Event planners are putting their money on the line when signing a room block contract, and often the gamble is just not worth it. If Stayker catches on, the group booking rate may start to pick up again.
Booking room blocks carries a high risk for event planners, leaving them liable for the cost of the rooms if they are not ultimately filled.
It has gotten so bad that group booking overall is on the decline, and has been for nearly a year. Planners, reluctant to face an ever-growing risk and slashed commision payments, are looking at other options to house attendees, but often the solutions are not adequate, especially for larger events. Stayker, a hotel booking platform launched Thursday, aims to reduce this risk for planners, matching attendees up with available hotels and circumventing much of the back-and-forth required in booking and negotiating rooms.
“I’ve done a lot of hotel contracting in the past and the biggest pain point is attrition and honestly the commission cuts — that’s the big elephant in the room nobody’s talking about,” said Talley Richey, vice president and co-founder at Stayker. Attrition refers to the penalties hotels will often contract planners to pay if a certain percentage of the room block is not filled.
Richey and fellow co-founder Amy Barker have been working in the hospitality business for over 30 years, and have seen many of these problems first-hand. The startup, which is based out of Charlotte, North Carolina, connects planners to a network of hotels with available rooms and gives them a commission cut afterwards, aiming to add an element of security to what is quickly starting to feel like a high-stakes gamble.
Commission payments have dropped for planners over the past year, opening them up to further financial risk. In February, Marriott slashed third-party planner commissions from 10 percent to 7 percent, and Hilton, Hyatt, and Intercontinental Hotel Group soon followed suit, leading some independent planners to question their ability to stay in business.
“The risk is high and it’s very painful for the planner,” said Amy Barker, CEO and co-founder at Stayker. “The hotels are rightfully protecting their inventory. Revenue managers are watching every room block. Not to mention, hotels are advertising book direct with exclusive deals for rewards members, and that makes it very difficult for planners to know exactly what their attendees are going to do. They have to literally put their money on the line.”
Cut-off dates are one of the biggest challenges for event organizers. Planners and hotels will often set cut-off dates in order to minimize losses, releasing some of the available rooms back into sale if they are not filled.
Attendees who try to register after the cut off date, however, may find themselves without event housing. Negotiating rooms for these attendees often means embarking on yet another request-for-proposal process with a hotel, which can take days or weeks. Planners may try to address this problem by booking a courtesy block at another hotel, but hotels are reluctant to do that, since the money is not guaranteed, and it pulls rooms out of circulation.
“The biggest benefit for the planner is the ability to use this post cut-off date,” said Richey.
The new booking platform allows event planners to embed a Stayker link to their website, giving attendees the option to book rooms with available hotels, no matter how close to the date of the event itself. Planners do not have to negotiate rates with hotels, but can simply allow attendees to book online.
“We had so many problems in the past. You come up on the cut-off date, and suddenly everyone wants to register for the hotels. You have no inventory, and then you have a lag of going to the salesperson, and saying, ‘we need more rooms.’ then the salesperson has to go to the revenue manager. It could be a week window where you’re sitting there not selling rooms, so attendees start looking outside the block. We can turn [our platform] on so quickly, so the hotels keep getting reservations. The group planner fills their block. Everybody’s happy.”
The decline in group bookings has already showed up in hotel earnings, from Hilton to Hyatt to IHG, and in Cvent’s group booking report, which surveys the booking activity from thousands of companies on its global supplier network. This decline, which has been steadily projected for over a year, is suggested to continue into 2020.
“Certainly hotel revenues are down in this last quarter, and I think much faster than we expected them to be declining,” Richey said. “And in reality the group block sizes are also decreasing. And we feel like there’s a room for a tool that addresses some of this for groups that may be risk-adverse. And this could be a positive for both the planner and the hotel.”
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Photo credit: Conference attendees mingle in the halls of a hotel convention center. Dion Hinchcliffe / Flickr.com