As hoteliers herald a boom in business, groups find higher rates and fewer dates at upscale properties.

Donald StametsWhile some planners are able to plan far in advance, the last-minute booking is thriving. Donald Stamets, right, director of catering and conference services for Ritz-Carlton Orlando, Grande Lakes, finds meetings booked within a 45-day window are the fastest-growing sector of business at his property.

    “Short-term’s been ramping up for the past three years,” he notes, “but it’s gotten to the point where that market is crazy. We’ve had people call on a Monday about bringing their group in that Thursday.”

    Last-minute arrivals became so common, in fact, that Stamets formed a service committee, called the executive meetings team, devoted exclusively to handling those groups.

    “We had to do something,” he says. “My team would be working on a meeting that had been booked six months out, and all of a sudden I’d throw them a file on 20 corporate people who are paying higher rates and arriving in one week. The focus from the service side was just being stretched, and in order to provide every one of our luxury customers with the service they expect, we had to make a new team.”

Setting up the infrastructure to field latecomers allows Stamets and staff to anticipate short-notice bookings, rather than dread them. Too often, Stamets says, hoteliers are dismissive or even mildly resentful of what’s often called pop-in business. “I make sure my staff understands,” he says, “that this is how business is done nowadays.”

    As the luxury rebound continues to mount, Stamets adds, the onus won’t be on planners to book earlier, but on hotels not to squander their resources.

    “Any planner who’s having difficulty finding business at the last minute is working with a hotel that doesn’t understand how to prepare for last-minute business ahead of time,” Stamets says. “Short-term business is where the industry is heading, and smart hotels will start getting ready for that.”

Just as the miserable economy meant space and bargains galore for meeting planners, today’s thriving luxury market spells disaster for those who have grown accustomed to sliding their meetings in at the last minute at rock-bottom prices.

    Last year, when Mary Jo Blythe and MasterPlan were given five months to arrange a high-end meeting that required hefty amounts of meeting space, the search for a location was fairly easy. “This year, though, with the same challenge, I’d have to go back to the client and say, ‘I’m sorry, but I can’t find you a thing,’” she says.

    While short-term bookings continue to rule the market, their increasing abundance is leaving some planners with little choice but to start planning further out. “Short-term availability definitely is shrinking,” Blythe says. “Even six to nine months out would be pretty tough to pull off at this point.”

    Weekends are especially difficult, according to veteran planner Cindy Nachman-Senders, president of Potomac, Md.-based CNS Consulting Group, who sees hotels saving the few empty rooms they do have for the increasingly healthy leisure market.

    “After 9/11,” she says, “hotels wanted you whenever you wanted to come. Now they ask if you’ll accept a different set of nights, usually in the middle of the week. You have to be much more flexible now, and you have to be willing to accept higher rates.”

    According to PwC’s Bjorn Hanson, even as occupancy growth trails off over the next several years, rate growth should continue to accelerate, with a 5.8 percent rate hike expected for this year alone.

    While much of the price increase is due to the familiar arc of supply and demand, Hanson points out, “Not all of this is just the psychological attitude of the market.” Some of the upward crawl will be the result of hotels using tiered reservation systems.

    The tiered system, which is the standard hotel template for selling rooms, outfits most reservation offices with a wall full of blinking, color-coded lights. When occupancy is low, hotels offer green-light prices, moving on to red-light rates as rooms continue to fill, until occupancy hits 70 percent, at which point rates are at their highest. By next year, when occupancy is expected to hover at 71.5 percent, according to PwC, higher rates are guaranteed.

    Of course, what Hanson calls psychology also will have a hand. The slow, steady re-emergence of the seller’s market has high-end hoteliers, and their pricing advisers, gearing up for a reversal of fortune.

“The greatest cause of our diminished revenue wasn’t occupancy,” says Huckestein, “it was our prices. There were a few years there when consumers saw a time to get a great deal. As occupancy climbs even further, I think those days are coming to an end.”

    Ritz-Carlton’s representative agrees, claiming the chain is “looking at group business differently now that it’s less rate-sensitive.”

    Four Seasons’ Hubler, who boasts of the chain’s rigid consistency in pricing during the leaner years while competitors were making compromises “We do not bend on our pricing integrity,” he says pledges to make changes now. “Moving into 2005,” he warns, “we’re looking at every market with a competitive eye. Where we can make price increases, we will.”

“There were a few years when consumers saw a time
to get a great deal…I think those days are coming to an end.”
Dieter Huckestein, Conrad Hotels

Even among those witnessing the recent groundswell in luxury business, some find such optimism premature. Tom Hubler, Naperville, Ill.-based vice president of sales, North America, for Four Seasons, confirms that 2004 brought on a marked increase in meetings and conventions for the chain, but he is quick to distance himself from declarations of “rebound” or “boom.”

    “I would call it the beginning of a recovery,” he cautions. “When you look at a chart of our business in 2004 compared to the years previous, the line is certainly moving in the right direction.”

    Incentive houses such as St. Louis, Mo.-based Maritz Inc. and Atlanta-based USMotivation have yet to see the sort of turnaround that lives up to the gangbusters-level hype. “Budgets have crept up since 9/11,” says Caryn Bigelow, USMotivation’s manager for travel planning, incentives and meeting services, “but I wouldn’t call it a comeback certainly not to pre-9/11 levels.”

    As Dr. Bjorn Hanson, New York City-based global industry leader of the Hospitality & Leisure Practice for PwC, puts it, “When you look at a 7.2 percent occupancy increase in isolation, that’s a really impressive number. What people are forgetting, though, is how much business declined in the years leading up that.” Occupancy in the luxury market dipped by 12 percent in 2001 over 2000, and inflation-adjusted RevPAR dropped a dramatic 16.6 percent in 2001, 6.5 percent in 2002 and 1.2 percent in 2003, according to PwC.

    “I read so many reports about the explosion of the luxury market, but we haven’t made back one-third of what we’ve lost,” adds Hanson.

    In fact, it’s not clear whether the industry ever will. The same numbers that reveal last year’s spike in luxury occupancy suggest such increases will start diminishing as early as next year. “We call this the unwinding of restrictions on business travel,” Hanson says. “As primary restrictions get lifted, the spike in five-star bookings will become less and less prominent.”

    Statistics aside, anecdotal evidence points to a striking surge in high-end business. “We noticed a big push when the airlines stopped requiring Saturday stayovers for discounted tickets,” says Ellen Adelman, who saw conference business at both Shutters and Casa skyrocket once her clients didn’t need to book Saturday rooms. And with Sundays usually functioning as “the darkest day of the year,” when leisure travelers are leaving before most business travelers and meetings arrive, she was more than willing to offer reduced rates for the new Sunday influx.

    While some investigative methods are more precise than others “You just pay attention to how many of your friends are calling all of a sudden because they can’t get a room,” says Huckestein reports of new activity abound, along with serious implications for the planner wading back into luxury waters.

Originally posted on meetings-conventions.com