Venue Insights (1st Quarter 2017)

The Latest Hotel News Impacting Your Events

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Key Points

  • Markets such as Miami, Seattle, and Nashville, are seeing major increases in hotel construction and will be hot destinations to find value.
  • Hotels are facing increasing costs, including labor. Keep an eye out for surcharges or reduced service levels.
  • Marriott (post-Starwood merger) now makes up more than 50% of the hotels in several top-tier meeting destinations. Remain vigilant to avoid undue pricing pressure in those markets.

Hotel Construction On The Horizon

New hotels are being built at an increasing rate. We’ve reviewed the data, here’s what to expect:

New Hotel Supply Will Contain Minimal Meeting Space

The majority of new hotel construction is happening within upscale and upper midscale categories, which typically include brands with limited meeting space. Brands like Residence Inn, Hyatt Place, Hampton Inn, Holiday Inn Express, and Comfort Inn dominate the construction landscape. This shows that hotel brands are putting more focus on driving leisure business, not meetings and events.

2017 Pipeline of New Hotels - By Chain Segment - Hotel News

 

2017 New Meeting Supply - Hotel News

What does this mean for you?

The Need to Book Ahead Grows in Highly Desired Destinations

If your group needs a significant amount of meeting and event space in a top-tier city, it’s essential to start your venue search early to find the most options and availability.

Competition Will Rise In Key Markets

Since 2010, only a few new hotels have been built with very large ballrooms and event space. As a result, meeting planners for large meetings (500 or more on their peak night) will continue to face a lot of competition for current large hotels in top destinations, such as Orlando, Chicago and Las Vegas.

Looking for Value? Go Where the Cranes Are

Six major cities, including Nashville, Seattle, Miami and Houston, will see an increase of more than 20% of more hotel space in the next 3 years. With so many new hotel rooms, these destinations will feel the pressure to fill these rooms with new visitors and will be less likely to pass on significant price increases. They will also likely be more flexible when negotiating group rates for 2018 and beyond.

2017 Planned Hotel Growth - Hotel News

 

What to Expect in Hotel Pricing in 2017

Hotels to Boost Prices and/or Cut Costs

Analysts are predicting 1-2% growth in hotel RevPAR (revenue per available room) in 2017. What this means is that revenue increases from selling hotels rooms may not be enough to offset a hotel’s costs increases. When this happens, hotels look for ways to offset their rising costs. One way will be to increase other prices, often resort fees, catering prices, and surcharges. Or, by making service cuts, such as reducing the amount of banquet servers, replenishing beverages a few less times during an event, or decreasing the frequency of public space upkeep.

Discuss these strategies with hotel sales managers and see how/if your meeting could be affected.

Expect More Competition at Limited Service Hotels

With the majority of new hotel supply planned within the select service segment (upscale and upper midscale hotel brands, as reflected in ‘Hotel Construction’ section above), meeting planners will see lower prices from these properties, like Comfort Inn, Holiday Inn Select and Hampton Inn.

Luxury Properties Will Raise Rates

With so little luxury hotel construction – meaning little new competition – in the pipeline in the next few years, current larger premium hotels (brands such as JW Marriott, Four Season, Waldorf Astoria and Grand Hyatt) are likely to flex their market muscle by trying to pass along price increases to the customer.

Marriott + Starwood: The World’s Largest Hotel Company

News of Marriott’s 2016 acquisition of Starwood sent shockwaves throughout the meetings and events industry. Many meeting planners were worried about the difficulty of working with and distinguishing between the combined 30 different hotel brands. While others were apprehensive about Marriott’s perceived monopoly in top-tier meeting markets, lessening a meeting planner’s negotiating power.

The merger is still in its infancy and Marriott continues to work through all the details. Here is what we know so far:

Supply and Infrastructure Won’t Change

This acquisition did not bring a sudden change in the amount of available hotels and venue spaces. So, there is no reason to be concerned about fewer venue choices. Brands such as Sheraton, Marriott, and Westin will continue hosting large-scale conferences, while Ritz-Carlton, Renaissance, JW Marriott and St. Regis will continue to serve boutique events.

Marriott Will Control Majority of Top Meeting Destinations

Marriott now controls more than 50% of hotel inventory in 17 of the top 20 meeting destinations. Even more astonishing, Marriott will control 65-75% of the hotel inventory in seven of those destinations, including Washington, DC, Nashville, and Atlanta.

Negotiations Remain Top Concern

With Marriott’s new stronghold in top-tier meeting destinations, meeting planners are naturally feeling apprehensive that the drop in competition among hotels could drive higher group rates and undermine their ability to negotiate. In an interview with Skift, Brian King, Marriott global brand and sales officer, argued that rates should not be affected since they are derived directly from the specific market of the individual property. “The reality is the hotels are usually owned by individual owners and every hotel is a micro- market unto itself.” While this may be true, meeting planners should remain vigilant on how they can get the most of the Marriott – Starwood merger and avoid possible pitfalls.

Action Steps for the Smart Meeting Planner

Consider Booking Multiple Events All at Once

If you have several events on the calendar over the next few years, you can leverage Marriott’s 30 hotel brands to find the perfect fit for each event. By bundling your business all at one time, you may be a more attractive customer to Marriott and any other brand.

Check for Market Dominance

When choosing a destination for your meeting or event, determine many hotels are under the Marriott brand. You still want to have several properties to compete for your business to strengthen your position at the negotiating table. If too many of the competing properties are under the Marriott umbrella, you may not see as aggressive of bidding as you would if they were all under separate brands.

Prepare for a Few Bumps in the Road

Marriott has made many big promises following the Starwood merger. However, combining brands, loyalty programs, and sales functions of two very different organizations presents a monumental challenge. Marriott promised hundreds of millions of dollars of “synergies” – Wall Street speak for “cost cuts”. Some of these synergies will be felt in the sales organization and some at the properties.

While Marriott still works on tying up loose ends and bringing in hundreds of Starwood properties into the Marriott sales structure, you’ll likely face department reshuffling as sales managers are both eliminated and re-assigned. Anticipate these changes and be sure you have open line of communication in sales and on-property to ensure your needs are satisfied.

Hilton Split

2017 started off with a “new” Hilton.

To boost value to shareholders and to lower the company’s taxes, Hilton Worldwide completed its split in January into three distinct companies:

Hilton

Hilton’s core fee-based franchise and management business that oversees brands like Doubletree, Hilton Garden Inn, Embassy Suites, and Conrad Hotels & Resorts.

Park Hotels & Resorts

Now the country’s second-largest hotel real estate investment trust (REIT) that oversees 67 Hilton properties, with 85% in the upper-upscale market. Properties include Waldorf Astoria Orlando/Hilton Orlando Bonnet Creek and Hilton San Francisco Union Square.

Hilton Grand Vacations

A timeshare company that sells and markets vacation ownership, operates a point-based vacation club and manages resorts in leisure and urban destinations.

What Does This Mean For Meeting Planners?

This monumental split now frees up Hilton to focus even more on driving its core brands, growing the Hilton Honors loyalty programs and gaining more market share.

Here’s what we predict:

An Improved Sales Experience

Hilton recently invested in pushing innovative initiatives targeting group business, including the WowMakers series that celebrates planners and their work, a new streamlined RFP process, and a new focus on the ‘return on experience. ‘ We foresee Hilton paying even more attention to their sales experience for meeting planners and assertively going after the most lucrative groups and events.

Finetuning of Hotel Operations

Now that Hilton will be focused on growing the number of hotels they manage and wooing hotel owners, we anticipate they will work on perfecting their operations and guest service in an effort to position Hilton as the most profitable brand.

Further Expansion of Hilton’s Select Brands

To grow earnings, Hilton will likely place a high priority on building select service brands, like Hampton Inn. These brands are easier and less expensive to build than large meeting properties. This will benefit price-conscious meeting planners, who are seeking venues for small meetings or as an alternative site for a portion of a larger meeting.

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