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A Checklist for Function Space Management.
By Jil Larson
Wednesday, 6th October 2010
 
Of the challenges unique to large convention hotels, few are as complex as function space management; with bookings up to a decade into the future and the fine balance of partnering with convention centers while simultaneously booking groups contained entirely in-house, there are rarely clear indications of which business to take versus which to let go.

Rather than throw our hands up in the air and just let business fall where it may, it is revenue management's responsibility to establish clearly defined parameters to direct future success for the sales team, even without the benefit of a crystal ball. No group lead is going to fit perfectly into these guidelines, but they provide a measure by which different group opportunities can be evaluated.

They also go a long way toward mitigating the risk to the hotel in the event the group doesn't materialize exactly as planned, which only happens 100% of the time. The client's crystal ball works no better than the hotel's.

Two room night considerations must be evaluated before assessing function space allocation.

The True Lead: Experienced sales executives know the first step is to take every lead and re-work it to reflect reality. If the lead is for four peak nights but the program ends at 5pm on the third day, that fourth night is subject to 50% slippage or more. History isn't the reliable factor it once was in forecasting a group's true pattern, but a little common sense and a healthy dose of scepticism can go a long way in stripping the fluff out of an RFP and determining the true potential of the group's room night production.

Ideal Room Pattern: Sounds simple enough, but pay close attention to defining the optimal peak room night pattern. Leads often come through for groups requiring six nights, but the group peak encompasses only one or two nights. In those instances, the group should generally be evaluated based only on the peak nights and the function space assigned accordingly.

Once the group's room night requirements have been objectively evaluated, the real game begins. Assigning function space can be annoyingly complex, but having guidelines established at the outset makes the processfaster and less contentious.

Following are a list of considerations that should be established up front to streamline the process of function space management.

  • Peak acceptable blocks for "room only" groups. Okay, this doesn't actually assess function space, but unless there is an extraordinary amount of local catering demand for the property, this needs to be established to ensure the space doesn't go dark and fail to generate revenue during citywide conventions. Generally this guideline is established by demand season, based on the amount of group demand anticipated and the odds of finding a "spacey" group to fill up those empty function rooms.
  • Group catering revenue per room night. For groups requiring function space, this is a better consideration that the traditional guideline of rooms to space ratio. A rooms to space ratio advises how much function space a group should receive based on how many room nights are provided. That's great, but a group taking a lot of guestrooms is automatically rewarded with a lot of function space, which is only warranted if they're actually paying for that space. I prefer to allocate space based on how much catering revenue, including room rental, is being collected per room night booked. In my opinion, a small group with a lot of catering revenue can take as much or more space than a large group paying very little for the function space. As long as they pay for the space, it's none of my business how many people they put in it.
  • Headquarter status versus non-headquarter status. If bidding on headquarter status, two offers should be included in the bid, one with a larger block and catering minimums for headquarter status, and one with a smaller block and a higher rate if the headquarter status is assigned elsewhere and the hotel is only being used for overflow. There's no harm in letting the client know up front why it would pay to assign your property headquarter status with all its associated catering revenues.
  • Affiliate business. Group agreements often forget the clause ensuring affiliate business is not subject to the same concessions provided to the main group. Discounted room rental or any other concessions provided in the group agreement should not be extended to affiliates. Conversely, if a group bid assumes a significant amount of catering revenue from affiliates, a clause should be in place laying out the how the agreement will change if that promised affiliate business does not materialize.
  • Attrition and/or Advance Reductions. Any agreement including an option for an advance reduction in room block and or an attrition allowance should have a corresponding clause in place allowing for a change in function space allocation if those reductions in room block are exercised. I've seen too many groups drop significant room nights per their agreement but continue to cling to all of the original function space allocation, preventing the hotel from replacing those dropped rooms with another group due to lack of available space. On the other hand, with a clause that ensures function space is reduced at the same time the client exercises any options for room reductions, a catering minimum reduction should be permitted simultaneously.
  • Vertical space vs horizontal space. I made this term up, but bear with me because there is a huge difference between the two. Often a group is evaluated as being "spacey", requiring too much space for the catering revenues (or guest rooms) provided. However a group that is horizontally spacey is much more damaging than a group that is vertically spacey. Vertical space means the group needs too much space on the dates the guestrooms are inhouse. For example it fills half the hotel's group room needs but requires all the hotel's function space. That's bad. But far worse is the hotel that is horizontally spacey, requiring the correct proportion of space for the dates the group is inhouse, but also requiring that same space for two to three days pre and post for setup and tear down. That's really bad, and likely to displace much more business than a vertically spacey group. Few hotels pay attention to horizontal spaciness and get stuck with accepting the pre and post terms because they are too far down the line by the time this issue is noticed. Have predefined setup and teardown parameters established, determining what is acceptable and what requires approval to keep this issue on the front burner during the "discovery" stage.
  • Breakouts. Often trickier thanspace for the plenary session, the number, size, and assignment of breakouts is frequently glossed over during contracting which can lead to lost revenues down the line. At the very least, ensure every sales executive is armed with what can truly be accommodated the breakout rooms, as well as all charges associated with converting guestrooms into breakout rooms if applicable.
  • Agenda due dates. Generally assigned based on the size of the group and the length of the booking window, but something along the lines of "everything booked outside a year, agenda is dueeleven months prior to arrival, everything booked inside a year, agenda is due at time of booking" will ensure the hotel isn't turning down short term leads by holding too much space with no agenda attached.
  • Exhibit space. Whether table top or booth, separate charges for each exhibit should be considered in addition to room rental. This covers lighting, heating, cleaning, etc and is generally passed on to exhibitors so ensure it's included.
  • Guaranteed room names. Your convention services team may be happy to tell you how much business is lost because they are unable to re-assign function space due to meeting room names being guaranteed in contracts. There are groups that will absolutely insist upon it, but it is costly to the hotel and therefore should be charged if offered. Several hotels I've worked with will only agree to guarantee specific meeting rooms with rack room rental or a set fee (e.g. $5000.) Once there is a price to pay for guaranteed room names, clients occasionally find ways to be flexible on this issue.
  • Catering minimums. Don't leave this to guesswork. Take whatever your menu pricing is today, establish an annual escalation percentage, and provide your sales team with catering pricing for the next 15 years. The impact of annual compound increases is not well understood and often minimums are set far too low by the time the group actualizes, cutting into F&B profit margins.
  • Freesale. Left the most popular topic for the end. In my opinion, freesale dates for function space are best established by revenue management. Your wedding manager is likely to believe the ballroom should be freesale two years in advance, your corporate group sales manager is more likely to believe the correct limit is four months. Revenue management doesn't care who sells it, and can therefore evaluate solely on how best to ensure it is sold. More often than not, different spaces warrant different freesale dates, so if there is currently a "one size fits all" approach, it may be worth taking another look.This isn't everything, but establishing guidelines for the above can improve both catering and room revenues by keeping function space as aligned as possible with the group room base in place.
Service providers at Dynamic RM are proven leaders in the hotel revenue management field with established track records of success in a variety of hotel companies. These individuals are now independent contractors dedicated to the success of their hotels.

Dynamic RM was established by Jil Larson, a 25 year hotel veteran with leadership experience throughout the U.S.A. and Canada in revenue director positions at the property, cluster, regional, and corporate levels. When warranted, Ms. Larson involves partner revenue management leaders, each with particular expertise in specific markets, market segments, or software systems.

www.dynamicrevenuemanagement.com
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