Group bookings on the rise

Group business has disappeared for all hotels during the pandemic. So the big question is how soon, and how strongly will conferences, conventions and company group meetings return?  

Many countries still have operational restrictions on group gatherings, with Australia and New Zealand the leaders in allowing the resumption of events. But for the major hotel owners and brands, particularly in the USA, home of the convention, the return to group events is a major issue.  

Ahead of specific governmental guidance, many corporates are now taking the rollout of vaccines against covid-19 as a sign that they can plan for a resumption of group business. 

For the big beasts in the hotel space, nothing matters more than the return of conference business. It’s a niche that feeds meeting and event space rentals, as well as providing a raft of opportunities for room rentals at strong day rates. And in recent analyst calls, major hotel groups reported an increase in bookings for upcoming events.  

In China, which is providing a useful insight in many ways into the return of hotel business, Hyatt CEO Mark Hoplamazian noted on his recent earnings call: “The kind of group business that we saw in China over the course of 2020 was what you would have seen pre-covid: new product launches by car companies, a lot of new line introductions by luxury brands, and these were very, very extensively programmed. So we’re seeing that type of business come back with some significance.”  

In the US, the return of conferencing will dramatically impact the fortunes of major hotel landlords Park and Host. Both groups hold portfolios strong on large hotels in major US cities. While they have seen strong leisure bookings around holiday events, in recent months, it is the return of corporate that will really move the needle.  

At Host, CEO Jim Risoleo commented: “We saw a marked increase in group booking activity for our Marriott managed hotels in January. Our hotels booked approximately 101,000 group room nights for 2021, a 32% increase over January of 2019, with January typically being a slow month for group booking activity.” 

“In addition, our hotels had an impressive lead to booking conversion rate of 22%, compared to approximately 16% interest January 2019. While there are several types of groups being booked, we are pleased to see bookings for incentive meetings, which have returned after a hiatus in 2020. We also saw improved future group booking activity in January, with approximately 73,000 future group room nights booked for beyond 2021, representing a 42% increase to January of 2019.”  

At Park Hotels, CEO Tom Baltimore reported: “We are encouraged by the lead volume and group booking activities seen since November, shortly after news of the vaccines were announced. With leads for 2021 doubling and definite bookings for the year increasing fivefold in January. In addition, looking out to 2022, group pace is largely holding firm at this point with rates up 3% over the 2019 levels.” 

Hyatt’s Hoplamazian was optimistic that the good news in China will spread: “I’m really pleased, if not surprised, to report that we’re seeing some interesting and very positive data in group activity. From the beginning of the fourth quarter through January, we booked USD170m roughly in pure new group business for all future months, and that excluded any rebooking activity. And that represents a 20% acceleration over Q3 in pure new group bookings. We are, for the first time since covid-19 began, seeing association and corporate activity pick up for 2022 and beyond. And we have early signs that we will actually host corporate meetings as early as the second quarter of 2021. Now in addition to these new bookings, we’ve also rebooked approximately USD300m of business, or about 28% of our canceled group revenue, from March of 2020 through December of 2020.”  

Hilton CEO Chris Nassetta revealed: “We saw a meaningful step-up in new group demand in January. The second half of the year versus the second half of ’19 is down by 32%. So again, it’s still off, but by a lot lesser margin. And that’s a result of people saying, I got to get out. I want to get out. I got to have team meetings. Conventions are starting to book again because they’re going to go out of business if they don’t get booking again. With an expectation, obviously, by the time you get the second half of the year, that it’s safe, and they can do it from a health point of view.” 

And at Marriott, Stephanie Linnartz commented: “We’re starting to see a pick up in what I’d call more a normal types of group. So as an example, we’re starting to see some incentive meetings book in the fourth quarter of this year. January was not only a strong booking month which was terrific, actually the best month we’ve had in a couple of years, but the rate was up 11%. So I think that the story on the group front just underscores the point that there will be a return to meetings and group business. May be slower than we would like, but we’re seeing the demand. We’re also seeing in China some quite positive things on the group front. As a matter of fact, the bookings in China, group bookings were up to 20% of our room nights, again, which was encouraging.” 

Host, aside from ensuring its liquidity position, has also ringfenced a fund for potential acquisition targets. Risoleo reported: “In the first weeks of 2021, we have seen a marked increase in the number of attractive hotels coming to market. We now have a solid pipeline of interesting and actionable opportunities to evaluate. In many instances, the hotels we are looking at are owned by private owners who have been contemplating liquidity events for some time.” In contrast, Park is looking to sell a further USD300m or more of noncore hotels during 2021.  

HA Perspective [by Andrew Sangster]: There is general doom and gloom in the events business at the moment. I should know: more than half of Hotel Analyst’s turnover used to be in events. That share has shrunk to a big fat zero during the past year. 

The Meetings Industry Association is not cheering me up with its latest research, out this week. It said that business meetings and events budgets are not expected to return to pre-Covid levels until at least 2023. Despite the published timetable for reopening in the UK, planners are forecasting event budgets to be down 32% by the end of this year and will remain in a 12.5% deficit from 2023. Booking agents are even more gloomy: down 42% this year and 17% by 2023. 

Perhaps it’s wishful thinking on my part, but I believe the MIA outlook is too gloomy. Hotel Analyst is launching an event on Monday 28th June in London, our previously postponed Operational Real Estate Festival. 

As the news brightens, the feedback we are getting has improved. It has gone from “you must be mad” to “interesting, keep me in the loop and I’ll let you know”. 

Confidence begets confidence. As economies reopen, and look set to stay openpeople will again begin to book and seek out opportunities to connect and generate business leads. First back are going to be the social events with a backlog of weddings and similar celebrations, boosted by the strong consumer balance sheets.  

But corporates will not want to wait too long to get out again and ensure they do not miss out on growth opportunities. Lead times are longer for corporate activity but once there is certainty about the Covid situation, a return to previous levels of business looks set to come quicker than in recent recoveries given the opportunities available and the relative strength of corporate balance sheets. 

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