Transient Hotel Rate Drop Undermining Group Rates
The premium between transient and group hotel rates is shrinking or, in certain markets, vanishing completely, according to industry analysts, which could mean steep drops in group rates on the horizon but also could present difficulties to meeting buyers needing to fill room blocks for already scheduled events. Smith Travel Research this month reported that transient demand dropped sharply in the final months of 2008, particularly in the luxury tier, while group demand, though also declining, was a bit more steady. It naturally follows that both group demand and rates are slower to adjust during a downturn because of the long booking windows associated with the events, said Bjorn Hanson, an associate professor at New York University's Tisch Center. The U.S. luxury tier saw about a 13 percent drop in the premium between group and transient rates, from $75 at the beginning of the year to $65 at year-end, according to Smith Travel Research. In the upper upscale tier, that premium dropped 40 percent, from $15 in January 2008 to just $9 in December 2008, the firm reported.