I started my career working for hotels and learning the ins and outs of their strategies, but I’ve spent the majority of my 19-year career with third-parties, including onPeak. My extensive background in hotel contract negotiations and group pricing piqued my interest in the economics of hotel construction and strategy, which led me to discover some interesting research about the state of our event and meeting space.
Group demand is increasing, but finding meeting space is becoming a bigger challenge for event planners. Even though hotel construction is at near-record levels, meeting space is not being built to meet the increased demand. *Over the past five years, only 11 hotels have been built with 50,000 or more square feet of meeting space.
*Of hotels in the active pipeline (planning, final planning, or in construction), 85% of hotel projects have less than 150 rooms, so meeting space in these hotels is minimal.
Limited Service (aka Select Service) hotels are being built more often than full service hotels. A limited service hotel offers fewer amenities and may or may not have food and beverage service. A full service hotel would typically offer three meals per day, with ancillary outlets such as a bar or coffee stand.
*Sixty three percent of new construction is in select service hotels. Why is this the case?
- Labor costs are a large part of expense for any hotel, and with labor costs increasing, brands that are more efficient with labor are more attractive to operators.
- Profit is higher in limited service than full service hotels; fewer amenities equals less expense.
- Limited service hotels are 80% less costly to build than a large hotel, so banks are more willing to lend to these projects.
In addition to increased competition for space, demand from the Transient/Leisure sector is showing higher growth than Group business, so it’s more attractive to hoteliers. This results in hotels offering smaller room blocks to groups. 
As a meeting planner, here are the four things you need to know to overcome scarce event space :
- Be flexible on the date and pattern. If a hotel can layer your group with other business, they’ll be happy to work with you.
- Have reasonable expectations on rate. Ask hotels to explain why their rate offer makes sense if you think it’s too high.
- Have numbers and revenue from Food and Beverage spend, and other revenue enhancers for hotels included in your RFP. This can also help when discussing rates.
- Being a repeat customer is powerful, so nurture those hotel relationships.
*STR Hotel Data Conference August 2018 by Aoife Roche and Matthew Wilson
