NEW YORK — When COVID hit, hotels that remained open, particularly resorts and extended-stay hotels, had a modicum of success mainly from the leisure segment feeding them. Evaporated, however, was the group business that hotels traditionally thrive on. These guests are an ancillary revenue goldmine for hotels: they spend money on food, on beverage, on spa, on golf, on parking—on everything not bolted or serviced within the room.
That attractive cohort all but disappeared during the pandemic. It’s back now and hoteliers, gathered at an “Industry Leaders” panel during the NYU International Hospitality Industry Investment Conference, couldn’t be more elated.
“Group has returned,” said Peter Strebel, chairman of Omni Hotels & Resorts, whose portfolio of more than 50 hotels is basically split between resorts and convention properties. “Our numbers and leads are far better than 2019 and next year’s pace is strong—way above where we were in 2019.”
The group makeup has skewed toward SMEs, or small to midsize enterprises, with groups from 10 to up 100. Strebel said Omni hotels are seeing an increase in short-term meetings, maybe for training or regular meeting purposes. “Spending,” he said, outside rooms is way up, in wedding, catering, golf—people spending more on experiences.”
Strebel said that Washington, D.C., where it has one hotel, the Omni Shoreham, was the last group market to recover and “now is on fire.” Associations, meanwhile, are still slower to come back.
Sloan Dean, CEO of Remington Hospitality, a third-party manager, is seeing the same trends as Omni’s Strebel outlined. Group demand, he said, is exceeding 2019 levels — up 33% year-over-year for Remington’s hotels — and bolstered by banquet and catering, which is up 25%. “Before COVID,” he said, “we were selling mostly just rooms. Now, groups are arranging dinners on site as opposed to going out. So bar and catering is up and that helps profitability.”
Added John Murray, president and CEO of Sonesta International Hotels, “People don’t come to office as much but still need to get together.” He said Sonesta’s urban properties are up, driven by leisure and a gradual recovery of corporate business.
SHIFTING BUSINESS
The return of group business is another drop in the hospitality cauldron that hoteliers stir up to grow revenue and increase profit. Meanwhile, as business returns, the shape of it is having a change.
John Cohlan is CEO of Margaritaville, a brand that knows a thing or two about leisure… and cheeseburgers. He said the pandemic’s impact on the way we live and travel has left an indelible mark. The biggest shift he said: “Friday is a permanent snow day,” comparing every child’s winter wish to how the workforce now treats the end of the work week. “Tuesday through Thursday people are in the office but throwing in the towel on Friday. That’s permanent.”
Having that Friday to Monday cushion has been a boon for hotels, which are seeing higher weekend demand and higher rates.
Jeff Wagoner, president and CEO of Outrigger Hospitality Group, shared the same sentiment as Cohlan, only with a small tweak since a preponderance of his hotels are in Hawaii and other warm-weather locales. “Friday is a beach day,” he said, adding that it’s shaping up for a strong summer season.
He said that travel patterns globally are bit uneven. Japan, a huge feeder for Hawaii, “is still slow to come back,” Wagoner said, only at 40% of prepandemic numbers.
It’s not all serendipity. Some of the pent-up demand in the wake of the pandemic has ebbed and many travelers, especially affluent travelers, have exhausted domestic travel and recalibrated their travel intent. “The higher-end traveler is now going to to Europe and not domestic,” Strebel offered. It’s resulted in rates coming down some from their heady highs.
Remington’s Dean agreed with the Europe assertion. “It’s a good argument,” he said. Leisure demand, he said, has stabilized. “We are not getting double-digit growth and resorts have pulled back a few basis points.” However, as demand in resort and secondary markets has curbed, urban is now up, Dean contended. “They are feeling better, especially as group continues to truck along. That’s a forward indicator.”
At Outrigger, Wagoner said he is starting to see a shift and normalization three years after COVID. At the outset, the first accommodations to sell out were beachfront bungalows and suites. That’s slowed, Wagoner said. “They were pent-up trends. It’s leveling out.”