Shortened Booking Windows – The New Normal?
By Jenny Lee and Sandra Lien
With “recovery” being the ultimate buzzword in the hospitality sector over the past two years, we are noting one major trend that has yet to revert to its former, pre-recessionary ways: shorter booking windows in the meetings and conventions market. Not only are group booking windows shorter, but so are average stays, and even room blocks are downsizing. Operators can no longer rely on pace reports to predict group business volumes ninety days in advance. Although the booking windows may increase as recovery progresses – especially in the more highly sought after group destinations – the general consensus is that shorter booking windows are here to stay.
What Research Shows
According to a mid-2011 study performed by Zentila and marketing firm Ypartnership, the average booking window for off-site meetings is now only 36 days[1]. Before the so-called “AIG effect,” booking windows for larger conferences and conventions would be anywhere between three to five years. This presents a harsh new reality for meeting planners. Even the definition of “short term” is shrinking. Whereas that label in the past might have implied a range within 90 days, the 150 meeting planners surveyed in Zentila/Ypartnership’s study defined it as a mere 13 days.
For shorter-term meetings, approximately half of planners (53 percent) said they needed just two to three days to find a venue and 33 percent indicated they needed four days.
According to the 2013 American Express Meetings Forecast report:
“Planners are being asked by their companies to ‘do more with less’ and many are finding that their tighter meeting budgets are not approved until their company’s previous quarter results are known. This dynamic is putting increased pressure on already reduced lead times.”
The American Express Meetings report further states that while organizations recognize the value of meetings and events, due to the cost-conscious environment, the meeting approval process may continue to be prolonged. As long as the meeting planners are operating outside of the seven-day airfare rules and the seats are available, they will likely continue to do so.
How Operators Combat Shortening Booking Windows
Some operators are offering clients 10 percent to 20 percent off of meetings packages if they book 90 days or further in advance. Other operators are further adapting by scheduling meetings closer together. For example, it is commonplace to have 800 departures and 800 arrivals on the same day at the Sheraton in Denver.[2] To offset the inconvenience of checking in amidst larger crowds, the hotel will set aside a meeting room offering beverages and snacks while holding luggage for guests that are unable to check in right away.
More discipline is also being shown in restricting arrival and departure patterns, similar to the airline industry. If a smaller group requests utilizing a popular group night (Tuesday and Wednesday), they will have to pay a premium rate or the business will go to a larger group. Hotels also supplement their revenue through increased food and beverage sales by offering upgraded receptions and/or plated meals.
Shortened Booking Windows Could (Moderately) Increase as Recovery Continues
Although most groups are more flexible about their dates with the abilities of advanced technology, booking windows may moderately lengthen as 2012 hotel fundamentals boasted overall improvement. This has already been demonstrated in the larger meeting/convention markets of New York City, Chicago, Las Vegas, and Orlando. However, we note that nation-wide, group demand growth has lagged behind the pace of transient demand, and the March 2013 TravelClick Perspective reports that group commitments for 2013 remain ahead of last year by only 0.9 percent – a figure that was revised downward from 2.2 percent at the beginning of January due to the softening of consumer and business confidence resulting from uncertainties created by the fiscal cliff and sequestration. Nevertheless, group demand is expected to slowly improve through 2014, as in most markets these issues are more hype than actual problem.
With occupancies returning to pre-recessionary levels, hotel managers are targeting more aggressive rate strategies going forward, and are less willing to concede room rates for group business as transient business remains healthy. Meetings and Conventions reports that room rates are expected to reach 2008 (unadjusted) levels as the US achieves above-inflationary rate increases in 2013 and beyond. Increases in room rates should entice planners to book further in advance should discounted rates be offered.
It is interesting to note that, although room rates are increasing, few meeting planners are having trouble finding rooms. Surprisingly, some meeting planners indicate that it is easier to find room availability this year than last year (this can be partly attributed to the national overbuilding of conventions and convention hotels in the US today, creating a glut of available space).
Given that hotel rooms are still available in 2013, the lead time for booking events has not yet changed for most planners, with the length of booking windows almost the same this year as last year. While there is currently no notable change in booking windows, an impact should become more evident as recovery continues.
Potential Impact from Airfares on Booking Windows
Currently, meeting planners have had no substantial reason to book months in advance as airfares do not largely fluctuate until 28 days prior to departure, and prices are at their lowest between 18 to 28 days prior departure.[3] However, the average fare increases approximately 5 percent two weeks before departure, and increases 30 percent the week prior departure, only limiting very last-minute bookings.
With carriers attempting to hike more than 1 million fares across their system, ticket prices are expected to increase approximately 7 percent this year.[4] The possible merger between American Airlines and US Airways would likely lead to further airfare hikes and cuts in capacity. Airfare increases may price lastminute groups out of the market and as a result impact booking windows, especially for those booking less than 18 days prior to departure.
In summary, we predict that although the shorter booking windows may moderately expand as the economy improves, this new trend will be a long-term one as long as airfares do not interfere and price groups out of the market. Only hotel operators that capitalize on shorter booking windows by adapting and developing strategies can realize new business opportunities and come out ahead.
About the Authors:
Sandra Lien is a Vice president of Pinnacle Advisory Group in Newport Beach, California. A graduate of the Cornell University School of Hotel Administration, Ms. Lien has extensive experience in feasibility analysis, due diligence and valuation of hotels, condo hotels, timeshare facilities, and convention hotels.
Jenny Lee is a Vice President of Pinnacle Advisory Group in the West Coast office. Specializing in researching and providing counseling on complex hospitality real estate issues, she holds a Master of Business Administration from University of Chicago’s Booth School of Business and is a graduate of Cornell University’s School of Hotel Administration.
[1] “Sales teams feel pinch of short booking windows,” Hotelnewsnow.com, July 2011
[2] “Hoteliers combat shrinking meetings trend,” Hotelnewsnow.com, February 1, 2013
[3] “How to get the cheapest price on airfare”, FOXBusiness, August 30, 2012
[4] “Fliers can expect higher airfares, fewer airlines, more fees, experts say,” NBCNews.com, December 30, 2012