!
The relevance of this story to hotel sales is that many times, the sales person is "selling" in a vacuum and does not understand the whole picture or entire competitive marketplace. A thorough understanding of the competitors' properties, as well as the sales person's property, creates a position of strength for the sales person in justifying rates or conditions of booking. A luxury property offering amenities such as Frette linens, 24-hour room service, and separate shower stalls and bathtubs, competing with a standard corporate hotel, should negotiate based on the superior product it has rather than on rate alone. But that cannot happen unless the sales person is well versed in all the elements of his/her property as well as with all of its competitors.