Revenue managers, being the savvy bunch that they are, know that outliers are important. How they and their colleagues respond to these exceptionally slow or busy days in their forecasts can have a profound impact on their ability to meet key revenue and profitability goals.
So naturally, when the “The Big One” is coming to town they tend to sit up and take notice.
Whether the event comes in the form of the Olympics, the World Cup, Eurovision, F1 events or a massive international superstar’s tour coming to town, these occasions keep hoteliers on alert as they try to capitalize upon and adapt to the extraordinary market fluctuations that come with them.
What hoteliers should know when a major event is coming to town
While it’s easy enough to surmise that a huge event coming to town means hotels will be busy, understanding the impact—and how to steer clear of missteps—is much more nuanced.
With these events comes a lot of noise, expectations, and potential for overreactions. So what should operators try to keep in mind as they prepare for the next blockbuster event?
1. Major events often send “regular” business packing
With so much attention focused on the influx of event-driven travelers, it can be easy to lose sight of how this event surge will impact your typical group and corporate business guests—particularly in the lead up to the event.
For many group and business travelers, the prospect of being anywhere near the epicenter of a large-scale event is a major deterrent. Whether they’re looking to avoid event demand-driven cost increases, the crowds, logistical hurdles, or some combination of the above, hotels close to the action should brace for potential a drop off in business from this segment in the immediate lead-up.
This trend was clearly observed by IDeaS among a selection of London-area hotels during the 2012 Olympics and has proven true in subsequent Olympic games. That said, the precise impact of a major event on group and corporate business demand will depend on the nature of the event itself. For example, this aversion may not be as pronounced for a single weekend of Taylor Swift tour dates or for a sporting event where host locations aren’t settled well in advance.
It is vital to not only understand the characteristics (price sensitivity, booking window, propensity to cancel, propensity to buy down if rates are available, etc.) of the new demand to come but also those of the formerly reliable business that will be displaced.
There is a ‘net-gain/loss’ equation to keep in mind – especially in the days and even weeks pre- and post- many major events. Be thoughtful in your budget and forecast projections so that these tremendous opportunities don’t end up falling short of expectations.
2. A room can be found
While occupancy will almost assuredly climb in nearby hotels during the course of a major event, data shows it’s still possible for travelers to find a room. For instance, check out STR’s exploration of the impact hosting the Super Bowl had on host markets. Some years the inn is getting awfully close to full, with overall market occupancy north of 95 percent (New Orleans 2013 and Phoenix 2015), while others are in the 70-80 percent occupancy range.
Of course, there’s a host of complicating variables to account for—fan enthusiasm, the overall quantity of rooms (including short term rentals) available in the market, ease of venue access within geographic footprint, etc.—that will influence how hoteliers’ approach an event.
The 2024 Olympics were another example of this major event dynamic. During the lead-up to the games in Paris, expectations born out of limited new room supply and massive transient demand led many properties to aggressively push rates. In the aftermath, Paris hotels did see a substantial ~24% jump in occupancy YoY, but overall citywide occupancy hovered around 80% during the games. Paired with the at or near record-high ADRs reported during this period, and there were clearly some missed opportunities to capitalize and potentially secure otherwise priced out demand with agile, market-driven pricing strategies.
3. Cancellation and overbooking management is key
It’s critical for hoteliers to think through how they’ll minimize the impact of potential last-minute cancellations. A thoughtful, proactive approach to developing and implementing cancellation policies is essential as poor policy planning creates greater uncertainty and last-minute chaos.
One tried-and-true approach is to implement phased pre-payment restrictions and longer cancellation periods. So instead of your standard cancellation notice period, guests with a change of plans will need to inform the property anywhere from 7 to 28 days in advance to avoid losing out on their partial pre-payment. When terms and conditions are clearly communicated at booking, these tightened terms are generally accepted by the public during high-demand events, and will provide your hotel with time to adapt and minimize the financial impact of a cancellation.
Wholesale contracts are another potential sticking point. Many hotels will have a large portion of their inventory tied up in these contracts for major events—and while there’s a strong business rationale for these agreements as they provide a strong baseline of room demand throughout the year, their comparatively low rates can drag down event-window performance. To hedge against this, attempt to negotiate separate terms (blackout dates, smaller block commitments, higher rates, earlier release dates…) for any contract/wholesale contracts over these ultra-high demand dates in order to capture the greatest revenue opportunities.
4. Function space is also at a premium—so don’t overlook it
It’s no surprise event space is also often in high demand during a major event, but how you approach making the most of this demand shouldn’t take a backseat to maximizing rooms revenue as these opportunities can be a boon to profitability.
Major events are an opportunity for companies to impress clients so it’s common for hotels and restaurants to get completely bought out by a company. These groups are usually willing to pay top dollar for the right facility to entertain their guests.
Hotels should consider setting premium food and beverage minimums for any group business seeking event space. It’s also important for commercial teams to consider the bigger picture and avoid basing decisions solely on STR report metrics.
Consider the total value and profitability of any group opportunities and weigh that against transient and other group demand. Remember, it doesn’t take much F&B spending to exceed the revenue and ultimately profit generated from rooms-only groups or individual travelers.
5. Plan early, and prepare to pivot if needed
Major events take major planning. To make the most of these events and position your property for success, you’ll need to start your strategic thinking and planning as soon as possible. Don’t wait to start defining what your ideal cancellation, payment, contracting and vetting policies are for an event. It’s also important to start early in determining what is the “correct” amount of group blocks to commit to an event and begin weighing how the steps taken to reach that target mix of group and transient business for a short-term event will impact your business in the long term.
Of course, anything that requires long-term planning also requires monitoring. Unexpected changes can quickly shift the calculus of any plan, so it’s critical to monitor with a level head and be ready to adapt as needed. Keep in mind there’s a lot of noisy or potentially conflicting information surrounding a major event. The advanced forecasting and automation capabilities of IDeaS’ technology shines through here, as frequent updates and fine tuning based on new information means teams can make smarter decisions faster while dealing with uncertainty.
Ready for the rush?
Preparing for a large-scale international event is undoubtedly a huge undertaking. But with the right strategies, technology and plans in place, hoteliers can take what stands to be a good opportunity and turn it into something spectacular.
Don’t miss your moment on the grand stage. Whether the bright lights of a major event are just around the corner or not, G3 RMS will help ensure your property isn’t leaving money on the table. Contact us today to learn more.