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by Lisa A. Grimaldi | May 01, 2012
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.

"Blocks, 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.

Following, experts weigh in on the relevancy of room blocks in today's market and how to make them sustainable models for group housing needs.