Groups and meetings growth to outperform overall hotel sector in 2016

Worldwide hotel revenues are tipped to hit a record high of $550 billion in 2016, with meetings becoming an increasingly important part of the picture.

NB This is a viewpoint by Ross Hoskings, president of Meetings.com.

This year's NYU Hotel Investors Conference saw a record attendance. This interest was largely due to investors seeking opportunities to buy into hotels' growing top and bottom lines. Hotel owners enjoyed record high profits of $60 billion in 2015, with even higher gains tipped for 2016.

Within this, the highly profitable worldwide groups and meetings market is forecast to reach revenues in 2016 of more than $192 billion, out of the $550 billion total.

This means that group bookings will account for 35% of the hotel revenues, compared with 31% in 2015.

This growth in groups and meetings, coupled with the Starwood/Marriott deal, means investors are looking to the full-service hotel market as a hedge against growing alternative accommodation brands such as Airbnb and HomeAway.

Alternative accommodations are more of a competitive threat to the limited-service hotel market.

Full-service hotels cater to the groups and meetings industry, an area where the alternative accommodation providers have little reach.

This new focus is in stark contrast to the trend after the mortgage crisis of 2008. Softer demand forced hotels to look at their operating expenses. The exposure on F&B operations at a hotel brings a 75% variable expense margin. Renting a hotel room, however, has less than 20% variable cost.

As a result, investors looked to limited service, room-only operations, reducing their exposure to negative cash flow during soft demand periods.

Fast forward to 2016: demand is reaching record highs. The now-retired Baby Boomers are starting to travel more, at the same time as corporations are spending some of their record profits on groups and meetings for their employees and clients.

These two trends are pushing the majority of the $192 billion groups and meetings spend through the full-service, 4- and 5-star hotel market this year.

In the past, booking small meetings could take as long as booking large complex meetings and carried a high cost of distribution.

The engineers at meetings.com (sister brand to online group hotel booking system, HotelPlanner) have concentrated on making the small meetings market more efficient and therefore more profitable. Tools are available to help hotel owners and operators connect with event planners to seamlessly book small meetings, all at a distribution cost of less than 4% of total revPAR.

Unfortunately, some hotels are still wedded to manual processes and give each lead equal importance, irrespective of what the potential revenue might be. Meanwhile planners are looking to save themselves time by limiting the number of hotels they approach with their RFP.

A better option for hotels is to let technology segment and sort the leads, so that smaller, short-term leads are answered electronically, automatically and immediately, while larger leads are sent to personal sales management directly.

In this way, the hotel with the right tech can respond quickly with rates and availability for the smaller meetings, allowing it to focus human resources on either the larger leads or in converting any take-up on its automated responses.

For the meeting planners, sending RFPs via meetings.com to hotels which are connected decreases their hotel selection time because the technology does the leg-work.

A meeting planner might only approach eight hotels in Chicago for a 100 rooms peak-night meeting because the old manual processes at the hoteliers' end made it daunting for planners to approach and handle many more.

But there could be thirty or more hotels in Chicago that would fit the RFP, some of which might have had a cancellation and are offering a bargain rate. New technology gives planners instantaneous communication with available hotels and all of the responses are delivered back to the planner in a comprehensive, easy to process format.

The net result - communication is enhanced and time is saved.

This automation and optimization engine for both hoteliers and planners sits at the heart of what meetings.com is delivering at both ends of the chain.