The relationship between
planners and hotels is like a pendulum
perpetually swinging in slow motion between buyers' market and sellers'
market. Today, as the worst of the recent recession fades into history,
the bar is shifting back to the supplier side, with an uptick in room
rates and tighter availability. What's different this time, however, is
that just as market forces are changing, the traditional concept of room
blocks is being challenged in fundamental ways that could affect how
planners do business for years to come.
Defined by the APEX
glossary as the number of sleeping rooms attributable to one event, room
blocks have long been a staple of meetings and conventions. Besides
guaranteeing that attendees will have rooms at a specific rate for the
duration of an event, blocks are considered the gold standard by
convention centers and destination management organizations when they
evaluate whether they want the business, how much meeting space, if any,
they're willing to allot a group on particular dates, and discounts or
perks they might be willing to extend to the organization.
in theory, work well," says Robert Mandelbaum, director of research
information services at Atlanta-based PKF Hospitality Research. "They
secure inventory for the planner, and the hotel knows that X number of
its rooms will be sold."
But in the past decade, traditional room blocks -- and delegate behavior -- have undergone a sea change. According to a recent M&C Research poll,
more than half of planners say the number of attendees booking outside
the block has risen over the past two years. The main reason is price:
Attendees can find cheaper rooms, sometimes in the designated hotel
itself, on the Internet.
The web is just one factor contributing
to the fall in popularity of room blocks. Others include attendees'
company travel policies, which might require that they stay in preferred
properties. Or, in some cases, the cost of rooms in the block exceeds
the attendees' spend thresholds. And, of course, there was the recession
and the subsequent buyers' market it created. Planners, knowing there
were plentiful low-cost rooms available, were reluctant to book blocks
for all potential attendees only to expose their organization to
attrition fees for rooms that weren't filled.
"Since 2009, it
was 'cut blocks, cut blocks,' often by 20 and 30 percent," says Dave
Scypinski, senior vice president for Los Angeles-based third-party
planning firm ConferenceDirect. "There were so many rooms available, our
clients weren't worried."
However, as Scypinski and other
industry experts have noted, the seller's market is returning. With
scant hotel development and occupancy rates at upper-tier properties
expected to stay at 70 percent for the next three years, according to
PKF, some planners are rethinking the block-chopping trend, while others
are questioning the need for blocks altogether.
experts weigh in on the relevancy of room blocks in today's market and
how to make them sustainable models for group housing needs.