HotelPlanner.com would like you to pay attention to group travel, one of the last travel sectors to adapt to online distribution.
About one out of every 20 group bookings in the US goes through its system. The Florida-based company says it is processing nearly 3,000 groups and meetings per day.
The company powers the white-label group booking tools of Priceline, Travelocity, Orbitz, Expedia, Hotwire, and Kayak. (For an example, see groups.expedia.com.)
But only a sliver of all group bookings go through those online travel agencies.
And only a small share of group bookings are fully online today.
As context, about a third of hotel room bookings in North America are for group reservations, or about $60 billion-a-year’s worth. HotelPlanner says it is only processing about $3.6 billion-a-year of that volume, suggesting the mammoth amount of offline and semi-offline opportunity.
Look abroad and the opportunity is even bigger. The global market for group bookings is estimated at $192 billion, much of which remains offline.
HotelPlanner says it is about to be the technology partner that powers the direct website of a US-based hotel chain with more than 4,000 properties. This summer it signed a partnership with Super Shuttle, the giant firm owned by Veolia Transport.
Since 2015, the company has expanded its workforce from 90 to 150 workers across its offices in Florida, Las Vegas, London, and Hong Kong. It recently moved in to a new 15,000-square-foot headquarters in West Palm Beach. It has been named one of the 5,000 fastest-growing companies in the US.
In the US, HotelPlanner says that its numbers are set to grow in 2016, in light of its acquisition of Hotel Hotline, which has been doing $12 million a year in hotel bookings.
HotelPlanner’s competitors include Cvent, which heavily targets corporate and convention-sized events, whereas HotelPlanner tends to focus on smaller leisure travel groups. At the even smaller end of the market are the executive assistants planning small gatherings, which is an area being tended to by startups like Groupize and Make It Social.
To catch up on developments, Tnooz spoke with Tim Hentschel, chief executive of HotelPlanner and its subsidiary Meetings.com, by phone from his London office.
Taking the long view, Hentschel says that all of the reduction in friction that has taken place in online bookings of individual leisure and corporate travel bookings is coming now to group travel bookings.
CEO Q&A
Hentschel says:
“We get criticized as an industry that we're not advanced enough, but people don't understand that we're working as fast as we can and as hard as we can. The innovation from group travel platforms is only as good as we can get the hotels to adopt new workflows. Their existing processes, which are often slow, document-based requests-for-proposals”
“We have the data points to show that our online system converts consumers much higher than what a traditional RFP system online does....
“One way of reducing friction is by having computers replace sales managers in generating instant rates for groups, based on data about what a hotel wants to achieve according to several metrics, such as yield. Our revenue management software helps with that.
"We also simplify the million qualifications hotels may be tempted to put around a deal, like you must pick up this much if the attrition is X and the deposit must be Y."
Group travel's long game
Hentschel has travel distribution in his blood. His family owns hotels and the in-bound tour operator American Tours International. His grandparents have also owned hotels and his wife has been a director of sales for several convention-sized hotels.
From that background, he argues that many hotel owners need to wise up to the changing digital channel or see an attrition of market share that dramatically decreases the value of their properties. He says:
"The play in the hotel market, where the money is made, is on the real estate side.
"If I run a hotel correctly because I set rates more effectively than my competitor and show nice profits, I can flip that hotel in a few years and dramatically raise the value of what I bought it for.
"Say I bought it for $100 million dollars. I might get $200 million for it in 5 years’ time, so long as I make sure that I'm a rate leader in that comp set.
"How do you become a rate leader without dominating the group business? You can't. The group business is going to book 6 to 8 months in advance, and sometimes 2 years’ out for the really big events.
"If I, as the hotel owner, have that group on the books and my competition doesn't, I can yield up from there. I'm going to win the rate game.
"If I win the rate game, then I will get the more value out of my real estate investment than the competition. I'm going to get more money for that hotel when I, as the hotel owner, go to sell it, by showing the trends on their revenue numbers has gone up, up, and up.
"That matters more than squeezing out an extra couple of dollars on a group booking negotiation today, which is being penny wise and pound foolish.
"Yes, some hotels fight over margin. But who cares what the margin is if I'm getting twice as much for my hotel room than the property next door?
"You see more of that logic when you have the owner-operator. We have 60,000 hotel members and 60% of them are owner-operators. Especially in the two- and three-star hotel category. They get it.
"They're all about winning that group because they know winning that group brings that rate. They know that moving more revenues through their hotel is going to get them a better interest rate from the bank, so that's going to save them more money on a monthly basis, too.
"But there's a disconnect, unfortunately, from the hotel-ownership side, especially after Sarbanes-Oxley, where many hotel groups have separated the management company from the real estate owner. Franchising also complicates things.
"There are some other exceptions that explain the slowness to innovate. In certain areas that is very high demand, like in Washington, DC, there's only so much downtown hotel inventory, and the convention-sized hotels stay 98% occupied with transient travelers that stay......
"They can put a very, very high rate up there and they aren’t interested in innovating in their RFP process, broadly speaking...
"But even a hotel like that has to find its perfect mix, right? Where they're allocating for overall room inventories, the right amount of group. If you're talking about 400 rooms, you need about a 2,000-room hotel to absorb a group of that size without having any disruption to its overall flow of individual transient travelers..
"Hotels also need to learn to be good to repeat customers. If you have an event and it's a successful event, the hotel shouldn't raise the rate on you next year. Some greedy hotels will do that.
"Oh man, that's where HotelPlanner comes in. We come down on the hotel big time. We say, look, if you're a successful event promoter, or somebody who put on a successful event, you are king in our eyes.
"We encourage the hotel to keep your rate the same for a repeat, successful event.
"We're not getting a membership fee on a monthly or a yearly basis from a hotel. We're not afraid to tell a hotel that we don't appreciate what they're doing, or we don't think that their rate is right, or we don't think that their booking policies are right, and so on and so forth....
"Some Convention and Visitors Bureaus (CVBs) love us, and see our work and say, 'Hey, we want to partner with you. You bring a lot of volume in the group space into many cities.' Then other CVBs will see us as competition. It's split across that line.
"CVBs shouldn't see us as competition because we partner up with event managers. We'll sponsor a lot of events, and as a sponsor we have a big say on where they go.
"CVBs should be embracing the same values that we embrace.
"But there's a certain conflict of interest right? Because they're taking their payments from the hotel, so they're not necessarily going to bite the hand that feeds them. We're paying a referral fee. We know our customer is our client. Without that customer creating that event, there is no money to take a referral fee on.
"If CVBs see us as somebody that's trying to do good for the industry as a whole and raise the industry overall, then yeah, we get along very well. But if they're just, like, ah, I think you're a competition because I have an RFP form on my website, and you have an RFP form, then we have a problem."
"As we promote group travel as being fun and cool for everybody, we ought to be able to work together with a destination that wants to say, we're a fun destination for group travel. I expect the conflict to go away over time as CVBs see the successes of other destinations."
Looking ahead
HotelPlanner aims to grow through partnerships with industry stakeholders. It says it compliments the work of global distribution systems, like its partner Travelport.
For instance, it has functionality that lets it sell packages with sporting event and concert tickets plus hotel rooms. For that, there is the opportunity to offer multiple hotel options by working with distribution partners, especially if it is a really big event like the Super Bowl and consumers are going to need inventory within, say, a 30-mile radius. Only a GDS or OTA can provide the inventory for that.
Besides partnerships, innovating in tech will matter. Hentschel argues that the company that can ultimately win the back-end will have a huge advantage for winning the consumer. He says:
"In the future, customers are going to want to ask devices like Amazon Alexa, ‘Book me a room for my wedding.’ When somebody asks their voice-based, artificial intelligence system to book them something, we need to be there.”
Five years ago he and his co-founder bought out the original angel funders. The employee-owned financial structure offers flexibility to adapt to future tech tends in group travel, Hentschel says.