Did You Budget For Attrition This Year?

Before the Great Recession, strong growth in occupancy and room rates helped many groups avoid guest-room attrition and other performance charges. With the dramatic decline in leisure and business travel, all of that has changed.

The tide has turned. This year and into 2011, many groups can expect their room pickup to be down 10 percent, 15 percent, or even more. Numerous dynamics are going to affect your room pickup, including:

• Travel cutbacks – Corporations will be sending fewer people (exhibitors and attendees) to shows or cutting travel altogether.
• Shorter trips – Attendees will be weighing whether to save $179 plus tax by missing the last half day.
• Trading down – Last year, they might have stayed at the JW; this year it’ll be the Courtyard. It’s just down the street and has free Wi-Fi.
• Supply vs. demand – Revenue management experts advise holding rates, but the reality is that when a competitor drops its rate, other hotels will soon follow. Reasonable group rates from 2007-2008 will not be competitive with what attendees can get on their own.

Here are five best practices to help limit or steer clear of attrition damages:

1. Adjust early
Whether your contract allows for room-block adjustment or not, the longer you give the hotel to resell your rooms, the more likely they will be successful. Look at what space you can give back to the hotel to help sell the released rooms.

2. Monitor rate
Google your hotel to find out what rates other groups are paying. Also check meta-search engines like Kayak, HotelsCombined or SideStep to keep an eye on rates being offered to the general public. The group rate must be competitive. I don’t care what the contract says, if a hotel is not priced to the current market, it will lose occupancy and tick off good clients. Most associations now have blogs or online communities. When one attendee finds a lower rate, half the members know about it within 24 hours. The group loses trust and loyalty. If this happens, hotels will lose that client.

3. Offer one-stop shopping
Maximize your room pickup by tying together the registration and housing processes. The leading housing technologies can integrate with numerous registration platforms and help you identify who is registered but not yet housed. From there, your registration system could send out conditional confirmations strongly encouraging attendees who are registered but not housed to book the group hotel.

4. Communicate
Oftentimes, attendees and exhibitors don’t realize that they are creating a potential liability by not staying in the group block. Increase awareness and beg for their support. Consider a call campaign, especially to your exhibitors.

5. Push for concessions
In a market like this, strong partners should get preferred treatment. If planners are going to great lengths to promote and drive room pickup, hotels should reward them by:

• Only charging attrition on the lost room profit, regardless of what the contract states.
• Giving the group credit for all reservations, regardless of rate and distribution channel. Miscoded rooms will be 10 percent to 20 percent of the actual occupancy.
• Allowing the group to make up its room pickup shortfall by upgrading F&B or allowing up-selling to attendees. They shouldn’t worry where the revenue falls, as long as it’s there.
• Giving two groups paying attrition over the same dates a proportionate break.

Planners help demonstrate their value by documenting cost savings through negotiations or planning efforts. Savvy planners will also document the expenses that they have negotiated away – cost avoidance.

Hotels are in for some tough times in 2010-2011 and will have less flexibility in negotiating away attrition liabilities with the promise of future business. However, they should look to ease the pain of planners who go above and beyond to entice attendees and exhibitors to book inside the group block. In tough times, partnerships matter.

This post was originally published in Convene. It was reprinted with permission of Convene, the magazine of the Professional Convention Management Association. © 2010 www.pcma.org

What tips would you add about reducing or avoiding attrition?