Back in April, I blogged about the trend of group room rates rising above transient rates. At that time, Smith Travel Research reported that it saw group room rates as more expensive than transient rooms in five major markets—Orlando, New York City, Chicago, Atlanta, and Phoenix. Now, STR is reporting that, for the first time since it starting reporting on group market data in 2002, the average daily rate (ADR) for groups is higher than the transient rate in all of the top 25 markets.
As hotels struggle to attract leisure travelers, the ADR for transients has dropped 16 percent through June, as compared to the first half of 2008, to $150. Meanwhile, the ADR for groups in the top 25 markets is $154, down four percent from the first half of 2008, according to STR.
Interestingly, this upside-down structure is not new to all the cities studied by Smith Travel. The annual average transient rate in Orlando, for example, has been lower than the average group rate since at least 2005, reported Orlando Sentinel. The reasoning behind its rates is unclear, but Alan Villaverde, general manger of the 891-room Peabody Orlando hotel, told the newspaper that one factor may be the city's heavy dependence on vacation travelers, a "very price-sensitive segment."
Whatever the logic behind the trend, it certainly seems to leave meeting planners at a disadvantage. Many are dealing with group rates that were negotiated years ago, or will face attrition fees if attendees try to book cheaper rooms outside of the group block.
However, David Brudney, president of hospitality marketing consultant David Brudney and Associates, told MeetingsNet that hotels are likely to be flexible with group rates.
"If you looked at this six months from now, the rates would be more closely aligned because of all the renegotiation and threats of cancellation," he said. Additionally, it's easier to negotiate on other items, such as meeting rooms and preferred tee times.
Villaverde agreed that hotels will adapt rates on a case-by-case basis.
"You'll find us offering discounted rates around that group," Villaverde told Orlando Sentinel. "Most convention hotels have that same philosophy."
As hotels struggle to attract leisure travelers, the ADR for transients has dropped 16 percent through June, as compared to the first half of 2008, to $150. Meanwhile, the ADR for groups in the top 25 markets is $154, down four percent from the first half of 2008, according to STR.
Interestingly, this upside-down structure is not new to all the cities studied by Smith Travel. The annual average transient rate in Orlando, for example, has been lower than the average group rate since at least 2005, reported Orlando Sentinel. The reasoning behind its rates is unclear, but Alan Villaverde, general manger of the 891-room Peabody Orlando hotel, told the newspaper that one factor may be the city's heavy dependence on vacation travelers, a "very price-sensitive segment."
Whatever the logic behind the trend, it certainly seems to leave meeting planners at a disadvantage. Many are dealing with group rates that were negotiated years ago, or will face attrition fees if attendees try to book cheaper rooms outside of the group block.
However, David Brudney, president of hospitality marketing consultant David Brudney and Associates, told MeetingsNet that hotels are likely to be flexible with group rates.
"If you looked at this six months from now, the rates would be more closely aligned because of all the renegotiation and threats of cancellation," he said. Additionally, it's easier to negotiate on other items, such as meeting rooms and preferred tee times.
Villaverde agreed that hotels will adapt rates on a case-by-case basis.
"You'll find us offering discounted rates around that group," Villaverde told Orlando Sentinel. "Most convention hotels have that same philosophy."
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