Is the Price Right?Is the Price Right?
Demand & Competitive Rates
Presented by:
Tammy Rajaniemi, Manager HMG Extended Stay Revenue Management
Paul Malje, Revenue Manager – Candlewood Suites – Value Partners
First Things First…
Clear your mind!
See & Say
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See & Say
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YellowYellow BlackBlack
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PurplePurple RedRed
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GreenGreen OrangeOrange
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Overview
What should the Rate be? Forecasting Factors to Consider
Demand Competitor Rates
Revenue Management
Products RevenueManagement
DistributionChannel
Direct
Web
GDS
Customers/Segments
Hotel Rooms
Factors
Rate Decisions are Governed by Two Factors
CONSUMER DEMAND
COMPETITIVE RATES
Consumer Demand
Forecasting Demand Implicit Explicit
CONSUMER DEMAND
Consumer Demand
Forecasting Example: Forecast: 50% Occupancy Action: Open Allocations on All Channels Response: More Booking Result: 62% Occupancy
Was the Forecast Wrong? CONSUMER DEMAND
Consumer Demand
Forecasting Mistakes Goal Setting vs. Forecasting Define a ‘Good’ Forecast The Gambler’s Fallacy Focus on Recent Trends Not Taking Action
CONSUMER DEMAND
Consumer Demand
When Demand is High
CONSUMER DEMAND
COMPETITIVE RATES
Consumer Demand
When Demand is Low
COMPETITIVE RATES
CONSUMER DEMAND
Consumer Demand
Usually Demand is In-between
CONSUMER DEMAND
COMPETITIVE RATES
Impact of Demand
Every day’s demand is different; often requiring different rates
Demand varies by booking channel; requiring distribution strategies
Demand dictates the DIRECTIONDIRECTION that rates should move
Impact of Competitive Rates
Competitive Rates limit the DEGREEDEGREE – not direction of rate changes
Competitive rates may differ by channel Trends are as important as individual rates
Impact of Competitive Rates
Don’t be the ‘Greater Fool’
Taking Action
Shop Competitive Rates Multiple Channels Average Length of Stay Call Arounds
Taking Action
Be aware of your booking window
Book
ings
Days Left
42 35 28 21 14 7 0
Taking Action
Cornell University Study "Price Discounting - Is It a Wise Strategy to
Raise Revenues?" Examined demand for rooms at 480 hotels in 22
metropolitan areas in the U.S.
Taking Action
"The prevailing wisdom is that reducing room rates entices new consumers to enter the market and buy more rooms…”
“…This has nevernever worked for the hotel industry, and it won't work in this era of proliferating hotel room discounts and Web-based travel deals, because new consumers do not enter the market in response to hotel discounting. Instead, existing Instead, existing consumers simply get more for less, and hotel consumers simply get more for less, and hotel revenues fallrevenues fall."
Good News ~ Bad News
Bad News First:Your long-lost Uncle in Atlanta just passed away.
The Good News:He left you his restaurant in Buckhead!
Café Ptomaine
Celebrating its 3rd year Located in the heart of Buckhead on
Peachtree Road Casual American Fare in a Relaxed
Atmosphere Serving Lunch and Dinner 7 days a week
Café Ptomaine
The Stipulation In 3 years, the Restaurant has not made a cent
in profit. You have 5 weeks to turn a profit or you will lose
the Restaurant to your evil cousin Cheryl.
Week One
You visit ‘The Buck Stops Here’ Restaurant next door to the Café Ptomaine. Atmosphere is trendier Was very busy at 4pm on Wednesday The menu has a few similar items Meal was $15 more than a meal at Café
Ptomaine
Week One
A. Immediately raise all menu prices 10%
B. Change prices to be the same as TBSH
C. Review all restaurants in the area and determine your prime competitors
D. Report that you got food poisoning to the local press
A. $25
B. $50
C. $100C. $100
D. $ 0
Week Two
You review the Reports from Week One Highest lunch sales: Tue, Wed, Thur, Fri Highest dinner sales: Wed, Fri, Sat Sunday and Monday are the two slowest days
overall
Week Two
A. Offer 25% off discount for anyone eating on Sunday or Monday
B. Check sales volume at competitors before taking action
C. Focus advertising on Sunday and Monday
D. Close the Café on Sunday and Monday
A. $ 50
B. $100B. $100
C. $ 75
D. $ 25
Week Three
You review the Reports from Week Two and compare to Week One. There is no change in pattern – strong lunch
days are the same as is the case for dinner Overall sales are up 30% week over week
Week Three
A. Forecast the same increase for next week
B. Forecast a greater increase for next week
C. Monitor next week’s sales to see if increase is constant or one time
D. Place a ‘Help Wanted’ add for more staff !
A. $ 75
B. $50
C. $100C. $100
D. $ 0
Week Four
You review the Reports from the first three weeks Overall sales are back to Week One level Comment Cards indicate a gap in attracting a
mature crowd The “20 & 30-Somethings” like to hang out at the
Café
Week Four
A. Create specific and unique menu items that will attract a wider audience
B. Offer a 20% Senior Discount
C. Add an Early Bird Special to the menu
D. Tell the ‘youngsters’ that they have to leave after an hour
A. $100A. $100
B. $ 50
C. $ 50
D. $ 0
Week Five
You review the Reports from the first four weeks Sales are only marginally higher since you took
over Labor costs remain high due to low volume Your Competitors and the overall Market are
very strong
Week Five
A. Lower the menu prices in order to attract more business
B. Offer a ‘bounce back’ coupon to all guests
C. Review position in the Market and make specific and targeted changes
D. Organize a sales blitz to better communicate your unique dining experience
A. $ 0
B. $ 50
C. $100C. $100
D. $ 50
The Results
$500 - $400
$399 - $200
Under $199
Move over Emeril
Maybe a job at McDonald’s is right for you
Give the keys to Cheryl and call Domino’s
Thank you!Thank you!