Revenue Management Webinar Series What Are the Best ...eoplugin.commpartners.com/HSMAI/111122/111122_Presentation Sl… · 2011 Smith Travel Research, Inc. 19 Hotel Industry Forecasts

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Revenue Management Webinar Series

What Are the Best Practices in Pricing and Price Optimization?November 22, 2011

This webinar series is brought to you by This webinar series is brought to you by HSMAI University, HSMAI University, HotelNewsNowHotelNewsNow , and STR, and , and STR, and

sponsored by sponsored by IDeaSIDeaS Revenue SolutionsRevenue Solutions

Overview of Format and TopicOverview of Format and Topic

Webinar Moderator

Fran Brasseux

Executive Vice President, HSMAI

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Revenue Management Webinar Series:

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Panel Moderator:

Jeff Higley, VP,

Digital Media &

Communications

HotelNewsNow/

STR STR/STR Global

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TodayToday’’s Presenters: s Presenters: Panel Moderator: Jeff Higley, VP, Digital Media and Communications, HotelNewsNow.com/STR/STR Global

Panelists:

Jan D. Freitag

Vice President, Global DevelopmentSmith Travel Research

Kathleen Cullen, CRME

Corporate Director of

Revenue StrategiesHeritage Hotels & Resorts

Chris AndersonProfessor

Cornell University

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2011 Smith Travel Research, Inc. 7

US Overview- Trends in Pricing -

Jan D. Freitag

Senior Vice President


Agenda

• Total US • US Scales• US Forecast• Channel Data

Smith Travel Research, Inc. and/or STR Global, Ltd. (collectively for these purposes, “STR”) are the e xclusive owners of all rights in these Industry Presentations and t heir content. Reproduction of all or a portion of th ese presentations for any purpose without prior approval of STR is st rictly prohibited.


www.hotelnewsnow.com

Click on “Industry Presentations”

Smith Travel Research, Inc. and/or STR Global, Ltd. (collectively for these purposes, “STR”) are the exclusive owners of all rights in these Industry Pr esentations and their content. Reproduction of all or a portion of these presentations for any purpose wi thout prior approval of STR is strictly prohibited.


Total US - Key StatisticsYTD September 2011

% Change• Hotels 52k• Room Supply 1.3 bn 0.7%• Room Demand 814 mm 5.3%• Occupancy 61.6% 4.6%• A.D.R. $101 3.6%• RevPAR $62 8.3%• Room Revenue $82 bn 9.1%


On An Annualized Basis: Most Rooms Sold - EVER

*Number of Rooms Sold, 12 MMA, 1/89 – 9/11


US Scales


Strong Demand Growth, Supply Not An Issue

*Supply / Demand % Change, by Scale, YTD 9/2011


Will OCC Growth Lead To ADR Growth?

*OCC / ADR % Change, by Scale, YTD 9/2011


OCC: Lower End Of The Market Still Missing Out

*Absolute OCC %, by Scale, YTD 9/2011


ADR: Towards A Two Class Society?

*Absolute ADR $, by Scale, YTD 9/2011


US Forecast


Total United StatesKey Performance Indicator Outlook (% change vs. Pri or Year)2011 - 2012

2011Forecast

2012Forecast

Supply 0.7% 0.9%

Demand 4.7% 1.1%

Occupancy 4.0% 0.2%

ADR 3.6% 3.7%

RevPAR 7.7% 3.9%


Hotel Industry Forecasts – STR Revisions

2012

Demand ADR

Jan 11 2.2 6.8

Jun 11 2.5 6.0

Aug 11 2.5 4.9

Nov 11 1.1 3.7


Total United StatesChain Scale Key Performance Indicator Outlook

2011F by Chain Scale

Chain Scale

Occupancy

(% chg)

ADR

(% chg)RevPAR (%chg)

Luxury 5.0% 6.1% 11.3%

Upper Upscale 2.5% 3.8% 6.4%

Upscale 3.7% 3.4% 7.3%

Upper Midscale 5.0% 3.3% 8.5%

Midscale 2.7% -0.9% 1.8%

Economy 3.6% 2.0% 5.7%

Independent 4.1% 3.3% 7.6%

Total United States 4.0% 3.6% 7.7%


Total United StatesChain Scale Key Performance Indicator Outlook

2012F by Chain Scale

Chain Scale

Occupancy

(% chg)

ADR

(% chg)RevPAR (%chg)

Luxury 1.3% 5.5% 6.9%

Upper Upscale -0.6% 4.0% 3.4%

Upscale 1.4% 4.2% 5.7%

Upper Midscale -0.2% 3.8% 3.6%

Midscale 1.0% 0.8% 1.8%

Economy 0.6% 2.3% 3.0%

Independent -0.6% 3.0% 2.4%

Total United States 0.2% 3.7% 3.9%


US Demand and Revenue By Channel

- A First Look -


Absolute Revenue for Total US by Channel Annual 2009 & 2010, in billions of dollars


ADR ($) for Total US by Channel


ADR ($) for Total US by OTA Business Model


www.hotelnewsnow.com

Click on “Industry Presentations”

Smith Travel Research, Inc. and/or STR Global, Ltd. (collectively for these purposes, “STR”) are the exclusive owners of all rights in these Industry Pr esentations and their content. Reproduction of all or a portion of these presentations for any purpose wi thout prior approval of STR is strictly prohibited.

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Chris Anderson

Professor

Cornell University

Two Hotelies in trouble

Mario and Hilary are suspected of a crime committed

by two persons. They are being questioned by

authorities in two separate rooms.

Each is being encouraged to cooperate (confess).

There is very little evidence so if neither confess they

will get off w/ small fine.

Two Hotelies in trouble

M: Small FineH: Small Fine

M: Long PrisonH: Free

M: FreeH: Long Prison

M: Short PrisonH: Short Prison

Mario

Hilary

Don’t Confess ConfessConfess

Confess

Don’tConfess

Likely Outcome?

M: Small FineH: Small Fine

M: Long PrisonH: Free

M: FreeH: Long Prison

M: Short PrisonH: Short Prison

Mario

Hilary

Don’t Confess ConfessConfess

Confess

Don’tConfess

Price Cut/War!

Mario

Hilary

Hold Cut

Cut

Hold

Price Cut/War!

M: Moderate ProfitH: Moderate Profit

M: No MoneyH: Big Profit

M: Big ProfitH: No Money

M: Tiny ProfitH: Tiny Profit

Mario

Hilary

Hold Cut

Cut

Hold

Calculate the minimum sales volume necessaryfor the volume effect to balance the price effect.

Price

Service/Rooms

Demand

Variable Cost

P1

P2

Q2Q1

∆P

∆Q

A

B

Contribution margin (CM)CM = P – VC

A = CM lost B= CM gained

Pricing Actions

• General posted price changes

– Prompt response

– Require greater demand response than price

decrease (only elastic segments will be non

dilutive)

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Pricing Actions

• General posted price changes

– Prompt response

– Require greater demand response than price decrease (only elastic

segments will be non dilutive)

• Pricing actions need to be targeted

– (elastic segments)

• Non-blanketed

– Avoid response

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Non-Dilutive Pricing

• Opaque (Priceline,Hotwire,TopSecret)

• Membership selling (Tzoo, Jetsetter, Groupon, LivingScocial…)

• Search (SEO/SEM)

• Mobile (HotelTonight, Tonight Only)

• OTAs

• Penny Auctions (Off & Away)

• …..

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Opaques

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Opaque Differences

• Hotwire – 1 offering per star per area

• TopSecret – lists all inventory

• Priceline – random allocations

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Corporate Director of Revenue

Strategies

Heritage Hotels & Resorts

Membership Selling

• TZoo

– Direct marketing

• FlashSales

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TravelZoo

TravelZoo

Jetsetter/Flash Sales

Organic and Paid Searches

Organic Results

Organic Results

Paid Results

Organic

Results

Local

Results

Organic

and Paid

Searches

Implications

• Positives

– Numerous (and growing) ways to creatively reach

customers

– Many partially disclosed

• Negatives

– Channel/program management

– Email/offer fatigue

– Scale

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Questions? Questions? Panel Moderator: Jeff Higley, VP, Digital Media and Communications, HotelNewsNow.com/STR/STR Global

Panelists:

Jan D. Freitag

Vice President, Global DevelopmentSmith Travel Research


Corporate Director of

Revenue StrategiesHeritage Hotels & Resorts

Chris AndersonProfessor

Cornell University

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Upcoming Webinars:

The HSMAI University 10-part 2011 Revenue Management Series –

Next Sessions:

• What is the Future of Distribution? – November 29, 2 011• What Will the Revenue Manager of the Future Look Li ke? – December 20, 2011

•December 6 – Distribution Channel Analysis, with Cin dy Estis Green and Mark Lomanno•December 8 – Taming the Email Beast, with Randy Dean•December 13 – Digital Marketing webinar with expert panel

To register for these and more, please go to

www.hsmaiuniversity.org.

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Revenue Management Webinar Series What Are the Best ...eoplugin.commpartners.com/HSMAI/111122/111122_Presentation Sl… · 2011 Smith Travel Research, Inc. 19 Hotel Industry Forecasts