As the coronavirus pandemic spurs group cancellations, hotel sales and marketing teams are focused on rebooking what they can into the second half of 2020 and seeking out whatever revenue there is to be had in the meantime.
REPORT FROM THE U.S.—Hotels that have in the past been able to count on groups as a major revenue driver are being forced into revenue-later or something-better-than-nothing sales scenarios as those groups dry up, at least temporarily, due to pandemic fears and social-distancing edicts.
At a time when hotels are closing and employees are being furloughed due to lost business, the motivation for sales teams becomes clear, said Allison Handy, SVP of sales, marketing and revenue optimization at Prism Hotels & Resorts.
“The message I’m hoping to emphasize with my team is that every little bit of money you get coming in—whether it’s a cancellation fee or a few rooms for that government agency that needs a block of rooms, or that corporate team that has to be within arm’s reach of the office—whatever small piece of business you can get is potentially one more employee that gets hours to work to put food on the table for their family,” she said.
“When we think of it in those terms, it’s a new source of motivation to hunt for revenue. We’re being creative. We know that right now companies can’t hold conferences, but they want to live-stream. Maybe they don’t want to live-stream from their bedroom desk with their dog barking in the background. If we can provide a place for them to live-stream a conference or message to their teams, that’s a small source of revenue.”
Some business is also coming from medical staffs, first-responders and county agencies, using hotels in Prism’s portfolio (which comprises 25 branded hotels in the U.S.) as accommodations as they combat the growing COVID-19 coronavirus pandemic, Handy said.
Lovell Casiero, SVP of sales and marketing at PM Hotel Group, said her teams are focused on three areas: rebooking groups that have canceled, seeking out the business that’s still out there and setting strategy for the future.
PM, with 48 mostly branded U.S. hotels in its management portfolio, has “had some good wins … uncovering business still using hotels,” which will help to somewhat tide the company over until there’s a return to normalcy, she said.
RAR Hospitality has also had some success finding business for the 11 branded and six boutique hotels that it manages in the U.S., founder and CEO Robert Rauch said by email.
“We have suspended sales calls to traditional groups and are looking for new markets including office space replacement for guests who work remotely, guests needing a place to self-isolate and project managers who have projects that are continuing despite COVID-19,” he said, noting that most groups on the books through May, and some through June, have canceled or rescheduled.
Groups that can reschedule are being rebooked into June and through the rest of 2020, which brings its own set of challenges, Casiero said.
“(We’re) doing everything we can to recapture these bookings and strategically place them where we have opportunity to fill something that traditionally may be a need date,” she said. “The budgets for June, July and August and the rest of the year are not going away, so now we have to rebook business that shouldn’t have been taking place over this three-month period and still be able to accommodate business that we expected to have coming down the pike.”
Terranea Resort is also anticipating a “very robust” third and fourth quarter of 2020—and even the first half of 2021—as its sales team rebooks groups into any openings it can find, said Agnelo Fernandes, chief strategy officer and EVP at the sprawling 102-acre, 582-room luxury resort on the coast of Los Angeles in southern California.
“We’re really fortunate that most of our group guests are legacy groups who repeat here and run several programs throughout the year,” he said, and those with events that have been affected by the coronavirus response “have been repositioned in different dates.”
The condensed time frame has made rebooking difficult in some cases for Terranea.
“We’ve been enjoying some dramatic success in the group segment, which puts us at a disadvantage when it comes to space,” he said.
Group business typically accounts for about 60% of the hotel’s revenue.
“We don’t want groups pouring into Q1—we’d rather keep the business for the year in the year,” but finding a date that works sometimes means “jockeying into Q1 and sometimes Q2.”
“When we reach a happy medium, (groups) will come back to us,” Fernandes said. “Our lens is for the long haul, and not just for the next year or two or three years. We look out five years and sometimes even beyond that.”
Not every group can be rebooked, however, and then the focus turns to holding those clients to obligations while maintaining relationships, sources said.
Being proactive has helped, Casiero said.
“When we saw our first three cancellations at one of our hotels, we started having calls to talk about how we react to this. I’ve been having calls with my team and portfolio for three going on four weeks now,” she said. “PM (Hotel Group), as a 23-year-old company—and I’ve been in this business for more than 30 years, so this is not my first opportunity to go into a crisis mode—we knew this was something we needed to be out in front of.”
Those first cancellations were for events with attendees coming from China, where the outbreak originated, and then the approach was on a “case-by-case basis, to rebook clients for a later date, and they were very open to that,” she said.
At that stage, the groups that were not open to rebooking were for the most part ready and willing to pay the cancellation fees, Handy said.
“Initially it seemed so much easier. The companies knew they owed us money and were prepared to pay us. They even factored the cost of those cancellations into their decisions,” she said.
As the virus has spread and the situation evolved, “it has become much more challenging for hotels to collect any sort of penalty on groups,” Handy said.
Fernandes said the Terranea team worked with those groups “to make sure that in the confines of what was agreed, certain obligations were met,” but he also acknowledged that “we’ve got to fine-tune this to make sure we’re not doing wrong by our clients but also protecting the asset, and its reputation, for the future.”
Doing both sometimes requires creative solutions.
“At one of our hotels on the West Coast, a group canceled and made it clear that the cancellation fees would put them under,” Handy said. “They simply didn’t have the money to pay it. This was a group coming to attend an event that a company was hosting for colleges and universities.
“The deal we made was they would agree if the event was rescheduled, or if they should return for any event in our area, they would guarantee us first right to their business. They were beyond grateful, and it was a win for us because we do believe the event will be rescheduled. They also agreed to send out the message to all of their constituents that a deal had been made to use this hotel. We see that as a win. We could have put this financial burden on them. Yes, the contract would have allowed that, but the net positive that came out of it is better.”
In other cases, she said, Prism hotels have allowed groups to apply a substantial portion of what they owe in cancellation fees to a future booking, as advance deposits locking in that business. One group agreed to reschedule an annual event at the property within six months, and if that isn’t possible, to guarantee to book that event at the hotel for the next two years, she said.
“We took the approach of ‘let’s collect something to offset the costs we incurred, but let’s continue this relationship.’ Showing that level of commitment sweetened the deal,” Handy said.
Casiero said PM Hotel Group has taken a similar approach.
“A lot of tour and travel (business) we do in D.C., we’re not going to be able to replace that business,” she said. “As schools close maybe until the end of the year, we’re not going to be able to rebook that sporting event or student group coming to see the capital. Those are lost, but we’re trying to apply those deposits to future events, even though it’s a new event and not a rebooked event.”
That flexibility will also be important going forward, she added.
“We need to also evaluate as business starts to come back. People are going to be less confident about finding minimums (such as with food and beverage) in attrition clauses,” she said. “Perhaps we need to get more flexible in contract terms, while meeting planners and social events are finding confidence again in being able to book, (to communicate) that these mandates aren’t going to come back, in order to start doing business again.”
These types of solutions don’t work for every group, Handy said, “and with many others, it was simply ‘this is what you owe and need to pay,’ and they get it.”
She said family reunions and religious groups can be among the most challenging to resolve, noting that many seem to sign the agreements without reading the cancellation language.
One rule Prism stands firm on, she said, is that it will not discount group business that is booking now or rebooking for later.
“This is a short-term impact that is occurring right now; it does not merit us needing to discount that business down the road,” she said.
However, “if you are showing empathy for their situation, they are far more likely to show empathy for ours,” she said.
“Our COO (Mark Van Amerongen) keeps using a quote: ‘In times of adversity, character is not built but revealed.’ How we are working with our customers and how they are working with us is how relationships and partnerships are built.”
Fernandes said one of the bright spots for Terranea during these challenging times has been the relationships that have been strengthened.
“The positive side I’ve seen with our team has been a heightened sense of camaraderie. The storm is here. This is where we’re tested. Everybody is banding together. … Nobody has all the answers, but we’re becoming agile and nimble, and finding that creativity is at a heightened level,” he said.
“We’ve always had great relationships (with our guests), and those have been fortified even further now that everyone is in the same boat. This is not a Terranea problem; it’s a global problem that needs to be addressed and resolved. … It’s too critical for hospitality not to come back in a speedy format, and get to some level of recovery. Everybody is focused on that: How do we get bigger and stronger?”
The hoteliers all expressed confidence that hospitality and travel will rebound and strengthen quickly once health concerns are abated.
“We are actively working on what our business plan looks like when this is over,” Casiero said. “This will not last forever. This, too, shall pass. We’ll be back to doing business, and will have learned something very valuable.”