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The trouble with groups…

Few of us can escape the demands of group business and for most of us, it is a lucrative segment of our business.  Groups block multiple rooms, often over multiple nights and they spend in our bars and restaurants, but are we really managing this segment of our business properly?

The problem is that groups often book far in advance and working out the optimum rate is usually a shot in the dark.  If you have a Revenue Management system this should help with the sums, but at all times hoteliers need to be careful that they aren’t displacing better rated business and actually losing money.  So how do we do that?

  • First of all, look at the dates; the number of nights and the groups budget.
  • Analyse the same period last year.  Did you fill?  How was that business made up?  Are you likely to end up with the same volume of business this year?  What was the average rate last year?  Is it higher or lower than the group wants to pay?
  • Look at not only the specific dates in question last year (and of course don’t forget to look at day patterns rather than date patterns), but look at how days in that month usually trend. So for example, if the group request is Wednesday/Thursday,  how did not only the same Wednesday/Thursday behave last year but also how do Wednesdays and Thursdays normally behave?
  • If you feel the group has potential to displace business on the days they have requested, is there an opportunity to move them to another date, perhaps the following week or even 2 days later?
  • Have your Revenue Manager (or system) forecast demand for the dates in question.
Corp 1 Corp 2 Leisure Wedding Group Total New Group
Wednesday 18 July 2018
Current BOB 0 0 4 30 60 94
Predicted 10 22 28 30 60 150 40
ADR £80.50 £92.75 £72.50 £102.00 £75.50 £81.00
Capacity 180 Rooms
Without Group 150 Rooms
With Group 190 Rooms
Displaced 10 Rooms
  • So what does the above forecast tell you? If you accept the group, you will be displacing 10 rooms on Wednesday 18th July. You will of course need to do the same exercise for Thursday 19th.  If you accept at an ADR of £81.00 you will need to displace 10 rooms, which in this case could come from your Leisure Segment as their ADR is lower.  However this is just a simple example.  You will need to evaluate over multiple days and make sure that you aren’t displacing business from segments that are important not only to your overall strategy but make sure that any decision you make won’t effect guest loyalty as you need your regular guests to come back!
  • If you decide to except the group, you need to ensure that your Revenue Manager adjusts the rate strategy for other segments immediately.  Can you push for higher rates from other segments?  What are their price points?
  • Don’t forget to analyse Group Wash.  This group may not have actually stayed with you before but chances are a similar group has.  Did they take all of their rooms or was their wash closer to arrival? Does that effect your decision?
  • It is also a good idea to know your competition.  Often if the group doesn’t suit your customer profile or if it doesn’t fit your rate strategy, it can be a good idea to let them go to a competitor.  But do you know your competitor?  Do you understand their product offering and their rate strategy?  You may think you do, but do you really?
  • If you walk the group to another competitor, do you get to mop-up all that juicy higher rated business that will come in closer to arrival date? By allowing them to take the cheaper business does that allow you to hold out for higher rated group business or lucrative corporates?  This should of course be part of your evaluation
  • Now what about incremental spend?  We all know that their are certain guests (based purely on their culture) who will eat and drink in your property while others won’t.  Accept a group from Ireland and you know your bar takings will be through the roof (tongue in cheek of course but my advice would be to order more Guinness!). But having an understanding of your Adjusted ADR – so the price paid less the cost of having the room occupied and the cost of bringing that business to your hotel which will give you a true nett, then add in the predicted spend per room.  What does that tell you?  Accept or deny?
  • The trick of course is to get the group to confirm all rooms and contract hard.  The cherry on the cake of all business is to move them to ‘need dates’ like a Sunday or Monday but you can only play hard-ball when you have all the facts… And don’t forget to be flexible if the group does move to need dates.  Do the above exercise again and evaluate the ADR you need to achieve.  If you can drop the price a little for a Sunday / Monday and secure them on these dates rather that your busy Wednesday/Thursday, wouldn’t it pay to be flexible on price?

Groups are fantastic business, there is little doubt about that and if accepted should be viewed as a base to build other more lucrative rates on.  Make sure your events team have a understanding of the impact a group has on your overall business and of course, let Revenue make the final decision on accept or deny.  After all, they have the expertise and a whole heap of spreadsheets to work this out for you!

Best of luck! (and for all things revenue, just ask@rightrevenue.wpengine.com)