Four Scenarios for the Group Segment in a COVID19 world
How will Covid19 impact the hotels' group segment? Let's explore possible scenarios using a Scenario Planning approach by Woody Wade.
It's hard to underestimate the importance of group business for the hotel industry. Groups contribute revenue to rooms, F&B, and other departments of the hotel. Many properties in the urban markets depend on the group business to survive. Many hotels in leisure destinations rely on the group business to bring revenue on days of the week with low leisure demand. Hotels need a well-balanced and profitable mix of transient and group business.
It's vital to develop possible scenarios for the group segment as COVID19 keeps bringing chaos and uncertainty to the industry. Every hotel can then develop strategies to deal with each scenario and anticipate the future rather than react when it might be too late.
Let's explore four possible scenarios that lie between two critical uncertainties affecting the group segment:
- Gatherings restrictions & social distancing rules vs. no limit to gatherings & no social distancing rules. Depending on how pandemic unfolds governments (states in the U.S.) may continue, suspend, partially suspend various restrictions for gatherings and social distancing rules.
- Budget cuts vs. regular budgets. Businesses across the world are financially affected by the pandemic, which leads to spending cuts. Cost-cutting could affect meetings, events & travel budgets.
1) "Virtual reality": Gatherings restrictions persist, and companies cut events, meetings, and travel budgets. Companies move meetings online. Virtual conferences and happy hours become a reality. Hotels lose most of the group business.
Possible strategies for hoteliers: re-think segmentation mix and pricing strategy; cut costs; find new revenue streams, etc.
2) "New Normal": Companies have money to travel; however, various restrictions and social distancing rules are in place. Planning an event for hotels and companies is more complicated than before. Gatherings limits, social distancing rules, location of the event, size of meeting spaces available influence the planning decisions. Group sizes become smaller, revenue decreases, and some markets become less favorable for groups.
Possible strategies for hoteliers: develop service protocols for the events according to local requirements; train staff on how to sell and cater to the group business in a new environment; re-think pricing strategies for groups, shift focus to small events (weddings, small groups), etc.
3)"Scaling Down": Restrictions are lifted, but companies are cutting costs. Group demand decreases, and competition for group business intensifies. Companies have a wide variety of choices, and prices are very affordable.
Possible strategies for hoteliers: re-analyze and find ways to strengthen the competitive advantages of the hotel in terms of group business; try to win group business by offering a combination of price and value; re-think selling strategies; re-think group segments mix etc.
4)"Back on Track": No restrictions or budget cuts. Travel is back to normal. Hotels benefit from the pre-covid19 level of group demand; however, they need to compensate for revenue losses caused by the pandemic.
Possible strategies for hoteliers: identify ways to grow the group segment; look at the competition; analyze pricing; new marketing initiatives; re-think staffing levels.
To learn about the fantastic scenario planning method, please visit Woody's web site.
You can also purchase "Scenario Planning: A Field Guide to the Future" here.
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