Written by Lisa Palmeri | Vice President, Global Enterprise Solutions
It’s the thrill of the chase, and ultimately the deal, that leads one to scour the internet for the best possible price on a hotel room. I admit to thoroughly enjoying this challenge which often leads to prolonged research, not unlike that of a scientist researching a new theory or invention. With a myriad of hotel booking sites from which to capture that holy grail of accomplishments – the cheapest room rate – it’s no wonder group rates are often perceived as overpriced. So why are professionally negotiated rates sometimes higher than a room rate any consumer can readily book online?
It boils down to simple math and sophisticated revenue management. Online pricing applies to limited inventory which fluctuates hour by hour based on the volume of internet booking activity. Hotels offer different prices based on the type of room (single, double, suite), the view (ocean, parking lot), weekday versus weekend, and other factors. Hotel revenue managers are constantly monitoring their daily income and inventory. Revenue management software works behind the scenes looking at past history and predictive behavior to determine how many rooms will be offered at a discount either via the hotel website or online booking channels.
Guestrooms are a perishable commodity so hotels don’t want to miss the opportunity to put “heads in beds.” They want their hotel rooms available for sale in as many online outlets as possible and will offer early-bird online specials. Likewise, as the check-in date draws near and if the hotel has excess inventory, they might offer a deal to stimulate demand. Keep in mind, the most favorable online rates are restrictive; usually non-refundable, need to be purchased immediately and paid in full at the time of purchase.
“While it’s quite easy to find a competitive room rate for one or two rooms, the exercise becomes more difficult when searching for ten or more rooms,” said Denise Farrell, Director, Global Procurement. This is because these group blocks often need meeting space, special amenities, concessions (cost waived items and/or discounts on hotel-provided group services). They also require preferential business and legal terms governing the transaction (company specific hotel addendum) which are especially important for risk mitigation and duty of care. “We had a client incentive program near Naples, Florida the week after Hurricane Irma. The property was not damaged, but the area was severely flooded and their offsite activities impacted. Because of our solid relationship with the hotel and protection clauses in the contract, we were able to reschedule for a later date at no additional cost. Plus, our buyer and program manager, will take care of all the details,” said Denise.
In addition to evaluating the requested dates and space, revenue managers also score the potential group booking based on several factors including, but not limited to:
- Ratio of guestrooms to meeting space requested – if rooms are few, but space is heavy, room rates may be increased
- Value of the concessions – every upgrade, waiver and discount has a cost factor
- Revenue generated by other services – group food and beverage functions, meeting room rental, and spending in other hotel outlets
- Percentage of the property’s overall inventory that the group booking constitutes
- Group’s performance history – filling rooms blocked and meeting revenue targets
- Seasonality and pattern of stay – high demand dates and preferred days of the week
- Potential to book another, more lucrative group over the same period
Group rates are the result of a rather complex algorithm based on the overall scope and revenue potential of the meeting. It’s a delicate balance. As procurement professionals, we’re also negotiating for favorable terms relating to attrition (reduction of rooms), cancellation policies, payment terms, cut-off dates for rooming list submission, competitors in house, force majeure, mutual indemnification, as well as other business and legal terms.
Professionally sourced group room blocks provide many benefits that a guest may not realize at first glance, thus an explanation of these is recommended when sending out meeting invitations. Common benefits include an upgraded room if the group block was booked in an upgraded category (internet rates are typically offered for standard room types), better amenities (complimentary WiFi, breakfast, parking, late check-out), more flexible payment terms (or billing to a master account if company paid), and heightened duty of care in the event of an emergency, by being associated with a group in which onsite support resources may be available. In the end, the value of professionally procured group room blocks far outweigh the discounted room rate one or two attendees might be able to book online.
It is difficult to make a direct comparison, but important to consider the ease of use, overall value and total cost, not just the room rate. Our award-winning procurement team has unparalleled experience and is results driven. “We maintain a focus on superior site selection/sourcing to secure the optimal venues and best-in-class contract negotiation to ensure your event budget produces the highest value to meet your expectations. We leverage our depth of experience, rigorous processes, superior technology, industry relationships and buying power to contract the best rates and terms for your program and organization,” said Denise. Interested in learning more about how our team can save you both time and money, contact us directly at email@example.com.