OTA Group Bookings - yes or no?
Should hoteliers allow group bookings via the OTAs?
Revenue Optimization — Viewpoint by Silvia Cantarella
An interesting "dilemma" and an indication of the state of the relationship between hotels and OTAs, when we discuss whether getting a certain form of business is good for both partners.
Traditionally, hotels have blocked rooms for groups - but the group had to commit to a certain utilizaton, blocks had release dates and deposits to confirm the arrangements were required. Hotels also quoted room-rates based on the size of the group, day-pattern and other revenue streams. Brands are allowing small groups to book online - but these groups are clearly identified and also limited in size.
In general, OTAs (or bedbanks, wholesalers) should refrain from "gaming" the system by submitting reservations for 10+ rooms with the same name, dates. While someone could argue that it should not matter to the hotel how business is being booked, the practice circumvents basic revenue management principles. Any hotel will increase rates once occupancy increases - technically, an OTA can book ALL of the remaining rooms at a rate which is based on a lower occupancy level; but also cancel 90% of these rooms at the regular transient cancellation period. Obviously, the hotel would have no time to replace these last minute cancellations and then suffer from unsold inventory (a typical group would be responsible for 80% or more utilization and have a "cut-off" of several weeks before arrival giving the hotel time to sell released rooms).
One option to make it more difficult for these "groups" is to charge a deposit (1 night) for all transient reservations. Most planners will not want to tie up a few thousand USD on their cards until the group arrives. This practice will not help for OTA collect bookings as long as OTA VCCs are only valid from the day of arrival. Many hotels also have clauses in agreements with wholesalers to exclude bookings of more than 10 rooms from the negotiated rates (if hotels realize that they don't, they should implement these asap)
I could see the possibility to allow non-refundable, fully-prepaid reservations of up to 15 or 20 rooms at larger hotels as there is no risk of last minute cancellations and the impact on occupancy is less.
Operationally, these groups can also pose challenges as the organizer will request additional services - most likely only a few days before arrival - which then creates a "fire-drill scenario" rather than an environment where guest needs are discussed in advance and in an organized fashion.
In conclusion, yes, hotels should ask their OTA partners to limit the number of rooms that can be booked in one reservation and OTAs should include a clause on their booking engine and confirmations that different deposit, cancellation rules will apply to reservations of a certain number of rooms.