Group Hotel Rates Exceed Transient

STR Data Reveals Shift in Prices in Luxury Tier

JFreitagRoom rates for tran­sient travelers vs. groups in the U.S. luxury and upper-upscale hotel segments shifted in 2008, per data from Smith Travel Research, with average group rates becoming more expensive than transient rates.

At the start of 2008, transient average daily rate (ADR) exceeded group ADR by nearly $80 in the luxury segment and by about $16 at upper-upscale properties, based on the preceding 12 months, according to Jan Freitag, vice president of global development for Hendersonville, Tenn.-based STR.

But since then, transient business has dropped more sharply than group business. At luxury hotels, transient demand began dropping steeply last July and continued to do so as of March 2009. Group demand, meanwhile, increased last spring and held relatively steady until October, when it began to weaken.

In the upper-upscale segment, transient demand was much stronger at the outset of 2008 but was nearly even with groups by year's end.

In both cases, the result was a strong drop in the transient ADR, while group rates held steady in 2008 and only slowly declined in 2009, according to Freitag.

For the first 28 days of March, ADR for groups was $155.82 at luxury and upscale properties, down 2.9 percent from last year. Transient ADR for the same period dropped 17.9 percent, to $149.61.

"Planners have to be proactive with hotels and be aware of their lowest rates," said Freitag. "Hotels should agree to match online rates or perhaps renegotiate."

In addition to monitoring costs at contracted hotels, it's important for planners to document their findings, said Jonathan Howe, a senior partner in the hospitality law firm of Howe & Hutton Ltd. "It's a lot easier to fight fire with facts than by just saying you heard somebody got this rate," he noted.

Group rates often include a number of extras, such as meeting space or coffee breaks, so planners must be realistic. But if a rate negotiated last year is now significantly higher than the current average for business or leisure travelers, planners should renegotiate, Howe said. "Ask the hotel to help market your event and their property by bringing the rate down to a realistic level," he added.

If attrition is a significant factor, planners should insist on getting credit for every attendee, regardless of how their room was booked. "Tell the hotel: ‘You're the one who diluted the block by making these rates available,' " Howe advised.

STR lumps lower-tiered properties into an "all others" category. For the first 28 days of March, the transient ADR was $78.52, while the group ADR was $86.06. These figures represent an 11 percent drop year-over-year in the transient rate, but a 2.2 percent increase in the group rate.