Chapter 10

Groups

Introduction

So far, we have been considering guests mainly as individuals. However, as we have seen, many of them arrive as part of groups, either on inclusive tours, as conference delegates, or even unexpectedly as collections of passengers forced to stay overnight unexpectedly because of bad weather or technical problems.

In the last chapter we saw that these different market segments differ in terms of how far ahead they book and how much they pay. We have mentioned this kind of business at a number of other places in the text, and you should have some idea of its importance. We have also made various references to the modifications in procedures needed in the case of groups. It is now time to bring these together and look at their implications as a whole.

There is no agreed definition as to what constitutes a ‘group’, but it is clearly not quite the same as a family booking, even a large one. The essential elements are that it should be booked as a unit, pay the same rate, have some common interest or purpose (even if it is only the accidental one of travelling by the same plane or coach), arrive together and depart together. Arrivals and departures need not be ‘en bloc’: in fact conference delegates often arrive separately, and some may stay on afterwards. However, the great bulk of the bed nights involved will be over the same period.

Groups can range from half a dozen persons up to a couple of hundred or even more. This difference of scale is bound to affect the way the hotel deals with them. Since the group is likely to amount to a significant proportion of guests staying on any one night, the hotel will pay particular attention to the booking process. Negotiations over price are likely to be much keener, not least because the group organizer is in a more powerful bargaining position than any individual guest.

The main forms of group business are group inclusive tours (i.e. package holidays) and conferences. However, we have also taken the opportunity to consider the implications of another and rather specialized form of business, namely, that of timeshares.

Negotiating

Tour operators, conference organizers and the like differ from ordinary guests in a number of respects. Because they book large numbers of rooms, and do so much further in advance than most other guests, they are able to negotiate terms in a way that is seldom possible for an individual.

Although the group organizer wants accommodation and the hotel wants to let it, there is a clear conflict of interest between the two sides. The former wants to have as many rooms as possible during the peak period, and to get them at the lowest possible rates, whereas the hotel wants to use group bookings to fill up during slack periods, and to charge the highest possible rates for them.

There is nothing reprehensible about either set of objectives, and since both sides want the rooms filled, the result will usually be a bargaining process ending in a mutually acceptable arrangement. There are two possible situations:

1 If the hotel considers that the rooms would otherwise remain empty, its minimum position will be determined by the marginal cost of taking the group. As you should be aware, the marginal cost of letting a room is low. It includes:

– stationery

– additional heating and lighting

– consumables such as soap and any ‘welcome pack’

– additional laundry costs

– any additional receptionists’, housekeeping, restaurant and bar staff wages. These expense headings are usually described as ‘semi-variable’ ones because they go up in ‘steps’. The point is that while the existing staff can deal with one or two extra guests without help, a group of 100 or so is a very different matter. Even if we include these staff costs, the marginal cost is still very low. This gives the hotel a lot of room to manoeuvre. Unfortunately, experienced tour organizers know this, and can be expected to drive a hard bargain.

2 If the rooms would otherwise be filled by customers who would have paid more, then yield management considerations come into play. In particular, the hotel will have to calculate the effects of ‘displacement’. This strengthens its negotiating position.

Since demand usually varies from season to season, the result may well be a ‘package’ agreement by which the hotel agrees to take a certain number of group bookings at the high season (thus sacrificing some revenue) in return for an undertaking by the group organizer to take up rooms during slack or ‘shoulder’ (i.e. intermediate) periods (Figure 53). Such agreements are sometimes expressed in terms of a formula such as 1:1 or even 1:2, depending on the relative strengths of the negotiating parties. Group organizers know that they will have to work harder to fill whatever off-season blocks they have committed themselves to, so the bargaining is likely to be keen.

Alternatively, the hotel may raise the level of discount offered according to the number of rooms booked over a whole twelve-month period. There are only a limited number of rooms available over the high season, so if the group organizer wants to qualify for the higher rate of discount, he must agree to take extra rooms outside the peak season. The effect of such a quantity discount is thus to encourage the group organizer to sell off-peak packages.

One of the advantages of group business is that it provides the hotel with a degree of security. As long as the group organizer is reliable, the hotel knows that a significant number of bookings are ‘in the bag’ well in advance. Another important consideration is that the administrative costs of handling this type of booking are lower (though this is offset to some extent by the need to spend time on negotiations). These factors help to increase the attractiveness of group bookings.

On the other hand, groups may tend to drive out higher yielding customers. This is an example of ‘Gresham's Law’, which simply means that the bad tends to drive out the good. This particular effect is different from ‘displacement’ because it may happen even if the hotel is not turning away late bookings. Individual rack rate customers are sometimes deterred by the prospect of mixing with package tour holiday-makers or conference delegates, and switch to other hotels. This effect is difficult to measure, but it is undoubtedly real. Because of it, hotels may restrict the overall number of rooms to be allocated to groups at any one time. One of the attractions of the weekend package is that since relatively few high yield guests stay in city centre hotels over the weekends, such hotels are able to keep the two types of business separate to a considerable extent.

Figure 53 Peak and ‘shoulder’ occupancy periods

Assessing the value of group business

The hotel needs to take more than just room revenue into account. Group rates tend to be package or inclusive ones. A group tour will generally have its evening meal in the hotel, while a conference (whose members are supposed to be attending the proceedings all day) will usually have lunch. They may or may not have their evening meal as well, depending on how many alternative eating places there are in the vicinity. There may well be exceptions (delegates’ partners may want to go shopping or sightseeing and not be tied down to regular meals at the hotel), but these are the norms. This high level of predictability makes meal planning easier, but at the expense of a lower average spend.

On the other hand, it is more difficult to predict whether rack rate and business guests will make use of the hotel's food and beverage facilities. They may employ them for entertaining, or they may go out and sample those in the surrounding area. If such guests do use the hotel's facilities, their average spend is likely to be higher.

There can be other kinds of revenue to take into consideration. Conferences make use of the hotel's conference suite, and it is normal to make a charge for this. Conferences usually have tea or coffee served halfway through each session: the hotel adds a charge for this, too. Conference delegates often spend significant amounts in the bar after the formal sessions are over (their food and accommodation is almost always paid for so they have a good deal of ‘pocket money’: besides, they have a common interest and the opportunity to meet colleagues from other institutions). There may also be extras such as laundry and telephone charges.

Experience will indicate how much value to put upon these additional benefits. The main point to note is that simple occupancy or even accommodation yield are not the only factors to be taken into account. Consider the following:

A group of fifty at a package rate of £80 per head (£40 of this accommodation, £40 food) plus 5 per cent extras will displace thirty-five rack rate guests who would have paid £80 per head for their accommodation and another £50 per head on average for food and drink, with 10 per cent for extras. Should you take the group?

Ignoring complications like secondary or tertiary displacement, the gains and losses work out like this:

Gains:
Accommodation 50 @ £40	=	£2,000
Food 50 @ £40	=	£2,000
Subtotal		£4,000
Extras @ 5%	=	£200
Total		£4,200
Losses:
Accommodation 35 @ £80	=	£2,800
Food 35 @ £50	=	£1,750
Subtotal		£4,550
Extras @ 10%	=	£455
Total		£5,005

In this case the answer would be to say ‘no’ to the group, but you should be able to see that the rooms division manager would be likely to give one answer and the restaurant manager another. This underlines the fact that the question needs to be looked at as a whole.

Another important consideration to take into account is the ‘squeeze factor’. The hotel's interest lies in filling beds rather than rooms, because two persons in a twin room will eat two breakfasts and two main meals rather than one, quite apart from incurring more extras. This explains why a lot of holiday packages are offered on a ‘1/2’ basis, which means two persons sharing a twin room. Many of the particularly attractive offers in travel agents’ windows are on this basis, and those individuals who want their own room will find that they have to pay a single supplement, or even a much higher rate altogether.

Conferences pose a particular problem in this respect because while group tours normally include enough couples to produce a reasonable split between twins and singles, delegates usually attend as individuals and would prefer to have single rooms. It is common for conference booking documents to offer a discount to those willing to share a twin or double room, especially if the conference is in the peak season.

Advance booking considerations

A group represents a much larger proportion of a night's bookings than any single reservation, and a failure on the part of the group organizer to honour its contract is much more serious than an individual ‘no show’. Hotels thus take more interest in the commercial reliability of group organizers than individuals, and check them more carefully. Individual guest histories are very much an optional feature of hotel procedures, but it is normal to maintain some such form of ‘agent record card’ as far as group organizers are concerned.

It is difficult for group organizers to predict exactly how many rooms they will need, and the natural tendency is for them to play safe and reserve too many. Experienced hotel sales managers are aware of this and allow for an element of ‘shrinkage’. This is sometimes known as the ‘wash factor’. Shrinkage is difficult for the group organizer to avoid, and tolerating it is part of good client relations. You are, however, entitled to expect that the proportion of rooms cancelled will go down as the final deadline approaches, because the group organizer's customers will have paid their deposits and be reluctant to forfeit these. What may well happen is something like this:

24 months ahead:	120 rooms booked
12 months ahead:	25% (i.e. 30) cancelled (leaving 90 booked)
6 months ahead:	10% of remainder (i.e. 9) cancelled (leaving 81 booked)
3 months ahead:	5% of remainder (i.e. 4) cancelled (leaving 77 booked)

Obviously, hotels cannot allow this cancellation process to go on until the very last moment. As we have seen, the last few weeks are those in which high yield bookings really start to come in, and hotels cannot afford to turn such guests away only to find that the group organizers do not want the rooms after all. Hotels therefore protect themselves by imposing cancellation deadlines. Such deadlines can be graded, as follows:

Up to 90 days (i.e. 3 months)	No charge
60 days (i.e. 2 months)	25% of bill
30 days (i.e. 1 month)	50% of bill

A group organizer who allows these deadlines to go by but then fails to take up the full number of rooms reserved remains liable for the full amount agreed. Cancellation deadlines are normally set at one month before the arrival date, but this period may be extended to two or even three months in the case of very large groups. The point is, of course, that it is more difficult to resell large numbers of rooms at the last minute.

Advance booking procedures

Group bookings are inherently more complicated than individual ones because there are a number of additional factors to consider. These include:

1 The arrangements for payment. The package price is simply transferred to the group organizer's ledger account in the usual way, but it may be necessary to open separate ‘extras’ accounts for individual group members so that they can obtain drinks, laundry and possibly room service on credit. If such credit is not extended, the situation needs to be made clear to both the guests and the other hotel departments in a manner which the former do not find offensive.

2 Any additional administrative arrangements. Groups are often directed to a separate area for check-in purposes, partly to foster a feeling of group cohesion and partly to avoid long queues at reception. They may also have some kind of welcoming party, or a special ‘guest amenity package’. The documentation needs to summarize these details and spell out the division of responsibilities between the hotel and the group organizer.

3 Arrangements in respect of couriers, etc. Groups are normally accompanied by a courier or tour organizer, and often by a driver as well. It is common for such functionaries to be accommodated free or at reduced rates, especially if they handle administrative tasks which would otherwise have to be undertaken by the hotel's own staff. These arrangements need to be spelled out in the documentation.

For all these reasons, group reservation forms are likely to be more complex than individual ones. A typical form is shown in Figure 54.

As you can see, this form places more emphasis on the actual arrival and departure times. It is important to know these so that the hotel can be ready. It also asks for the name of any agent who might be handling the group locally (this is quite a common practice), and for details of any ship, flight or other form of transportation (the hotel might be well advised to ring up the local airport to confirm that the plane is actually on time). Finally, details of all meals and other refreshments agreed are included so that the food and beverage department can be advised.

As we have seen, group bookings are often made much further in advance than individual ones. A ‘time horizon’ of two years or so is not uncommon. The group organizer then sells places on the group tour, which means that the actual bed spaces are booked long before they are actually taken up. This in turn means that there may have to be last minute adjustments to the room allocations (the group organizers may find that they have sold slightly more twins and fewer singles than they expected, for instance).

Hotels are naturally anxious to find out the exact position as far in advance of the date of arrival as possible. They need to know if the group will require more twins, for example, or whether it is going to be able to release some singles for last minute sale to high yield customers. The hotel will therefore press the group organizers for a detailed rooming list several days in advance.

The rooming list should give the names of the group members, the type of room to be allocated and other relevant information, such as details of those who want or are willing to share and those who want adjacent rooms. It is also helpful if it includes nationalities and passport numbers, because this allows the hotel to preprepare registration forms.

Unfortunately, the group organizers may suffer from late cancellations, or still be selling places up to the last minute, so may have difficulty in supplying a final rooming list. This is a common source of conflict between hotels and group organizers. The hotel should understand the latter's problems, but it is still its job to keep prodding and cajoling the group organizers to send the rooming list through as soon as possible. Clearly, continuing difficulties in this respect would be noted on the agent record card and taken into consideration in any further negotiations.

The hotel's other departments need to be given details of any group arrivals well in advance so that they can make their own arrangements. Housekeeping has to make sure that all the rooms are ready for when the group arrives, and this requirement is different from the kind of ‘flow’ pattern required for a succession of individual guests. The head hall porter must arrange to have staff ready to shift a substantial quantity of luggage as quickly as possible (nobody wants coaches standing around for long periods while they are unloaded). Even if front office does not circulate individual arrivals lists, it is almost bound to distribute a group arrivals list. This is often sent out a week in advance so that the other departmental heads can make appropriate staffing arrangements.

Group check-in aspects

The main problem on arrival is likely to be possible overload of the reception facilities. As we have seen, groups are often directed to a separate area for registration. The hotel should consider to what extent preregistration is possible. Ideally, it will have printed off an individual registration form and included this with a preprepared ‘Welcome’ package, room key and key card for each guest. It is also possible to get the group tour guests to complete a registration form prior to arrival: on the coach from the airport, perhaps. Group organizers are usually only too willing to co-operate with front office to smooth out the registration process.

Figure 54 Group reservation form

Computerized systems make provision for this important type of business. It is usually possible to allocate a code reference to each group. Entering this when you are checking in the guest automatically transfers the agreed accommodation and meal charges to the master bill, while still allowing you to maintain an ‘extras’ account if desired.

A typical procedure for a unified group (i.e. one that all arrives at the same time) would be:

1 Enter the ‘Group Check-In’ section of the program. Skip the guest's name and address fields on the screen and enter the group code.

2 The program will then display the group's members in accordance with the rooming list previously entered. As each name is displayed, you type in the room number and hand over the appropriate room key and/or welcome package. The room number is not entered until this stage because you can't be sure that any individual group member is going to arrive until he actually does so.

3 The first name on the list should be that of the group organizer or courier, because he is responsible for the master bill.

4 The program should allow you to choose between options such as:

(a) Full package terms, no ‘extras’.

(b) Full package terms, with ‘extras’ for some or all group members.

(c) Room rate only to master bill, other charges to individual bills.

5 In addition, (b) and (c) would require you to say how the guest proposed to settle the individual bill.

This procedure still allows you to re-assign rooms not taken up because of non-arrivals.

Groups in residence

There are no special procedural aspects, but it is sometimes necessary to guard against a tendency on the part of staff to treat group members as ‘second-class guests’.

The main problem is likely to centre around which ‘extras’ can be charged to accounts, and all departments need to be clear as to the exact terms.

Group check-out aspects

These mirror the check-in procedures. The tour organizer will want to keep the group together, so a separate waiting area is a good idea. This also helps to free the rooms for servicing.

The hotel needs to ensure that all keys are returned and any ‘extras’ bills are paid. It is very much in the group organizers’ interests to co-operate in this process, because otherwise they will be involved in chasing up any guests who have not settled with the hotel.

Conferences

Conferences are very similar to groups. They are often arranged just as far in advance, and represent just as significant a part of the night's business. Consequently, the procedures for handling conference business are very similar.

The main difference is that the hotel has to provide more in the way of facilities. Conferences require general meeting rooms and additional syndicate discussion rooms, as well as areas set aside for conference registration, press briefing (if appropriate) and any associated social events. The key points to be considered in respect of a conference booking are as follows:

1 Accommodation requirements. These cover not only the number of delegates expected and the types of bedrooms required, but also the conference rooms themselves.

2 Equipment. Modern conference presentations often employ sophisticated audio-visual aids, and the hotel ought to be able to provide microphones, slide, film and overhead projectors, speaker's lecterns and the like, as well as humbler items such as pencils, notepads and ashtrays. There is often a need for copying facilities or computer networks, as well as telephone and fax facilities and internal messaging arrangements. All this needs to be discussed and agreed with the organizer.

3 Food and beverage requirements. It is usual to break up the conference proceedings with a series of tea and coffee breaks, and these must be agreed with the client and arranged with the food and beverage department.

4 VIP arrangements. Many conferences invite distinguished guest speakers to address them. These may need to be met at the airport or station, and should be afforded every possible courtesy by the hotel as well as the conference organizers.

5 Signs, etc. It will be necessary to put these up so that the delegates can find their way around. However, they should not be too large or widespread as this may annoy the other guests.

6 Partners’ programmes. Delegates often bring their wives, husbands or children along with them, and a programme of visits, excursions and other activities may be arranged for them. This, too, requires planning, and the extent of the hotel's responsibility (and the appropriate charges) needs to be settled beforehand.

A point worth bearing in mind is that, unlike group tour members, conference delegates may very well have differing arrival and departure dates. Some only come for a day or two, while others may take the opportunity to stay on longer afterwards in order to get to know the area better. This represents a possible source of business for the hotel, but it also raises some problems, the main one being what kind of terms should be offered in respect of the additional days. Not unnaturally, the delegates expect these to be the same as the conference rate, but this may well lead to them displacing higher yield business. This needs to be considered in the light of what we have said about yield management.

Timeshares

Timeshare developments are often centred around a hotel, and a number of hotels have converted some of their accommodation into timeshare apartments or are run along timeshare lines. Such developments may be found in both resort areas and in city centres.

The basic timeshare concept is that a purchaser buys limited ownership rights to a specified unit of accommodation. These entitle him to occupy that accommodation for a given period each year (the periods are normally one or more weeks) over an extended time span (twenty, forty or eighty years or more). The property is usually a self-catering apartment, but this is not always the case: the timeshare concept can also be applied to shorter periods in ordinary hotel accommodation.

The same unit of accommodation can be ‘sold’ to fifty separate buyers (two weeks per year are usually held back for maintenance). Each buyer is entitled to use the accommodation during his or her specified week, though he then has to vacate it so that the next owner can move in. Timeshare is cheaper than maintaining a separate holiday home, and has the advantage that maintenance can be taken care of by the management.

The advantage to the developer is that since the units are actually sold, the development costs can be recovered more quickly than with an ordinary hotel. However, the marketing costs are high since each unit has to be ‘sold’ up to fifty times, and are generally estimated to equal the actual construction costs. Timeshare selling techniques have attracted some unfavourable comment in recent years, but you should distinguish between reputable members of the industry and the ‘cowboy’ end of the market.

Buying a timeshare does not mean that the owner has to go back to the same destination at the same season every year for the rest of his life. There are various provisions which add greater flexibility:

All reputable schemes belong to one or other of the main timeshare exchange programmes. These allow owners to ‘swop’ their weeks with other periods elsewhere (as with foreign currency, there can be favourable or unfavourable exchange rates).

There are a number of hotel schemes which allow owners to take their time allocation on a day-by-day basis, to ‘stockpile’ entitlements (i.e. carry them forward from one year to the next), or to choose one of a number of participating hotels. Such ‘property bond’ arrangements are becoming increasingly important nowadays.

Owners do not necessarily have to occupy their accommodation themselves. They can put it at the disposal of their relatives, for instance, or their employees (a significant proportion of timeshare visitors are in fact guests of the actual owners).

Owners unable to take up their allotted periods can ask the management company to let it for them instead. The company would charge a fee for this service, but the letting income can still be substantial, and some owners treat their timeshares as revenue-earning investments.

The management of a timeshare operation requires special consideration. Since there is multiple ownership of the accommodation (sometimes this is effected through shareholding, sometimes through club membership), there needs to be an owners’ association. In theory this is responsible for running the complex, but in practice it often enters into a management contract with the developer or an experienced hotel company. Such contracts have to cover reciprocal duties and responsibilities, maintenance arrangements, the fees to be paid by the owners and many other matters, and are inevitably very complicated.

From the front office point of view, the main complications arising from timeshare letting are likely to be as follows:

1 In ‘pure’ timeshare, the owner is entitled to occupy one specific unit of accommodation for a specified period. This means that it must be ‘blocked’ on some form of conventional chart (club style arrangements whereby an owner is entitled to a certain number of nights anywhere within a group usually require him to advise the hotel he has selected well in advance and are subject to availability restrictions). Owners might be expected to remember their own periods, but experience suggests that it is a good idea to remind them nevertheless.

2 As indicated, many timeshares are actually occupied by the owner's relatives, friends or employees, or by exchange visitors, or are let to strangers. The management's front office needs to keep track of these. The question of whether an owner needs to register when occupying his own property does not seem to have been resolved, but the safest answer would appear to be ‘yes’, and this is certainly true for non-owner occupants.

3 Although owners have already paid for their accommodation and are only liable for the annual maintenance charge, there will still be a need for some ‘guest accounting’ to cover:

– normal lets

– hotel type services such as laundry, etc. incurred by owners or their guests

– extra nights, possibly in alternative accommodation.

To sum up. timeshare management is very similar to ordinary hotel operations, but with a few additional complications. We have discussed most of these, but there is one last and very important one of which you need to be aware. People staying in timeshares are likely to be even more critical of any shortcomings than ordinary guests are. This is understandable: after all, it is their property!