The OTA fervor has died down somewhat, but it appears the hotel industry still lacks focus. One of the more widely covered headlines regarded a single property cutting its room service. Broader implications there? Several years ago, when the industry was still suffering in the throes of recession and hoteliers began scapegoating online travel agencies for all that ailed them, we often joked that these third-party intermediaries received more than 90% of the industry’s attention while accounting for less than 10% of total booked revenue. During panels and presentations, OTAs seemed to dominate the conversation while a number of much larger and dangerous issues continued to churn under the radar. The OTA fervor has died down somewhat since then, but it appears the industry still lacks focus. One of the more widely covered headlines coming out of the recent 35th Annual NYU International Hospitality Industry Investment Conference regarded a single property cutting its room service. Broader implications there? I think so. But news in and of itself? Not really. If only panelists and pundits would have steered the conversation to a far more pressing issue: group business. Let me rephrase: the lack of group business. This is a real problem, folks.
Chris Crenshaw at STR, parent company of HotelNewsNow.com, wrote an excellent analysis for us a while back that’s just as prescient today. Two particularly noteworthy findings: 1) The gap between total share of transient demand and group demand is widening. Before the downturn transient held a 17% premium, but today that gap is closer to 27%. 2) As big-box hotels look to recoup that lost demand, they’re dropping prices, which is having an inadvertent effect on rates across the industry. And the horizon does not look much brighter. For the next 12 months group demand is falling further and further behind transient, according to data from the “May 2013 TravelClick North American Hospitality Review.” Transient bookings through March 2014 are up 5.8% year over year. Group bookings during the same period are up only 1.7%. The trend rings especially true for the coming quarter: Transient occupancy during this July-to-September period is up 7.1%. Group occupancy is “up” a paltry 0.1%, according to TravelClick. Faced with this reality, we’re hearing tell of some traditional group hotels scaling back their group sales-and-marketing efforts and shifting more eggs into the transient basket. The group business simply isn’t there, so they’re focusing on leisure travel instead. The question then becomes: Will group business
ever return? I posed that question to Joseph Bates, VP of research for the Global Business Travel Association, and he provided a somewhat disturbing outlook: “What we’re seeing with respect to trip volume is that over time, since we began tracking business travel spending and volume (in 2000), overall trips have declined during that period. That’s the long-term trend. The overall number of trips will continue to decline. From that standpoint, we may not ever see a return to the peak we saw right before the recession because of this long-term trend,” he said. Quick caveat: The GBTA defines a “trip” as departure to return. Thus, an overnight stay in Chicago counts the same as a weeklong, three-city tour. Bates was quick to point out that while overall trip volume is down, per-trip spending is on the rise. It seems more travelers are trying to pack more into a given departure-to-return period. He views the group recovery as “slow and steady growth.” To his credit, he’s right. It’s not as though group business is decreasing. It’s just not increasing fast enough. The segment continues to be blown away by transient travel, which—as Crenshaw pointed out in his analysis—can have a dampening effect on average daily rate throughout much of the industry. Which is more than I can say about room service at a single hotel.
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