Because of the sheer variety of hotels and guest houses that are on offer to the public, there’s rarely a one size fits all solution to improving your hospitality business. Whilst many smaller boutique and independent hotels rely mostly on smaller or individual bookings with one or two rooms booked at a time, for those with the capacity, group bookings are a vital way to increase income.
Whilst occupancy rates of hotels will vary by city, size of hotel and demographic, figures suggest that this rate has slowly began to increase over the last four years, and are beginning to creep back towards pre 2007 levels at least in much of continental Europe and North America, at around 64% occupancy rates.
Full Occupancy and Profitability
The debate that remains is the most profitable way of filling your hotel. Full occupancy, having as few empty rooms in your hotel at any one time as possible, is understandably a primary aim of those in the hospitality sector. Along side the understandable prioritisation of occupancy rates as driver of profitability, another school of thought is based around the idea that different rates are charged depending on the source of booking. Whilst group bookings guarantee filled rooms, there is still resistance to a purely ‘occupancy oriented’ strategy from elements of the hotel industry. This is largely because for some hotels, keeping large portions of occupancy free rather than available for group bookings is more profitable. With last minute single and double bookings coming in at premium prices, in some cases there are higher margins to be made selling individually than to large group bookings, which often entail a booking discount for volume.
Some hotels are also deterred from having a group booking oriented strategy because they see group bookings as being synonymous with a more ‘business’ clientele. This typically doesn’t result in margins as high as in the luxury tourist and city break division of the sector. With additional income from higher spend on marked up indulgences adding value to a stay for hoteliers, the more ‘spend savvy’ business visitors for conferences don’t offer as profitable a ratio of cost to hotel per room to overall income per room.
In short, for some hotels who can guarantee the higher value visitors in the right numbers, then the corporate group booking led strategy might not be as profitable, but actually the destinations and stature of hotels for which this is the case is quite few. Those equipped with the right facilities, in terms of conference rooms, meeting rooms and the staff to turn around the high volume check-in and check-out processes which occur in less ‘steady’ and more simultaneous frequency with larger group bookings should consider this shift. Withholding space specifically for group bookings might seem to limit your income available from more lucrative non-group demand, particularly during high seasons, as outlined by Meetings Net in this piece, but the margins from group bookings however, are still there if the strategy is right.
It is also perhaps worth challenging the idea that business clientele from group bookings aren’t as profitable on a room by room basis. Whilst in some instances we can see that holiday makers are more likely to indulge in luxury spend at the hotel (minibar etc) adding profit through supplementary revenue streams, this pattern is also true for some business guests. The logic here being that you are more likely to spend money on indulgences if they are at your company’s expense. Room service for those working through the night can offer good margins and additional revenue, so don’t write off this client base based purely on their behaviour as consumers.
The Competitive Market of Group Bookings
You essentially place yourself in a different pool of competition when you focus on taking group bookings more specifically. If you have the facilities to offer then you can place yourself favourably in relation to the competition and the margin that can be made increases. Such is the size of investment required by those undertaking large bookings that to get the right location with the necessary facilities to ensure the purpose of the booking is a success then they are willing to pay premium prices to make sure of success.
Those hotels with excellent facilities for group bookings, such as the Rendezvous, are in a favourable position in relation to the demand, and can still charge prices to ensure margins comparable to the steadier non-group individual bookings. The advantage being that in such cases you are also ensuring a higher occupancy rate. So if you have the potential for facilities to place you in demand then allowing for reserving blocks of booking for groups can be a very profitable direction.