Commercial Strategy

Six essential steps hospitality leaders can take to improve M&E performance

If you asked a hotelier to tell you last night’s room occupancy, average daily rate (ADR), and revenue per available room (RevPAR), they could probably give you the answer in a heartbeat.

But what happens when you ask them about meeting space utilization, revenue per available square foot, or other key metrics pertaining to meetings and events (M&E)?

More likely than not, the hotelier would need some time to find the answer.

But considering that M&E accounts for about 20 to 30% of revenue for the average hospitality organization, hoteliers should pay just as much attention to M&E as they do guest rooms.

If not, they could be missing out on serious revenue.

So, to help you maximize your M&E revenue opportunity, we put together a list of six steps your business can take to boost M&E revenue.

Let’s get started.

Understanding the tremendous revenue-boosting opportunity of meetings and events in 2023

For hotels and other hospitality organizations, meetings and events have vast revenue potential, but the opportunity often gets overlooked.

In the US, meetings and events generate around $30 billion in hotel room revenue annually. And M&E business creates another $110 billion in revenue from ancillary services, including event space, food and beverage, ground transportation, equipment rental, audiovisual (AV) support, and more.

And while many aspects of the travel and hospitality industry are still trying to catch up to their 2019 levels, M&E is projected to surpass those levels in 2023.

In fact, M&E business in the US will bounce back to 106.4% of its 2019 levels in 2023. And that growth will likely hit 129.2% during 2024 according to Knowland’s Meetings Recovery Forecast.

And there’s good reason to believe those projections too. As of November 2022, specific markets, such as Dallas, Phoenix, and Nashville, have already reached 100% recovery.

While demand for M&E space continues to rise, the costs of these events are increasing too. Studies predict that the typical cost for each attendee will rise on a global basis by 1.5% for small-scale meetings and 3% for larger tradeshows and conferences.

According to the American Express 2023 Global Meetings and Events Forecast, hotel rates will likely increase across the globe by 4.9% in 2023. That includes everything from a 2.5% increase in the APAC region to a 7.4% increase in North America. Experts attribute these costs to higher food, labor, and other fixed costs.

And companies are ready to spend more on M&E in the face of those rising costs. American Express found that 65% of companies report that their meeting costs will go up, while an additional 10% report seeing their meeting costs increase by more than 11%.

Higher costs and more company spending mean that hospitality organizations need to pay extra attention to how they’re pricing their M&E space to keep profits moving upward.

So, why aren’t hospitality organizations taking advantage of the M&E opportunity as seriously as other aspects of their business? And what can they do to maximize earnings from M&E?

We answer those questions next.

Step 1: Give M&E KPIs the same attention you give to rooms metrics

So, what’s causing hospitality organizations to miss out on maximizing their M&E revenue potential?

For starters, hospitality organizations often pay attention to the wrong set of metrics.

Current revenue management practices often assess hotel group business results based on a revenue per available room (RevPAR) index. This metric fails to account for a group’s overall profitability for several reasons.

First of all, growth in RevPAR doesn’t necessarily equate to an increase in profits, similar to how a drop in RevPAR doesn’t signal decreased profitability.

When you use RevPAR to make decisions surrounding group business, RevPAR fails to include other revenue streams that add to your revenue beyond rooms. This includes food and beverage, function space, AV rental, and ground transportation—services that account for $110 billion in yearly revenue for organizations across the US.

So, here’s the danger with using RevPAR as a KPI (key performance indicator) for M&E business: If a hospitality organization only uses RevPAR to decide whether to accept a certain piece of group business, it could leave serious money on the table from not considering the money groups spend onsite beyond rooms during their stay.

Use these KPIs to boost M&E performance

To boost revenue from group and M&E business, your organization should consider the total revenue potential for every group business opportunity. This means considering what each group will spend on all services and revenue streams outside their rooms.

When you look beyond room revenue and consider what a group spends on food/beverage, AV support, transportation, etc., you get a more accurate idea of how much overall revenue the group could bring in.

Once you know the overall spend, you can say “yes” or “no” to each new group business opportunity and determine the ideal rate to offer.

Other KPIs that can help you determine which M&E business to accept include:

  • Function space utilization
  • Attendee occupancy versus optimum capacity
  • Revenue per square meter/foot per attendee
  • Function space efficiency
  • Profit per available space/time (ProPAST)
  • Profit per occupied space/time (ProPOST)

For additional insights into more helpful KPIs that you can use for your M&E business, check out A Quick Guide to Important Meeting & Event KPIs.

Step 2: Upgrade the visualization of your M&E business

Building a smarter, more informed M&E business strategy begins by upgrading your ability to collect data, visualize critical metrics, and measure business performance.

Essentially, you must have an idea of the business you’re working with, the profitability of that business, and the profit potential you have on the horizon.

But how do you collect and analyze data in a timely, cost-effective way?

Typically, that means upgrading your tech stack with a solution that can help you visualize:

  • Demand by day and day part
  • Demand by size
  • Lead time
  • Pace
  • Critical bookings
  • Space utilization
  • Conversions
  • Team member activity

Ideally, any visualization solution should let you see booking trends and patterns so that you can forecast demand with greater accuracy and adjust prices accordingly.

For more information on a solution that meets these criteria, check out our meetings and events strategy page.

Step 3: Increase your forecasting capability

While a visualization tool will help you gain a clear view of trends, patterns, and KPIs to create a more informed M&E strategy, it will not determine optimal prices for you. That task remains up to you.

What can you do if you lack time to manually calculate ideal prices? What if you could leave it up to an automated system?

Well, you can.

Automating your pricing decisions represents a hospitality organization’s next step to increase revenue from M&E business.

The ideal automated system would create forecasts and evaluate the profitability of groups that come to your organization looking for space.

And by automating reporting and pricing, your team members gain extra time that they can use to focus on other revenue-generating tasks. In fact, according to Hotel Tech Report, organizations that automate revenue management tasks typically save between 20 to 40 hours of employee time each month.

What would you do with that extra time?

Step 4: Prioritize & accept the most profitable business

It’s easy and natural to book the first group that approaches you about any given date. But that’s not necessarily a winning strategy.

Despite this, hoteliers often forget to consider the individual worth of meeting and event spaces. Oftentimes, if you can wait to book a more profitable group, you can earn more profit.

For instance, if your property contains a meeting room with space for 40 people, it would be easy to let a group of 15 people book that space if they ask for it first. During a time of low demand, this strategy often works well.

However, if another group comes along with 20 people and your business charges per person, then you just made your company an additional 33% in revenue.

Optimizing the value of your meeting and event space requires more than simply getting as many spaces and days booked as you can. To really maximize M&E revenue, you need to be more selective.

At a fundamental level, this starts with dividing rooms into smaller sections to simultaneously get more attendees on location. It also means coordinating meeting schedules to bring in customers projected to spend high amounts of money on ancillary goods and services.

But it can be challenging to understand what opportunities could come along, how much each group would be willing to spend, and how much to charge for each event space—especially compared to the competition—unless you have an efficient method for revealing future demand.

Again, this is where having the right tool can make a profound difference. It’s also where many hospitality organizations fall behind.

If you’re operating out of a standard spreadsheet, guesswork, and gut feel to make your predictions of future demand, you could be doing better. There’s a more efficient, easier way to manage and optimize your M&E business.

To find out how IDeaS can help, visit our meetings and events strategy page.

Step 5: Consider hiring a dedicated M&E revenue manager

Yes, measuring M&E business and room business using the same metrics can lead to missed opportunities. But having a separate revenue manager for each type of business (M&E and rooms) can help increase overall revenue and future revenue opportunities.

Just to be clear—we’re suggesting that your organization considers hiring a revenue manager to focus on M&E exclusively in addition to your current revenue manager for rooms business.

Think about it like this: if a segment of your business earns 20% of your revenue, then it would likely have someone in charge of it, right?

So, given that M&E could earn your organization anywhere from 15% to even 60% of its revenue, why wouldn’t this area of your business have someone overseeing it?

While it seems obvious, most hospitality organizations don’t have a designated M&E revenue manager, and they’re leaving money on the table as a result.

What needs to happen is no less than a cultural shift. Hospitality organizations need to be aware of the profit potential and then put resources behind the opportunity.

Of course, the industry could go on conducting business as usual. But if we’re ignoring a stream of revenue that brings in billions of dollars on an annual basis for the hospitality industry, then we need to take some time to reconsider what we’re doing.

With M&E business projected to grow 26% between 2022 and 2024, now represents the perfect opportunity to reconsider our M&E strategy and culture.

Step 6: Get a better handle on staffing requirements (by improving your forecasts)

According to the American Hotel & Lodging Association (AHLA), 87% of hotels report experiencing staffing shortages. Of those, 36% of respondents consider the shortage “severe.”

And while 42% of the survey’s respondents ranked housekeeping staff as the top need, hospitality industry leaders understand it’s been challenging to find and retain revenue strategists and managers as well.

For the revenue professionals that remain, there’s an added sense of pressure to ensure they’re offering the ideal compensation packages to employees.

They’re also feeling added urgency when it comes to optimally pricing rooms in ways that help their organizations remain profitable while faced with increasing costs. These circumstances make many organizations less motivated to drop rates to increase occupancy.

So, what are hospitality leaders doing to successfully face these labor challenges?

Many organizations have chosen to outsource labor to meet their staffing needs, especially for housekeeping and front desk work. Beyond that, however, organizations are partnering more with third-party agencies that can help with data entry and other tedious tasks.

Other organizations have turned toward automated solutions to help their existing staff collect data, generate reports, set prices, and forecast future revenue opportunities.

Allowing an automated system to take on these tasks gives thinly stretched teams more bandwidth to focus on areas where they can make the biggest impact, such as creating revenue strategy.

Beyond automation, other hospitality businesses are bringing marketing, sales, and revenue management teams together to promote more interaction, discussion, and solutions.

Bringing teams together also allows them to learn from each other. In many cases, this cross-pollination helps employees from marketing, sales, and management discover their interests in revenue management. This can help bolster internal talent pipelines and allow organizations to ease some of the pressure caused by the labor shortage.

Ready to unlock your meetings & events revenue potential?

Discover how IDeaS M&E solutions can help you empower your team with insights, prioritize the right opportunities, measure KPIs, automate forecasts, optimally price all revenue streams, and make confident decisions that will increase your profitability by booking a product demo with one of our revenue experts today.

Click here to get started.


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