NASHVILLE, Tennessee — As summer in the Northern Hemisphere wanes and peak leisure travel season comes to an end, hoteliers hope a recovery in group demand will pick up the slack.
It's anyone's guess when business travelers and large groups will return to hotels at their historical norms. But hotel revenue managers can examine the booking patterns of today's group business to drive future bookings and rates.
During a data presentation titled "Group Size Matters" at the recent Hotel Data Conference, Emmy Hise, CoStar Group's senior director of hospitality analytics, shared some performance metrics of group-business-oriented hotels with varying meeting space. The data set compared trailing 12-month performance through June 2023 to the same period in 2017, which Hise said is an exact calendar match to 2023 in terms of how holidays fell.
Of note, group occupancy appears to be fairly consistent Tuesday through Sunday for hotels that have 25,000 square feet of meeting space or less. But in hotels with greater than 25,000 square feet of meeting space, Tuesdays and Wednesdays had higher group occupancy than the other days of the week.
Regardless of hotel size, group occupancy on Sundays was down the most, which Hise said isn't surprising. Still, average daily rates for group demand were high, even with lower occupancy in the segment on Sunday nights.
"As hoteliers, a lot of us have learned that dropping rate doesn't necessarily induce demand. We might as well keep rates where they are and we will have lower operating expenses at a lower occupancy," Hise said.
She added that business travel for meetings or events is less likely on Sundays, unless travelers have the advantage of adding a day or two onto a business trip for some leisure purposes, which the industry refers to as "bleisure" travel.
"People covet their personal time now. They do not want to travel on a Sunday for a meeting," Hise said. "They want that personal time, unless they are coming for bleisure [and] they are making a longer stay."
There was a noticeable decrease in transient room rates between Saturday and Sunday at these hotels, and Hise said it's likely that slightly lower room rates could do more to convince leisure travelers to book Sunday nights than they could group business travelers. That might explain why group rates stayed high on Sunday nights, consistent with the other nights of the week.
"But why drop the group rate? Let's just keep it up because we know even if [guests are] kind of sneaking in on that group rate, keep it at closer to where that transient rate is so we're capitalizing on the rate overall," she said.
The data also offers insights into which hotel types are the most recovered. Hotels with less than 10,000 square feet of meeting space have shown nearly a 6% increase in group occupancy compared to 2017, Hise said. Larger hotels are still lagging 2017 levels, but what stood out is the largest group hotels — with more than 80,000 square feet of meeting space — were closer to 2017 group occupancy levels than hotels with between 25,000 and 80,000 square feet of meeting space.
"Why are these 80,000-square-foot mega boxes more recovered than these other hotel types?" Hise said.
Dana Cariss, vice president of revenue strategy and distribution at CoralTree Hospitality, shared some of his company's insights into what could be driving group business to the largest meeting hotels. Since CoralTree Hospitality was founded in 2018, Cariss compared 2023 performance to data from 2019.
Overall, he said, larger group hotels often have bigger sales teams and longer lead times to find group business, regardless of the size of the group.
"My general thought would have been that big hotels generally go after big whales, and most of the smaller groups end up at our midsize to lower-sized hotels or resorts," Cariss said. "But the big hotels are beating the small hotels to business, and they're not doing it with big groups. They're doing it with small groups, and they're churning and burning them."
Impact of Hotel Location
Since the onset of the pandemic, urban hotels have been slower to recover to past performance peaks as hotel guests flocked to resorts and suburban hotels in drive-to leisure destinations. Hise said that urban hotels are still behind with groups, too.
"It's probably no surprise to see that the urban location type is the only segment that is behind 2017 levels," Hise said. "We've alluded to ... citywide [events] not being fully back to what they were. But on the other side, resort and suburban location type group occupancy has exceeded 2017 levels."
Hise said one surprising data trend is resort properties were charging their highest average daily rates for groups on the weekends — Friday and Saturday nights — even though the highest group occupancy nights were Tuesdays and Wednesdays.
"What this tells me is obviously they're going to bump up the group ADR to be more in line with the transient ADR, but also these location types are going to be very selective on the type of group business that they are taking in on weekends because of the revenue they can get from the transient consumer," she said. "This is why group ADR is up because we really have to be thoughtful about how we're going to capture the business and get the most revenue."
Cariss said CoralTree Hospitality's lead times for securing group business have shifted among its urban, suburban and resort hotels compared to 2019 booking patterns. The biggest drop-off has been at urban hotels, where groups were booking 235 days ahead of events four years ago but that window has closed to just 156 days in 2023. Suburban hotels' lead times decreased from 150 days out in 2019 to 125 days out in 2023, while resort lead times increased from 202 days in advance in 2019 to 275 days out in 2023.
"If you're planning anything personally, whether it's a family vacation or you're fortunate enough to be marrying a significant other, you are thinking much further into the future now than we were two years ago and even pre-pandemic," he said. "People are looking further into the future in a drive-to [resort] destination, and we still aren't quite there yet in some of the other major class types."
Suburban or resort hotels could take an even greater share of group business away from the biggest hotels by drumming up business from convention attendees, the speakers said.
Hise and Cariss shared a case study of hotels in Houston and Denver which compared group occupancy rates throughout the year and considered how close the hotels were to each market's convention center. In 2017, hotels within a mile of the convention center had much higher group occupancy rates than the hotels further than a mile out, but by 2023, the hotels further away from the convention center had significantly narrowed the occupancy gap.
"We feel confident in the trend we're seeing that hotels a mile outside of the convention center within the market are performing better," Hise said.
"The soundbite is they are stealing group share from hotels in urban cores, and this is consistent," Cariss added.