A Checklist for Function Space Management Part I.
By Jil Larson
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 process faster 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.