Hotel group bookings represent a significant demand segment that remains grossly underserved by the technological advancements and business process improvements that have powered the growth of the internet, digital marketing and online distribution for hoteliers.

The fundamental problem was best described in a recent Kalibri Labs study:

Request for Proposal processes were structured years ago to help standardize contracting processes, but the large (estimated at 25%² of total U.S. hotel occupancy) group travel sector remains largely dependent on manual intervention and non-interactive processes. The resulting inefficiency negatively impacts discovery, acquisition, booking, fulfillment and settlement of group-related guest rooms and related event space contracts.

There is significant benefit for hotel owners, intermediaries and hotel brands to understand the economics of group and event demand when studied from:

• A small to large group perspective: 10 rooms to 100+ rooms as opposed to the reverse;
• The perspective of owners’ return on investment versus hotel brand economics;
• Intermediary capability to create a profitable marketplace; and
• Attendee demand as a consumer behavioral segment, rather than room block or rate plan tracking.

The group travel landscape is highly fragmented, ranging from large citywide conventions, corporate and association meetings, to sports teams, weddings and ad-hoc groups of friends. Despite the large market size, fragmented supply, diffuse demand sources and low technical sophistication, even the largest travel industry players have not yet cracked the code to create an efficient group booking marketplace.

Out of the 760 million room nights Booking Holdings booked in 2018, none was formally associated with groups. Expedia outsources its group bookings to HotelPlanner. Meetings and events behemoth Cvent currently targets only enterprise and mid-size event sectors.

Many startups, existing players and larger groups deploying niche product offerings are encircling the group travel / meetings and events ecosystem, including Bizly, Groupize, EventPro, Groups360 and Duetto. In addition to group booking sites, the list includes such diverse groups as global distribution systems (GDS), hospitality technology providers, business intelligence, revenue management, sales and marketing and meeting space diagramming organizations.

With growth rates plateauing, OTAs, search engines, metasearch sites and social media platforms are under pressure from investors to grow traffic and revenues. The question is when they will recognize the opportunity to improve traffic monetization by serving small group demand through a marketplace model to capture an incremental share of hotel revenue.

Traditionally, one of the key differentiators between hotels and private lodging has been meeting and event space. Following the growth of Airbnb and WeWork in shared lodging and commercial real estate, PeerSpace, LiquidSpace, Pacific Workplaces, DaVinci and eVenues are mimicking the model for meeting and event spaces.

Hotel operators and brands must recognize that the increased risk of intermediation potentially reduces hotel owner returns, while simultaneously enhancing the relevance of tangential technology platforms and affinity groups for their respective user communities.

Group travelers do not self-identify into the traditional market segmentation applied by the industry – each trip simply reflects an attempt to accomplish a specific goal for a collective group of travelers. An individual traveler may be a representative at a company-paid conference, attending a personally funded enrichment program the following week, while squeezing in a wedding over the intervening weekend. The individual’s decision-making processes are distinctly independent across the three events.

One of the key differentiators is who foots the bill for the travel. Guest expectations are based on perceived value – impacted by many factors including brand expectations and personal cost. The perfect hotel for one itinerary often represents an unacceptable option for another.

The hypothetical traveler referenced above might have been mildly disappointed with the quality of room service at a company-paid Ritz-Carlton but delighted by the breakfast buffet at the Hyatt Place near the wedding venue or even the late night bar menu at the independent 4-star property snagged downtown on Hotwire for a personally budget-friendly $97 per night.

Every individual possesses their own, innately personal, set of preferences and prioritization criteria. Even the most advanced collaborative filtering and predictive behavioral modeling technologies may be challenged to identify reliable purchase signals for pending group travel needs.

In many cases, group travel is disguised as transient business on hotel P&L statements, and is often booked through an intermediary, considering the traveler is intentionally seeking an alternative to the group’s host hotel in order to save money from their own pocket. This allocation (in transient) by hotels makes it difficult to accurately measure an already fragmented marketplace.

To better understand group demand dynamics, a more holistic approach is necessary – targeting the improvement of financial returns to hotel owners and experience enhancement for attendees. The other dimensions of the industry, such as conference and event planner requirements, destination attributes, intermediary facilitation, distribution channels and technology platforms should also be considered from a value creation perspective in support of the ultimate goals for suppliers and consumers across the group demand spectrum.

Particularly in light of last year’s 30% commission reduction initiated by Marriott and quickly followed by Hilton, IHG and Hyatt, among others, it is important to understand the players and dynamics of the group travel sector.

Contact Phocuswright to get involved in this upcoming research to better understand the groups and meetings traveler (their motivations, preferences and spend patterns) and how lodging suppliers, intermediaries and travel arrangers can finally turn their business trip into an experience. Learn more about the project's research topics and deliverables here.

¹“U.S. Groups & Meetings: The Economics and Complexity of Intermediation”, by Cindy Estis Green in collaboration with PricewaterhouseCoopers (PwC).
© 2018 Kalibri Labs, LLC. All Rights Reserved.

² “Trends® in the Hotel Industry” CBRE, 2019

³ “U.S. Online Travel Overview” Phocuswright, 2019

⁴ Ibid.

_{© 2019 Phocuswright Inc. All Rights Reserved.}