Group Pricing - Getting the Best Revenue While Keeping Bookings in the Block
By Juston Parker, President & CEO, Parker Hospitality Group, Inc.
To group, or not to group, that is the question. It doesn't take William Shakespeare to pose the quandary facing many hotels of how much group business is good business and when does a group pose a risk to maximizing revenues at a property. To begin to answer this, we must first uncover the principles that hospitality pricing has always been under.
Hotel Revenue Management has been and many times, still is, under the "department" of sales and marketing and the Director of Revenue, most of the time still reports to the Director of Sales. The Director of Sales has a mandate to fill the house and most sales managers focus on group business, so therefore the thought is "if we want a sales team, we want them to sell and they need to sell group". This then leads to the thought of "take group business and then if we get the transient to fill in the holes". These thoughts are fundamentally unsound and cost many properties hundreds of thousands of dollars.
Let's look at the definition of a group. According to Wikipedia, the word "group" has many different possibilities of usage (see http://en.wikipedia.org/wiki/Group). From group identifiers in Unix to group travel to groups of business, Wikipedia shows 44 different identifiers to "group". Group Travel is defined as:
A set of individuals traveling together and involved in similar activities. There are two types of groups:
Individuals usually travel in groups to benefit from lower product group rates. Group rates can be contracted for Hotels, Airlines and other forms of transportation, ticketed events and other miscellaneous items.
With that uncovered, let us look at the very root of the word, under Mathematics, group is defined as a set with a binary operation that satisfies certain axioms. For example, the set of integers with addition is a group. What does this mean? Actually, it means and combination of numbers that satisfies a need. Now, do the hotels use this definition? They would tell you no, but I say most actually do. Many hotels identify a group one of two ways, 1) if they have more than "X" number of rooms (many times 8 or more); 2) if multiple rooms also take banquet space and catering needs.
For a working definition going forward I suggest that we decide on what will make a good definition and I suggest the we furthermore define a group as:
Any number of travelers greater than 1, consisting of multiple rooms on any given night or nights.
I know, many of you are now going, "What is he thinking?" "A family who books two rooms is a group?" "We need to have our group coordinator manage all multiple room bookings?" Before I lose everyone, let's look at some statistics.
Travelers today book more rooms for more space than ever before. Studies show that nearly 50% of all travel (business and leisure combined) is part of a group given the above definition. An 23% of all travelers book multiple rooms for family, friends or associates when traveling. Nearly 1/4 of all travelers are group according to our definition. To determine how to price to these people effectively, we need to know what they value.
Research suggests that "group" travelers as defined above, are looking for ease of booking, value, location, price and amenities, in that order. Understanding this allows us to create a buying environment for them and ease conversion, reduce marketing, gain higher rates and ancillary spend and in turn profitability.
Booking Outside the Block
The dreaded "booking outside the block". First, I want someone to tell me why this is so bad? If I priced my rooms effectively and didn't try and oversell the group, and planned proactively for my strategy, then if they booked in or out, it wouldn't be so bad. Sure, I might have to track down a list, but in the end, they should have paid the rate that I strategically placed out there. If they got a rate lower than the block, shame on me! The school of thought has always been, "price high further out to be safe". This is how hotels get themselves into pricing trouble, especially on the group side. Understand your demand better, use your true forecast, not that one you submit to corporate, and price effectively. This way you can move from reactive pricing to proactive pricing and never worry of a person books outside the block again.
All of these actions need to be considered when pricing group business. Remember, all group business is good business, but not all groups are good business. Define what your groups look like. Price them competitively and don't charge them for everything you want. Place a good fair offer to them and keep it in parity with other channels and they will be more likely to book in the block and above all, let them book where they want. Not all group bookings have to come through the group. Groups are large and small, price effectlivey and you will gain the group businss you are looking for.
Juston Parker is President and CEO of Parker Hospitality Group. He began in reservations, then moved to operations, sales & marketing, food & beverage, and banquet & conference services. Mr. Parker has a passion for creating top revenues and growing innovative revenue strategies. His approach has increased revenues, even in challenging times. As a published author on Revenue Management, Juston has been interviewed and/or quoted on CNN, Yahoo Finance, and Fox News, as well as featured in publications ranging from HSMAI, to Thailand Hospitality, University of Florida, and Event Solutions. Mr. Parker can be contacted at 303-499-2443 or Juston@ParkerHospitality.com Extended Bio...
HotelExecutive.com retains the copyright to the articles published in the Hotel Business Review. Articles cannot be republished without prior written consent by HotelExecutive.com.