Authored by: Kristin Huben
Airline overbooking is no surprise to most of us. Leisure travelers with time flexibility may even hope they hear the gate agent call for volunteers to delay their travel in exchange for an incentive. For the airline, overselling seats protects revenue by ensuring that most flights leave full despite inevitable late cancellations and no-shows.
But many travelers are not as accustomed to hearing the hotel desk clerk tell them that the comfortable room they looked forward to at the end of a tiring journey is occupied by someone else, never mind their confirmed reservation. This means the traveler has no choice but to “walk” – in other words, move to a different hotel. And, although placement in a nearby, comparable hotel and an incentive like a free room night is usually offered, the value is often lost on business travelers who aren’t personally paying the bill anyway.
This practice has become more common as hotels are feeling the revenue pressure crunch just as airlines have been for decades. Hotels call this revenue management practice their “wash strategy.” Consumer awareness of it – for the individual traveler but even more importantly for group travel – is the key to avoiding frustration.
For groups, the consumer is the internal meeting manager. The meeting manager’s ultimate goal is a pleasant experience for group members, and the last thing they want is hiccups in travel or on arrival that will drop a dark cloud at the start of the meeting, conference or incentive experience. But, stay tuned. I have solutions to offer.
From wash to walk: some definitions
For those not up on the hotel industry lingo, let me first clarify the definitions.
In the hotel game, a customer with a confirmed reservation may be forced to walk when a hotel is overbooked and there’s no room in the inn when they arrive. The hotel will do its best to book the traveler in a comparable room in a different hotel as nearby as possible. Usually, the first night room fee is waived to compensate for the traveler’s inconvenience.
Walks happen when a hotel manages by a wash strategy. Wash is the term used for the difference between the percentage of occupancy at a particular time and the percentage of rooms that the hotel expects it will actually fill. It’s the hotel’s revenue management strategy, much like the familiar practice of airlines with their overbooking.
A growing trend in the hotel business
The possibility of hotels being oversold is growing, making it increasingly important for the consumer and meeting manager to understand and know how to work within the hotel’s system. Contributing factors are hotel industry consolidations, tighter supply in the group business, and changes in the mix of business travel and group ceilings.
Industry consolidation. According to Hotel News Now, “Consolidation has increased across the hotel industry in the past few years, as conditions get better for mergers and acquisitions, and anxiety grows over the state of the hotel cycle and importance of scale.” The result is limited group options, with hotels more focused on raising revenue than on the guest experience and loyalties. Mergers have created data that allow revenue management to overstep on plans from time to time.
Supply squeeze. Revenue and occupancy records were broken in the U.S. hotel industry in 2017. Room demand rose 2.7 percent, but room supply growth of 1.8 percent fell short of keeping pace with the demand.* The gap widened in 2018 with demand exceeding supply by 1.1%, both metrics continuing on the upswing.**
Business travel and group ceilings. Luxury and upper-upscale hotels have seen a steady increase over the last 10 years in business from transient travelers – those who travel as individuals rather than as part of a group – and the number of room nights consumed by these business travelers is still growing. Demand for rooms by groups, on the other hand, in the same category of hotels has grown at a much slower rate since 2011 – 9 percent demand growth for groups compared to 22 percent demand growth for transients.**
And the practice of washing isn’t likely to go away. Results show that it’s working. In 2017, room revenue increased 4.9 percent followed by 5.6 percent through August 2018.** Big box hotel brands have finely honed wash strategies based on historical data and contracts on their books for meetings and other groups. Especially in the case of large hotels, a hotel’s understanding of its wash trends is absolutely critical to its financial success. But it’s not an exact science or perfectly predictable. Like the old technology adage, “garbage in, garbage out,” a hotel’s misunderstanding of an incoming group’s travel tendencies can derail the estimates.
Effect on meetings and events
Group meeting managers need to be fully aware of the possibility of hotels being oversold. This must be added to the list of the aspects of large meetings that require risk management. The conundrum of facing one or more walks is multiplied when a group is checking in for a meeting or conference, particularly when the sponsoring company or organization wants everyone in the same hotel. We who are professionals in meetings and events management must do our part to educate our meeting manager customers so we can work together to ensure that all group members have an enjoyable travel experience.
Because meetings of 1,000 or more attendees now make up the largest major meeting segment in the industry and are on the rise, meeting managers and planners must work closely with hotel management to ensure that their attendees will be accommodated as planned – without fail.
So what’s a company meeting manager to do?
Experienced meetings industry professionals are aware of industry trends and hotel practices. They know how to mitigate the risk to a flawless customer experience. When company meeting managers work with such professionals, they can be assured that their hotel is not making incorrect assumptions about a particular group’s performance (i.e., typical cancellation percentage and/or late check-ins).
As meeting planners for all sizes of groups, it’s become an important part of our job to eliminate the walk risk before attendees arrive. Solid, open communication is the key. With the hotel, explaining to them the nature and tendencies of a particular group, and with the client, urging them to keep us informed when cancellations happen.
It’s important to understand the group’s wash history in context and to partner with the hotel for a win-win. It’s critical that we, as meeting planners, know and predict where the group may have wash leading into main arrivals, and that we communicate with the hotel about how we expect the group to fall off.
Advice to meeting and event planners:
• Stay current on industry trends in general and, in particular, for the hotel you’re using.
• Work through hotel contracts with a focus on protecting your group.
• Know the group’s wash history – typical cancellation percentages and late arrivals.
• Be prepared to explain it to the hotel – don’t assume they are doing the same math you are.
• Have good communication with the attendees so they’ll alert you of last-minute cancellations.
• Be working with the hotel all along on the hotel’s projected occupancy and pre-identify where there could be an issue.
• Plan a backup for the backup for the backup! Your customer will look to you to have a solve before there is even a problem.
When we work together and share knowledge of hotel and travel industry practices, we can help our group travelers to have an outstanding, motivating, memorable experience!
* STR, Inc.
** Total U.S. Key Statistics – KPIs and percent change, August 2018 12MMA; Copyright © 2018 STR, Inc.