A new Kalibri Labs report reveals increased intermediation in the groups and meetings segment of the hotel industry, the associated costs, and future projections. The analysis sheds light on the challenges imposed by a fragmented ecosystem with a focus on costs and the impact on relationships between hotels and their customers.
Groups and meetings business in the United States totaled approximately $300 billion in spending last, with about $140 billion spent in hotels. Of this hotel spend, about $30 billion represents room revenue, with F&B, ground transportation, AV, and other ancillary requirements making up the balance.
The report shows that groups and meetings business is about 15 percent of total U.S. room nights across the full spectrum of hotel segments. Full service hotels at the higher end of the rate range—those over a published rate of $220—have 30 to 35 percent of their room nights generated by groups and meetings business. Small meetings—those under 100 rooms on the peak night—make up almost three-fourths of the meetings in the U.S., however this represents just over one-fourth of the meetings revenue (28 percent). The balance of revenue is split between meetings requiring between 100 and 499 rooms (33 percent) and those over 500 rooms (39 percent).
Rising Customer Acquisition Costs
The report also details the meetings and events process—from when the event is conceived through its execution. The many intermediaries involved at various points adds to the process’ fragmentation and, ultimately, to its costs. Cost of customer acquisition has risen dramatically over the last five years as the proportion of intermediated events has increased, equating to over $4 billion in 2017. Customer acquisition costs are expected to reach close to $8 to 10 billion by 2022. The total costs can reach upwards of 35 percent of room revenue on many pieces of group business when all third-party commissions and other booking costs are considered.
Automation in Groups and Meetings
Automation has entered the sourcing, booking, and execution processes for groups and meetings over the last five years. However, it hasn’t always made the process more efficient for those involved. “With this renewed attention, the next two to three years appear to be an inflection point in the way the groups and meetings process will evolve,” Cindy Estis Green, CEO and co-founder of Kalibri Labs, says. “Operators with hotels of all sizes should pay heed to the costs and processes in place as they are likely to affect all events from the smallest social events to the largest corporate and association meetings. An open and robust dialogue on how to improve the efficiency of this ecosystem would benefit all involved to improve the overall guest experience and reduce costs for all parties.”