The cost to hotels for groups and meetings has been on the
rise in the U.S. in recent years. According to a report from hotel benchmarking
company Kalibri Labs, the cost, if left unchecked, likely will double by 2022.
Small Meetings & Corporates Grab the Biggest Shares
According to PwC estimates, small meetings with fewer than
100 room nights account for about 75 percent of all meetings in the U.S.
However, this group contributes only 28 percent of the revenue U.S. hotels earn
from meetings. Corporate-hosted meetings account for half of
meetings revenue at U.S. hotels, while associations account for a quarter.
Forty-seven percent of U.S. meetings are business meetings, 36 percent are for
conventions and trade shows, and incentive meetings account for 13 percent.
The report, titled U.S. Groups & Meetings: The Economics
and Complexity of Intermediation, estimates that groups and meetings cost the U.S.
hotel industry $3.4 billion to $4 billion in 2017. Commissions paid to
intermediaries accounted for $1.3 billion of that, based on a 10 percent
commission rate. By 2022, the cost could reach $8 billion or $10 billion,
according to projections from Kalibri Labs, PwC and Oliver Wyman.
Kalibri serendipitously released some early findings from
its research in January, just before Marriott International announced
its intention to cut groups and meetings commissions in the U.S and Canada from
10 percent to 7 percent by March 31. But even with the largest hotel company in
the world pledging to lower the money it pays out to intermediaries, Kalibri
co-founder and CEO Cindy Estis Green said that, at the rate intermediation is
growing, Marriott's move isn't enough to alter future projections.
The Solutions & Tech Problem
The ways in which organizations book groups and meetings
with hotels is largely unchanged from where it was 40 years ago, according to
the report. What has changed is the number of vendors who provide services and
solve for pain points in a stagnant process. Typically, they exist in the first
four stages of the meetings process: discovery, sourcing and booking, planning,
and execution.
Of the approximately 100,000 meeting planners in the U.S.,
according to PwC's estimates, 20 percent are external planners who aren't
directly employed by the organizations they assist. One-third of those external
planners are employed by one of six major firms: HelmsBriscoe,
ConferenceDirect, American Express Meetings & Events, Experient, Maritz
Travel and BCD Meetings & Events.
Tech companies also have emerged to assist with discovery,
sourcing, planning, and execution, including Cvent, Etouches, Groupize,
Groups360 and Cendyn. While certain steps of the process are now being
supported, Estis Green said, the solutions provided by third parties are still
contributing to a broken system. For example, while automation can solve for
the RFP process on the meeting host side, it increases the labor costs for
hotels, which get inundated with high volumes of queries. "The groups and
meetings market is very diverse," Estis Green said. "There are a lot
of tech companies that are interested in aggregating it, the way transient
business has aggregated over the last 15 years, and it's more complicated than
the transient business. There's more to it. The process is more complex."
Approximately 43% of group rooms revenue is being
intermediated. By 2022, Kalibri estimates, that portion will grow to 60 percent.
The Threat of Commoditization
Beyond the dollars and cents impact of increased
intermediation, Estis Green warned, "If hotels become a commodity for the
groups and meeting experience, the quality of the experience will deteriorate."
It becomes less about finding a unique and engaging space and more about
finding "a box."
"For hotels to be sharp and tuned in to what their
customers want, they need to know their customers really well," Estis
Green said, which is harder the more intermediaries step in between the two
sides.
She hopes the report will help the industry
recognize the need to change the meetings ecosystem. "In order to make it
more efficient," she said, "all of the players in the food chain may
have to give a little to make it work better."