Several top hotel executives recently reaffirmed signs of strength in group and corporate businessand predicted that negotiated rates for those segments would climb next year. Speaking here last week at New York University International Hospitality Industry Investment conference, the executives pointed to rising corporate occupancies and revenue, and a general desire throughout Corporate America to hold meetings as a means to generate more business during market recovery.
"As CEOs are starting to feel better about their own bottom lines, they are looking for ways to grow their own businesses," said Loews Hotels CEO Jonathan Tisch. "These meetings are going to be very important for them to discuss their own products within their organizations and get their sales force reenergized."
" Demand has come back aggressively," said Marriott International president and COO Arne Sorenson. "We have had a few months of pretty stunning numbers. If you look at the cycles in this industry, the years after recessions have been spectacular."
Hoteliers hope the same will be true in this cycle, and group activity in particular has provided a reason for optimism. "Right now, the phenomenon that we are seeing that's really driving us and compelling us much faster in this recovery than what we would have expected is group," said Hilton Worldwide CEO Christopher Nassetta. "It's not the kind of group that we are used to; it's not necessarily the group that we want longer term: There's a huge surge in small- and medium-size group and very short lead times." Overall, Hilton's group business in the United States during April grew 7 percent year over year, compared with 15 percent reductions in November and December 2009, Nassetta said.
For Hyatt Hotels Corp., group bookings "definitely" increased in March, and those group booking rates "grew for the first time in maybe two years," according to CEO Mark Hoplamazian.
Noting the previous post-recession industry recovery, Host Hotels & Resorts CEO W. Edward Walter said, "While it takes a while for group to get started, group got back to its prior peak much more quickly than transient. We have believed for the last several years that there was greater demand growth in the future for [groups]. We have been positioning our large assets to be able to do more group business."
Fearing 'Fragility'
Despite the optimism, Nassetta warned of the group segment's "fragility" and of "extraneous forces" that could negatively impact performance, including natural and manmade disasters, increased use of remote conferencing technologies that can replace corporate internal meetings and anti-travel rhetoric. On the last point, Choice Hotels International CEO Stephen Joyce said the industry should continue to "change the dialogue about travel" in order to prevent "cheap shots coming out of Washington."
Of course, the ongoing oil spill disaster in the Gulf Mexico was on the CEOs' minds amid reports of organizations scrubbing meeting throughout the region. Since early June, according to Best Western CEO David Kong, hotel owners along the Gulf Coast have "had tremendous cancellations."
Ashford Hospitality Trust CEO Monty Bennett said demand may be pushed to other locations. "When Katrina happened, you saw a huge influx of business into Houston, Austin and Dallas," he explained. "It is going to be interesting to see what happens, where that demand is pushed. I am pretty optimistic that the demand won't go away; it will go to other places."
However, Loews' Tisch warned that "if the oil does make a turn and starts to head up the East Coast and starts to affect the beaches on the East Coast and the state of Florida, that is going to be very problematic."
Looking Ahead
Despite positive trends, "the meetings business base is lower today than it was at the same stage of the cycle almost 10 years ago," said Marriott's Sorenson. "Ultimately, group business will come back."
Said Best Western's Kong, "We book a lot of meetings at different hotels and I know prices have gone up. The hotels are less willing to give on the prices to get customers--they are just not willing to do that anymore, so I think fabulous rates are over. We have to raise [corporate] ratesbecause the rates that we had given out are just not sustainable."