Calculating your worth:
Hyatt sales executives (clockwise from left)
Jack Horne, Fred Shea and Ty Helms
Sure, hotels want your business. But just how badly do they want it? How do they determine what mix of rates, dates, space and other variables will make it most worth their while to host your meeting? The answer is a complex one and growing more so, especially as the market strengthens and hoteliers have the luxury of being choosy.
Another increasing challenge to planners seeking rooms: Properties are becoming ever smarter about protecting their own profitability.
“Hotels have gotten very sophisticated about the concept of revenue management,” says Ty Helms, senior vice president of sales for Chicago-based Hyatt Hotels Corp. “Meeting planners need to understand the information available these days that helps determine the value of meetings business and helps hotel sales directors make better revenue decisions.”
Clearly, an understanding of how those decisions are made can be a powerful negotiating tool for planners. To that end, M&C asked the top executives of several hotel chains to divulge how they measure, evaluate and compare one piece of meetings business against another.
Finding the right mix
Three types of business make up a hotel’s customer base: groups, transient business travelers and leisure guests. While groups are vital to profitability, each hotel has a different benchmark for the amount of such business it needs to maximize its total revenue.
At convention hotels, the target for group business can be as high as 75 percent or more. At smaller downtown city hotels that tend to draw more transient business travel, the goal for groups usually is 25 to 30 percent. In the resort market, where the leisure demand is strong from Friday through Sunday, the weekday group business target might be set at 50 to 75 percent.
The best combination of all three types of business is, naturally, the one with the greatest revenue potential. In deciding what mix makes sense for a particular property on any given day or week of the year, hotels turn a sharp eye...backward.
“A hotel’s historical meetings data allows that property’s revenue manager to inform the director of sales of how many business opportunities might exist for future dates, and the average value of those opportunities,” says Helms. “The more years of data collection, the more accurate our ability to predict future demand.”
Past data is the hotel’s internal tool for determining how much group business it wants to sell over particular dates and at what rate, echoes Fred Shea, Hyatt’s Chicago-based vice president of sales. “A ceiling is put in place based on what we think the transient demand will be,” he notes. “But it is constantly being re-evaluated. As we get closer to the group block ceiling, we begin to re-evaluate whether the rate should go up or down, based on the overall demand we are getting.”
However, Shea cautions, it typically holds that when a hotels nears its group ceiling, it is running out of available meeting space.
With increased demand, a hotel has much less risk of having rooms go empty. This allows the property to take a second look at its mix and adjust its profitability, says Kevin Kowalski, vice president, brand marketing, for Atlanta-based Crowne Plaza Hotels & Resorts. “Now we can concentrate more on getting group business that is better value- rated, and less on SMERF [social, military, educational, religious, fraternal] groups, which generate less ancillary revenue,” Kowalski says.
Meeting planners who know a hotel’s target business mix for the days of their meeting can leverage that information in deciding whether to place the business early and be guaranteed the right meeting space, or wait and see if demand falls off and a better rate can be had. How does one find out a hotel’s target mix? Ask the salesperson.