GROUPS AND MEETINGS – THE NEXT FRONTIER IN ONLINE BOOKING
In January 2007 PhoCusWright, Inc. released Groups and Meetings: Market Opportunity Redefined. Authored by Dr. Daniel Connolly, with assistance from Dr. Bill Carroll and Ms. Susan Steinbrink, this report delivers a well-researched, timely, and thought-provoking analysis of the groups and meetings marketplace.
Two core questions that drove this research – how big is the groups and meetings marketplace and at what pace is this business moving online. In addressing these questions the authors have provided an estimate of the magnitude of group-related activity within travel – including within the hotel industry – and a valuable summation of the opportunities (and impediments) to achieving widespread online booking services for meeting organizers.
In conducting their research, the PhoCusWright team attempted what they termed a “360° perspective”. They interviewed meeting organizers, representatives of intermediaries, supplier executives and members of various professional meeting planner organizations. They sought, in looking at the online booking of meetings and groups, to determine and document what is working, what is not, the important trends, and likely developments.
The report begins by presenting metrics to describe the size and growth pattern of the meetings market. Copious statistics are provided, all showing continued growth of a marketplace that is already substantial in size. The total groups and meetings market (which includes air, hotel, car rental and other ground transportation, tour, cruise, meeting rooms, food and beverage and audiovisual equipment rental) generated $158 billion in 2005 and is projected to grow to $175 billion by 2008 according to PhoCusWright.
The authors then examine and estimate the size of sub-segments within this market — a market dominated by a combination of leisure group business and corporate group and meetings business. Addressing lodging activity specifically, the authors report $14.4 billion in expenditures in 2005 and project an increase to $18.1 million in 2008.
One of the far-reaching observations offered is the importance of small size meetings and group travel activity (in comparison to large-scale gatherings) in the leisure sector. The authors report that while 42% of all leisure group business was generated from groups involving 20 or more rooms, 58% of all activity was generated by group bookings for parties of 19 or fewer rooms.
Examining these group activity statistics leads to one of the most interesting proposals put forward in this report: that the travel industry should reconsider its basic definition of a “group”. Typically, the travel industry classifies groups as bookings for 10 (or sometimes 15) rooms (or individuals), depending on the nature of the travel services being supplied).
PhoCusWright disruptively challenges this traditional thinking by suggesting that the marketplace is only appropriately understood and tapped when the definition is recalibrated to define a group as two or more households traveling on an overnight journey. Applying this definition, 35% of leisure group business is provided by groups of nine rooms are under, while 23% is provided by groups occupying 9 to 19 rooms.
Turning to the corporate meetings and group sector, PhocusWright pegs the total value of activity in 2005 at $73.4 billion with growth projected to $75.8 billion in 2008. The report identifies the corporate segment as the largest area of online booking activity in comparison to other groups and meetings sectors, and predicts it will generate nearly $24 billion in online transactions in 2008, which equates to a 60% penetration rate.
PhoCusWright attributes this remarkable extent of online booking penetration to the general adoption of online booking tools within the corporate sector. That said, the authors remind us that they expect the fastest growth in adoption of online opportunities to come in the leisure segment, where they forecast the proportion of online bookings group and meeting reservations to grow from 19% in 2005 to 28% in 2008.
EXAMINING THE “MARKET FORCES”
Equally illuminating as the statistical analysis and market sizing is the identification and examination of what Groups and Meetings: Market Opportunity Redefined calls “market forces”. Dr. Connolly and his colleagues ask why the meetings and groups market has not moved online more quickly and why one might reasonably expect it to do so now. Not unexpectedly, the theme of technology, both in terms of the constraints of current systems and of the promise of emerging systems – surfaces repeatedly. Integration of the entire supply chain, they suggest, must be achieved if activity is to be moved substantially online.
The authors go to some length to document the shortcomings of current systems to centralize inventory – especially that beyond rooms inventory such as meeting space, food and beverage services, etc. – the challenges of applying revenue management principles to the pricing for those services, and the difficulties inherent in making them available in a user friendly manner on websites.
To their credit, they also remind the reader of the non-technical issues, including the myriad of factors involved in evaluating potential group business reservation to determine its importance, revenue potential and profitability. They point out the concerns at both ends of the booking process – on the part of buyers who are worried that automated options will not accommodate their specific and sometimes complex requirements and equally on the part of suppliers, who worry that they will not develop a full and accurate picture of the potential booking. Further, they suggest that suppliers in general do not feel pressured to move into the online world – a lack of motivation, they suggest, that may have unfortunate ramifications in coming years.
While noting the general inertia among suppliers with respect to bringing groups and meetings bookings online, the PhoCusWright team takes time to recognize the initial steps made by some suppliers. In the hotel sector the report highlights initiatives such as Hilton’s e-Events program and Starwood’s Meetings in a Moment, as well as a specialized variation – Marriott’s “Joy – your Dream Wedding” event and planning service and weddings portal.
If suppliers are not going to fill this gap, who will, the report asks. The authors then go on to suggest that a “wake-up call” is sounding for suppliers. That wake-up call is represented by Internet-based intermediaries who appear poised to enter this field.
An array of potential participants are identified by Dr. Connolly and his colleagues. At the front are the online travel agencies who they see as being faced with increased pressure from shareholders to grow and differentiate themselves. The group and meeting sector, they suggest, is a logical extension of existing booking capabilities, particularly in the managed corporate travel area. The experience garnered by Expedia, Travelocity and Orbitz could provide them with highly applicable skills and resources.
“In recent years the industry has seen a number of technology developments to support the shopping and booking process for meetings and groups” the report indicates. It describes the growth of companies like StarCite (recently merged with OnVantage) and Passkey for tasks like destination selection, itinerary planning, housing and group reservations processing. It also identifies new entrants such as Groople and Group Travel Planet, which, they propose, are looking to carve out their niches while sites like to MeetUp and TripHub are attempting to capitalize on Travel 2.0 trends by creating communities to promote and facilitate group travel.
In this report PhoCusWright correctly suggests that “the key challenge and opportunity are for one or more companies to merge and integrate the entire supply chain and various technologies supporting each phase of the in group lifecycle”. The goal they describe: “to provide friction free, end-to-end e-commerce”.
This report pulls no punches in describing how difficult meeting this objective will be. At the same time it makes the rewards awaiting the organizations who achieve this objective abundantly clear. The stakes are high, the opportunities great, and Groups and Meetings: Market Opportunity Redefined brings them into clear focus.