An effective hotel revenue management system is the key driver behind the hospitality industry’s ability to survive the economic crisis, retain and attract customers, and increase RevPAR. And the importance of revenue management has never been more important than now. Since the market is expected to decline overall, the average RevPAR and other hotel metrics will expectedly experience a downtrend as well. With a good system in place though, a hotel revenue manager can look past this into the real potential of his hotel.
Getting a deeper understanding of the hotel clients is crucial in this stage. For example, in a normal urban/suburban transient property for corporate executives, price sensitivity is lower because they are not the ones paying the bill. Even if the corporation is managing the cost of travel, the reality is that travelers will still prefer prime locations, complete facilities, and other amenities.
Another factor that should be considered is the bookings from hotel electronic sources. Because of the popularity of the internet, electronic hotel sales have been steadily increasing for the past decade. Hotel sales channels such as e-commerce, franchise web sites, and GDS systems should be looked into carefully. Usually, the hotel sales derived from these mediums come from leisure travelers who are looking for good deals.
It is important to measure the potential of each contract. This will enable both the hotel revenue manager as well as the sales staff determine how the business can be aligned in relation to their client profiles. But more than that, all the people involved in the hotel revenue management strategy should really believe that it is effective in order to execute it property and boost profitability.
If the people who are behind the yield management strategy and hotel software don’t believe in its capability, it will reflect on their performance. Remember that no matter how sophisticated inventory software, yield management software, or hotel software is; ultimately it is still people who use these tools. Unless it is utilized to increase RevPAR and increase hotel profitability, it will just be another tool that can be effective or ineffective in the decision-making process.
Read more: http://www.articlesbase.com/travel-articles/people-behind-the-revenue-management-system-871649.html#ixzz19TFkMB9M
Under Creative Commons License: Attribution
Tuesday, December 28, 2010
Friday, November 19, 2010
AAHOA's challenge to OTAs
The Asian American Hotel Owners Association can expect an uphill climb when it takes on the online travel agencies at their own game.
C.K. Patel, AAHOA’s chairman, mentioned during a panel at this week’s International Hotel/Motel & Restaurant Show in New York the association will launch an OTA of its own to compete with the likes of Expedia, Travelocity, Priceline and others. Patel said the platform would be up and running by June but didn’t want to give any of the other details. Details will be announced during AAHOA’s annual conference June 15-18 in Las Vegas. Calls and emails to a few other AAHOA members that I use as contacts were fruitless as they declined to provide any details.
Regardless of the details, it’s a gutsy move by AAHOA. Because the association’s members control about one quarter of the 4.8 million hotel rooms in the United States, there is some credibility to the AAHOA OTA idea.
But it’s not going to be easy to make an impact for several reasons:
• Start with the billions of dollars of marketing funds mainstream OTAs pump into branding each year. AAHOA doesn’t have deep enough pockets to be anything more than a blip on the radar of online hotel marketing.
• Many of AAHOA’s member properties are branded. That means the hotels must live up to corporate level agreements for providing room inventory to the current OTAs. If AAHOA’s trying to simply get a piece of the pie rather than put current OTAs out of business, it will work fine.
• Like any organization, AAHOA has different factions and there are power struggles. My sources tell me the idea of an AAHOA OTA is not dividing the association, but there are some members who aren’t fond of the idea.
All in all, it’s good to see an entity from within the hotel industry try to regain some control over room inventory. The OTAs are not all bad—their purpose of selling more hotel rooms is a good one. However, a lot of their advertising portrays hotel owners and operators as untrustworthy souls who are out to screw everyone. In the 15 years I’ve been covering the industry, I haven’t seen more than a handful of those types of owners.
The OTAs only sell inventory that has been approved by hotels. And yes, despite adamant pleas from the third-party providers, they do twist arms to ensure owners provide inventory at a certain price point.
The hotel brands have yet to stand up and grab control of room inventory on their licensees’ behalves, so it’s up to associations such as AAHOA to make an attempt. I’m not entirely optimistic they will succeed, but I’m rooting for them to help bring balance back to room distribution.
C.K. Patel, AAHOA’s chairman, mentioned during a panel at this week’s International Hotel/Motel & Restaurant Show in New York the association will launch an OTA of its own to compete with the likes of Expedia, Travelocity, Priceline and others. Patel said the platform would be up and running by June but didn’t want to give any of the other details. Details will be announced during AAHOA’s annual conference June 15-18 in Las Vegas. Calls and emails to a few other AAHOA members that I use as contacts were fruitless as they declined to provide any details.
Regardless of the details, it’s a gutsy move by AAHOA. Because the association’s members control about one quarter of the 4.8 million hotel rooms in the United States, there is some credibility to the AAHOA OTA idea.
But it’s not going to be easy to make an impact for several reasons:
• Start with the billions of dollars of marketing funds mainstream OTAs pump into branding each year. AAHOA doesn’t have deep enough pockets to be anything more than a blip on the radar of online hotel marketing.
• Many of AAHOA’s member properties are branded. That means the hotels must live up to corporate level agreements for providing room inventory to the current OTAs. If AAHOA’s trying to simply get a piece of the pie rather than put current OTAs out of business, it will work fine.
• Like any organization, AAHOA has different factions and there are power struggles. My sources tell me the idea of an AAHOA OTA is not dividing the association, but there are some members who aren’t fond of the idea.
All in all, it’s good to see an entity from within the hotel industry try to regain some control over room inventory. The OTAs are not all bad—their purpose of selling more hotel rooms is a good one. However, a lot of their advertising portrays hotel owners and operators as untrustworthy souls who are out to screw everyone. In the 15 years I’ve been covering the industry, I haven’t seen more than a handful of those types of owners.
The OTAs only sell inventory that has been approved by hotels. And yes, despite adamant pleas from the third-party providers, they do twist arms to ensure owners provide inventory at a certain price point.
The hotel brands have yet to stand up and grab control of room inventory on their licensees’ behalves, so it’s up to associations such as AAHOA to make an attempt. I’m not entirely optimistic they will succeed, but I’m rooting for them to help bring balance back to room distribution.
Thursday, November 11, 2010
Women, Facebook and your hotel
I didn’t find it particularly odd when my wife checked her Facebook account every day while on our honeymoon last year. To begin with, I was just as guilty, perusing my e-mail for news from family and friends while relaying some of our own sun-soaked adventures. But more importantly, her Facebook habits, I thought, were nothing more than a habitual practice that a 700-mile flight couldn’t disentangle.
My wife is not alone, it turns out. According to new survey findings from Wyndham’s Women on Their Way program, almost half (46%) of women access social media through smartphones while traveling.
Now, before you run into your manager’s office screaming about the need to allocate five full-time employees to monitor Facebook, let’s dissect those findings for a minute.
First, the respondents don’t represent all female travelers; the group is skewed noticeably in favor of social-media users. The survey polled 500 women between the ages of 18-50 who had social media accounts and who had taken an overnight trip during the past 12 months.
Second, just because they used social media during doesn’t mean others will be influenced by their updates and tweets and photos and blogs and reviews and litany of other avenues for expression. Remember, findings from Ypartnership suggest social networking sites have a limited influence on travelers’ purchasing habits.
“When we asked those travelers to tell us the extent to which they consult content on the social sites when it comes to getting recommendations about destinations and travel suppliers, the numbers are in low single digits (6%),” the firm’s chairman and CEO Peter Yesawich said during an interview earlier this summer.
However, that’s not to say social networks aren’t growing in use and influence. To say otherwise would be akin to saying the Internet in its entirety is a passing fad.
So perhaps we should focus on the biggest reason WHY women are using social media while traveling: to stay in touch with friends and family and share their experience with others.
That second part deserves particular attention. If travelers are communicating something about their experiences at your hotel, it had better be a very good something—a statement which not only underscores the continued need for exemplary customer service but also continued tracking to make sure all comments and updates are framed within this positive context.
This goes for women and men. Thank God for the impersonal gender neutrality of the Web.
My wife is not alone, it turns out. According to new survey findings from Wyndham’s Women on Their Way program, almost half (46%) of women access social media through smartphones while traveling.
Now, before you run into your manager’s office screaming about the need to allocate five full-time employees to monitor Facebook, let’s dissect those findings for a minute.
First, the respondents don’t represent all female travelers; the group is skewed noticeably in favor of social-media users. The survey polled 500 women between the ages of 18-50 who had social media accounts and who had taken an overnight trip during the past 12 months.
Second, just because they used social media during doesn’t mean others will be influenced by their updates and tweets and photos and blogs and reviews and litany of other avenues for expression. Remember, findings from Ypartnership suggest social networking sites have a limited influence on travelers’ purchasing habits.
“When we asked those travelers to tell us the extent to which they consult content on the social sites when it comes to getting recommendations about destinations and travel suppliers, the numbers are in low single digits (6%),” the firm’s chairman and CEO Peter Yesawich said during an interview earlier this summer.
However, that’s not to say social networks aren’t growing in use and influence. To say otherwise would be akin to saying the Internet in its entirety is a passing fad.
So perhaps we should focus on the biggest reason WHY women are using social media while traveling: to stay in touch with friends and family and share their experience with others.
That second part deserves particular attention. If travelers are communicating something about their experiences at your hotel, it had better be a very good something—a statement which not only underscores the continued need for exemplary customer service but also continued tracking to make sure all comments and updates are framed within this positive context.
This goes for women and men. Thank God for the impersonal gender neutrality of the Web.
Thursday, November 4, 2010
TripAdvisor Under Siege
TripAdvisor is under siege in the United Kingdom for posting what many angry hoteliers are calling fake hotel reviews. The news comes after KwikChex, an online reputation management company, announced plans to publish a list of thousands of reviewers’ fraudulent and defamatory posts.
“Once the list is published, websites that feature user-generated content—such as TripAdvisor—will have to notify any reviewers on the list. They will be given two weeks to remove their comments. They could face legal action if they cannot prove that they visited the hotels or restaurants concerned,” reports the Mail Online.
In another punch to the gut, editors of the Good Hotel Guide 2011, which rates the best hotels in the U.K., Ireland and continental Europe, slammed TripAdvisor “for being ‘brazen and shameless’ in printing malicious and collusive reviews without checking their authenticity,” according to caterersearch.com.
Far be it from me to step between a victim and the firing squad, but there are a few issues that should be addressed …
1. How can you possibly know what user-generated content is real and what is fake?
Now, I didn’t just fall off the proverbial turnip truck. I’m fully aware that not every review of every hotel comes from an actual guest. Some come from PR firms, others from jealous competitors, and others still from the hotels themselves.
But just because a reviewer says your service was garbage, your bed sheets smelled like Swiss cheese and your bathroom looked like something in a New York City subway doesn’t mean those comments are fake. Guests are allowed to post brutally honest comments as a means to relay their experience at your hotel.
KwikChex says it offers services to help hoteliers remove or respond to malicious and unfair reviews. But who judges them malicious or unfair? I’m sure the hotel’s perspective varies greatly from that of the guest.
Of greater concern is how they determine fake reviews. Honestly, I haven’t the faintest. I sent KwikChex a query and have yet to hear back as of press time. I’ll keep you posted …
2. Do negative, malicious or fake reviews a libel suit make?
KwikChex’s Chris Emmins told Mail Online: ‘‘People who leave these anonymous reviews, which can damage the reputation of both businesses and individuals, need to realize that not only can they be sued for libel but they can also face criminal prosecution.”
Full disclosure: I’m not familiar with U.K. libel law, so I can’t hypothesize as to whether hoteliers would have a legitimate case here.
If this trend spreads to the United States, however, hoteliers would be hard-pressed to argue this case effectively in court. To win a libel case in the States, it’s not enough to prove fault; U.S. jurisprudence requires plaintiffs prove “actual malice”—a legal term that means the reviewer either knew their review was false or acted with a reckless disregard for the truth when submitting the review. It’s an incredibly difficult legal hurdle to overcome. Certain jurisdictions within the U.S. do prohibit review fraud, however.
One other legal note: Notice that KwikChex’s threat of litigation does not specifically name TripAdvisor as a target, but rather the posters of content on the site. In the U.S., a website like TripAdvisor has certain immunities from content submitted from third-parties (in this case reviewers).
3. Is it even possible to authenticate every piece of user-generated content on a given website?
Theoretically, yes. TripAdvisor could devote limitless resources to authenticate and follow-up on every review posted to its site, and then cross-reference those reviews with hotel data to determine if the person posting stayed at the particular hotel during the particular time, and whether there was a shortage of staffing or other hiccups in service that might have resulted in a poor review.
I suppose the site also could require every reviewer to submit detailed personal information and sign legal documents to waive their rights in the event that some element of a review was fictitious or unfair.
But then, TripAdvisor doesn’t want to hemorrhage every cent of revenue on a fruitless, Quixotean witch hunt, nor does it want to drive away the valuable reviewers who made the website what it is today.
In other words, the editors of the Good Hotel Guide may have been a little harsh when they called TripAdvisor “brazen and shameless.” Easy on the caffeine, guys. If you know a lick about sites that subsist off user-generated content, you’d understand such verification is next to impossible.
Besides, TripAdvisor does have a pretty straightforward disclaimer users are required to check before they submit a review. It says, in part:
“TripAdvisor wishes to ensure that reviewers are not affiliated in any way with the establishment they are reviewing. By checking this box, you certify that you are not employed by the establishment, are not related to anyone employed there, and do not otherwise have a business or personal relationship with the owners or managers of this establishment that might bias your review.”
It’s going to be really interesting to see how TripAdvisor responds to KwikChex’s threats. As always, we’ll be here to report on any developments
“Once the list is published, websites that feature user-generated content—such as TripAdvisor—will have to notify any reviewers on the list. They will be given two weeks to remove their comments. They could face legal action if they cannot prove that they visited the hotels or restaurants concerned,” reports the Mail Online.
In another punch to the gut, editors of the Good Hotel Guide 2011, which rates the best hotels in the U.K., Ireland and continental Europe, slammed TripAdvisor “for being ‘brazen and shameless’ in printing malicious and collusive reviews without checking their authenticity,” according to caterersearch.com.
Far be it from me to step between a victim and the firing squad, but there are a few issues that should be addressed …
1. How can you possibly know what user-generated content is real and what is fake?
Now, I didn’t just fall off the proverbial turnip truck. I’m fully aware that not every review of every hotel comes from an actual guest. Some come from PR firms, others from jealous competitors, and others still from the hotels themselves.
But just because a reviewer says your service was garbage, your bed sheets smelled like Swiss cheese and your bathroom looked like something in a New York City subway doesn’t mean those comments are fake. Guests are allowed to post brutally honest comments as a means to relay their experience at your hotel.
KwikChex says it offers services to help hoteliers remove or respond to malicious and unfair reviews. But who judges them malicious or unfair? I’m sure the hotel’s perspective varies greatly from that of the guest.
Of greater concern is how they determine fake reviews. Honestly, I haven’t the faintest. I sent KwikChex a query and have yet to hear back as of press time. I’ll keep you posted …
2. Do negative, malicious or fake reviews a libel suit make?
KwikChex’s Chris Emmins told Mail Online: ‘‘People who leave these anonymous reviews, which can damage the reputation of both businesses and individuals, need to realize that not only can they be sued for libel but they can also face criminal prosecution.”
Full disclosure: I’m not familiar with U.K. libel law, so I can’t hypothesize as to whether hoteliers would have a legitimate case here.
If this trend spreads to the United States, however, hoteliers would be hard-pressed to argue this case effectively in court. To win a libel case in the States, it’s not enough to prove fault; U.S. jurisprudence requires plaintiffs prove “actual malice”—a legal term that means the reviewer either knew their review was false or acted with a reckless disregard for the truth when submitting the review. It’s an incredibly difficult legal hurdle to overcome. Certain jurisdictions within the U.S. do prohibit review fraud, however.
One other legal note: Notice that KwikChex’s threat of litigation does not specifically name TripAdvisor as a target, but rather the posters of content on the site. In the U.S., a website like TripAdvisor has certain immunities from content submitted from third-parties (in this case reviewers).
3. Is it even possible to authenticate every piece of user-generated content on a given website?
Theoretically, yes. TripAdvisor could devote limitless resources to authenticate and follow-up on every review posted to its site, and then cross-reference those reviews with hotel data to determine if the person posting stayed at the particular hotel during the particular time, and whether there was a shortage of staffing or other hiccups in service that might have resulted in a poor review.
I suppose the site also could require every reviewer to submit detailed personal information and sign legal documents to waive their rights in the event that some element of a review was fictitious or unfair.
But then, TripAdvisor doesn’t want to hemorrhage every cent of revenue on a fruitless, Quixotean witch hunt, nor does it want to drive away the valuable reviewers who made the website what it is today.
In other words, the editors of the Good Hotel Guide may have been a little harsh when they called TripAdvisor “brazen and shameless.” Easy on the caffeine, guys. If you know a lick about sites that subsist off user-generated content, you’d understand such verification is next to impossible.
Besides, TripAdvisor does have a pretty straightforward disclaimer users are required to check before they submit a review. It says, in part:
“TripAdvisor wishes to ensure that reviewers are not affiliated in any way with the establishment they are reviewing. By checking this box, you certify that you are not employed by the establishment, are not related to anyone employed there, and do not otherwise have a business or personal relationship with the owners or managers of this establishment that might bias your review.”
It’s going to be really interesting to see how TripAdvisor responds to KwikChex’s threats. As always, we’ll be here to report on any developments
Understanding OTA sort
Expedia executive Brian Ferguson lifted the veil surrounding his company’s hotel sorting process during the most interesting panel of the Cornell Hospitality Research Summit last week.
If you were wondering why sort, or order of appearance, is so important, Ferguson, VP of supply strategy and analysis at Expedia, said 95% of all transactions on the site occur with Page 1 hotels. And further, 47% of transactions occur with hotels in the top five positions on the page.
So that brings us to the question of how Expedia decides who goes where. Ferguson said factors the OTA takes into account include:
Long-term rate competitiveness;
participation in Expedia packages;
peak season inventory levels;
distance from a user’s desired location; and
negative user reviews.
Of course, rate is important, though Ferguson made a point of saying that OTAs do not set rate, but instead use the rate provided by hotels. “It’s not this notion of OTAs running down rates,” he said. “What the Internet has done is created a lot more transparency in rate. It’s easier to see who is the cheapest hotel.”
Surprisingly, no audience members threw anything at Ferguson.
He then added: “The Internet is not going to be uninvented. That genie is out of the bottle.”
Reviews are a particularly important factor in what hotels will be able to charge through a third-party site, Ferguson said. A 1-point increase in a review score equates to a 9% increase in average daily rate.
“By definition, the people on online travel sites are not looking for a specific brand,” he said. “They’re here to shop around, and they do shop.”
Another reason why this session was the most intriguing to me? Sitting in the audience was STR co-founder and CEO Randy Smith, who just minutes earlier during his keynote listed OTAs as being one factor behind the pricing crisis in the industry during the downturn.
I’m happy to report no one left the session with any black eyes.
If you were wondering why sort, or order of appearance, is so important, Ferguson, VP of supply strategy and analysis at Expedia, said 95% of all transactions on the site occur with Page 1 hotels. And further, 47% of transactions occur with hotels in the top five positions on the page.
So that brings us to the question of how Expedia decides who goes where. Ferguson said factors the OTA takes into account include:
Long-term rate competitiveness;
participation in Expedia packages;
peak season inventory levels;
distance from a user’s desired location; and
negative user reviews.
Of course, rate is important, though Ferguson made a point of saying that OTAs do not set rate, but instead use the rate provided by hotels. “It’s not this notion of OTAs running down rates,” he said. “What the Internet has done is created a lot more transparency in rate. It’s easier to see who is the cheapest hotel.”
Surprisingly, no audience members threw anything at Ferguson.
He then added: “The Internet is not going to be uninvented. That genie is out of the bottle.”
Reviews are a particularly important factor in what hotels will be able to charge through a third-party site, Ferguson said. A 1-point increase in a review score equates to a 9% increase in average daily rate.
“By definition, the people on online travel sites are not looking for a specific brand,” he said. “They’re here to shop around, and they do shop.”
Another reason why this session was the most intriguing to me? Sitting in the audience was STR co-founder and CEO Randy Smith, who just minutes earlier during his keynote listed OTAs as being one factor behind the pricing crisis in the industry during the downturn.
I’m happy to report no one left the session with any black eyes.
Tuesday, November 2, 2010
10 Revenue Management Tips
“Think Jerry would like this?” the man said to his wife, picking up an item.
“I guess so,” she said quizzically. “But what for?”
“His birthday,” the man replied.
“His birthday? Wasn’t that months ago?” she asked.
“Well yeah—in May.” He paused. “Better late than never, I guess.”
In a similar vein, I just found an e-mail incubating in my inbox that I’ve been meaning to cover for more than a month. For an online journalist, a month might as well be an eternity. (I can hear my managing editor grinding her teeth as she reads this.) But hey, better late than never, right?
The e-mail outlines the top 10 revenue management tips for independent hoteliers—though I would argue it’s something every revenue manager should consider. Full disclosure: The info comes from Evolution, a revenue manager service provider. But like I’ve already mentioned, the content bares mentioning.
1. Everyone’s listening. Facebook and Twitter are important, but don’t forget that Internet itself can be social media. There are infinite channels to track your brand or distribute to potential guests. Revenue managers often don’t have the time to monitor every one, but that’s no excuse to neglect them all. Implement an effective social media strategy to monitor what your resources allow.
2. Choose the right distribution channels. The idea is a no-brainer, but effective implementation is a bit trickier. Consider: channel distribution potential, distribution spread and cost, ease of channel management, marketing exposures, technology used.
3. Invest in your own website. Your most important distribution channel is your own website. Is your site optimized for SEO or pay-per-click campaigns? Identify what keywords your audience is searching for based on demand, season or market influences, and make sure your webmaster is following through in implementation.
4. Value is king. In a price-sensitive market, value is the most important factor for guests. That doesn’t mean you have to sacrifice rates, however. Develop value-add packages and length-of-stay discounts.
5. Better relationships mean better profits. Don’t try to do everything on your own. Invest time in building strong relationships with all of your distribution partners including online travel agents, consortia programs and corporate accounts.
6. Know thy audience. As the economy emerges from recession, the booking and travel habits of your target market might evolve. Are you targeting the right clientele? Could you attract higher spenders? Once you’ve identified your target market, look at how they book their holidays: Are they booking last minute or are they looking for early bird deals?
7. Look to the future. It’s important to look ahead and understand how economic and seasonal changes will affect the way people book your hotel. Respond to changes with targeted and differentiated rates and packages such as attractive last-minute offers.
8. Make sure you’re in the loop. The world of revenue management is constantly evolving and is more competitive than ever. Stay ahead of the fast-paced nature of the industry by attending conferences, events, seminars and trainings.
9. Dare to take risks. Revenue management is all about selling the right room, to the right customer, at the right time and for the right price. Getting this all right involves taking a few risks. Just make sure you’ve thought about the consequences, and, if it goes wrong, learn from your mistakes.
10. Set your targets and budgets early. Now is the time to set your revenue management targets and budgets for next year. Don’t do all the work yourself, though. Collaborate with other departments and always communicate your revenue management objectives to your colleagues—in particular the sales department to ensure you are all working towards the same goals.
“I guess so,” she said quizzically. “But what for?”
“His birthday,” the man replied.
“His birthday? Wasn’t that months ago?” she asked.
“Well yeah—in May.” He paused. “Better late than never, I guess.”
In a similar vein, I just found an e-mail incubating in my inbox that I’ve been meaning to cover for more than a month. For an online journalist, a month might as well be an eternity. (I can hear my managing editor grinding her teeth as she reads this.) But hey, better late than never, right?
The e-mail outlines the top 10 revenue management tips for independent hoteliers—though I would argue it’s something every revenue manager should consider. Full disclosure: The info comes from Evolution, a revenue manager service provider. But like I’ve already mentioned, the content bares mentioning.
1. Everyone’s listening. Facebook and Twitter are important, but don’t forget that Internet itself can be social media. There are infinite channels to track your brand or distribute to potential guests. Revenue managers often don’t have the time to monitor every one, but that’s no excuse to neglect them all. Implement an effective social media strategy to monitor what your resources allow.
2. Choose the right distribution channels. The idea is a no-brainer, but effective implementation is a bit trickier. Consider: channel distribution potential, distribution spread and cost, ease of channel management, marketing exposures, technology used.
3. Invest in your own website. Your most important distribution channel is your own website. Is your site optimized for SEO or pay-per-click campaigns? Identify what keywords your audience is searching for based on demand, season or market influences, and make sure your webmaster is following through in implementation.
4. Value is king. In a price-sensitive market, value is the most important factor for guests. That doesn’t mean you have to sacrifice rates, however. Develop value-add packages and length-of-stay discounts.
5. Better relationships mean better profits. Don’t try to do everything on your own. Invest time in building strong relationships with all of your distribution partners including online travel agents, consortia programs and corporate accounts.
6. Know thy audience. As the economy emerges from recession, the booking and travel habits of your target market might evolve. Are you targeting the right clientele? Could you attract higher spenders? Once you’ve identified your target market, look at how they book their holidays: Are they booking last minute or are they looking for early bird deals?
7. Look to the future. It’s important to look ahead and understand how economic and seasonal changes will affect the way people book your hotel. Respond to changes with targeted and differentiated rates and packages such as attractive last-minute offers.
8. Make sure you’re in the loop. The world of revenue management is constantly evolving and is more competitive than ever. Stay ahead of the fast-paced nature of the industry by attending conferences, events, seminars and trainings.
9. Dare to take risks. Revenue management is all about selling the right room, to the right customer, at the right time and for the right price. Getting this all right involves taking a few risks. Just make sure you’ve thought about the consequences, and, if it goes wrong, learn from your mistakes.
10. Set your targets and budgets early. Now is the time to set your revenue management targets and budgets for next year. Don’t do all the work yourself, though. Collaborate with other departments and always communicate your revenue management objectives to your colleagues—in particular the sales department to ensure you are all working towards the same goals.
Wednesday, July 28, 2010
Recovery? Yes, but it’s not an easy one
The mood at the 32nd annual New York University International Hospitality Industry Investment Conference is much better than it was last year. That’s no surprise as the industry was at the bottom of a steep down cycle when the gathering took place at the Waldorf=Astoria in June 2009. But what is mildly surprising as the conference opened at the Marriott Marquis Sunday night with a networking reception was there remains a number of skeptics when it comes to a recovery.
An unofficial poll (that means I asked everyone that I talked to during the two-hour reception the same question) showed about 65 percent of the 120 respondents said the hotel industry is in a recovery, 30 percent said it isn’t, and 5 percent said they simply didn’t know. Clearly it wasn’t a scientific research project, but the results were interesting.
The fact that almost a third of the attendees polled don’t believe there is a recovery yet exemplifies the harsh reality that things are still bad for hotel owners and operators. Not enough people are traveling, there’s still a freeze in the credit market and outside influences continue to batter the hotel industry: oil on beaches, ash clouds in the air, governments and entire monetary units teetering on the edge of disaster. It seems as if Murphy’s Law is in full swing.
Here are some of the interesting comments made during the polling:
* A number of people said the hotel industry abroad was in recovery mode, but not in the U.S.
* “Slow and steady wins the race” was repeated a few times, with the respondents noting that it’s going to be a long recovery process.
* “Fragile” and “cautious” were most often heard by people who took a moment before answering the question.
* The current situation was also described as a “slow, uphill roller coaster.”
* A number of the respondents who said “Yes, the industry is in recovery mode,” also said they based their response on the fact that demand is growing stronger every day.
* Hotel companies are beginning to spend more money on ancillary programs such as marketing and training, and that’s a sign that a recovery has started, according to a number of respondents.
* The most direct answer of the night? “Things are starting to get done, but it is slow. Anything that is getting done these days, whether it’s operations financing or whatever … it’s just so (freaking) difficult.”
And judging from everything that is going on, we shouldn’t expect it to get easier quickly. It will take some time and patience, but it will get done.
An unofficial poll (that means I asked everyone that I talked to during the two-hour reception the same question) showed about 65 percent of the 120 respondents said the hotel industry is in a recovery, 30 percent said it isn’t, and 5 percent said they simply didn’t know. Clearly it wasn’t a scientific research project, but the results were interesting.
The fact that almost a third of the attendees polled don’t believe there is a recovery yet exemplifies the harsh reality that things are still bad for hotel owners and operators. Not enough people are traveling, there’s still a freeze in the credit market and outside influences continue to batter the hotel industry: oil on beaches, ash clouds in the air, governments and entire monetary units teetering on the edge of disaster. It seems as if Murphy’s Law is in full swing.
Here are some of the interesting comments made during the polling:
* A number of people said the hotel industry abroad was in recovery mode, but not in the U.S.
* “Slow and steady wins the race” was repeated a few times, with the respondents noting that it’s going to be a long recovery process.
* “Fragile” and “cautious” were most often heard by people who took a moment before answering the question.
* The current situation was also described as a “slow, uphill roller coaster.”
* A number of the respondents who said “Yes, the industry is in recovery mode,” also said they based their response on the fact that demand is growing stronger every day.
* Hotel companies are beginning to spend more money on ancillary programs such as marketing and training, and that’s a sign that a recovery has started, according to a number of respondents.
* The most direct answer of the night? “Things are starting to get done, but it is slow. Anything that is getting done these days, whether it’s operations financing or whatever … it’s just so (freaking) difficult.”
And judging from everything that is going on, we shouldn’t expect it to get easier quickly. It will take some time and patience, but it will get done.
Tuesday, June 1, 2010
TAAP is the latest OTA challenge
Expedia’s Travel Agent Affiliate Program might be great news for travel agents, but it could mean a raw deal for hotels.
The program, referred to as TAAP, opens up the online travel agencies’ global hotel inventory to offline hotels. The travel agents also can earn commissions on hotels, packages and activities.
Similar Expedia programs already exist in Europe and Asia. Expedia did not return a request for comment on the program.
OTAs have been a hot topic of conversation this year, especially regarding their treatment of occupancy taxes. And this latest move has already generated some wariness within the hotel sector.
Bharat Patel, chairman and CEO of Sun Development & Management Corporation, said TAAP will have a “huge impact” on the industry.
Hotels already are at the mercy of the OTAs when there are last-minute rooms that need to be sold.
“We already have … a battle of rates,” Patel said. “It will lead to rate erosion even more.” He also questioned how the commissions for travel agents will be structured.
What it means for brands
Gerry Chase, COO of New Castle Hotels & Resorts, said a quarter of the business generated by his company’s 26 hotels can be directly tied to OTAs, so he has a vested stake in how TAAP plays out.
“They’re our best friends and maybe our biggest concern,” he said.
This is also potentially bad news for brands.
“Brands will become irrelevant,” he said. “They (OTAs) will start assigning their own star systems.”
To stay relevant, hotels are going to have to state their case on how they are unique. “We cannot blend all the things we do,” Chase said.
The downfall of GDS?
Global Distribution Systems also could be in some peril, Patel said. Why pay for that information when you have a vast array of hotel properties at your fingertips through Expedia, he reasoned. “It could spell a doom for GDS,” he said.
Chase, however, said GDSes aren’t going anywhere.
“It will continue to be a dominant source,” he said. “… The industry can’t afford to dismantle GDS.”
At the end of the day, Chase said hoteliers need to take this latest development in stride and continue focusing on providing quality service to guests.
“It’s going to happen anyway,” he said of the growing OTA influence in the sector, “so we will have to embrace it.”
The program, referred to as TAAP, opens up the online travel agencies’ global hotel inventory to offline hotels. The travel agents also can earn commissions on hotels, packages and activities.
Similar Expedia programs already exist in Europe and Asia. Expedia did not return a request for comment on the program.
OTAs have been a hot topic of conversation this year, especially regarding their treatment of occupancy taxes. And this latest move has already generated some wariness within the hotel sector.
Bharat Patel, chairman and CEO of Sun Development & Management Corporation, said TAAP will have a “huge impact” on the industry.
Hotels already are at the mercy of the OTAs when there are last-minute rooms that need to be sold.
“We already have … a battle of rates,” Patel said. “It will lead to rate erosion even more.” He also questioned how the commissions for travel agents will be structured.
What it means for brands
Gerry Chase, COO of New Castle Hotels & Resorts, said a quarter of the business generated by his company’s 26 hotels can be directly tied to OTAs, so he has a vested stake in how TAAP plays out.
“They’re our best friends and maybe our biggest concern,” he said.
This is also potentially bad news for brands.
“Brands will become irrelevant,” he said. “They (OTAs) will start assigning their own star systems.”
To stay relevant, hotels are going to have to state their case on how they are unique. “We cannot blend all the things we do,” Chase said.
The downfall of GDS?
Global Distribution Systems also could be in some peril, Patel said. Why pay for that information when you have a vast array of hotel properties at your fingertips through Expedia, he reasoned. “It could spell a doom for GDS,” he said.
Chase, however, said GDSes aren’t going anywhere.
“It will continue to be a dominant source,” he said. “… The industry can’t afford to dismantle GDS.”
At the end of the day, Chase said hoteliers need to take this latest development in stride and continue focusing on providing quality service to guests.
“It’s going to happen anyway,” he said of the growing OTA influence in the sector, “so we will have to embrace it.”
Friday, April 30, 2010
7 lessons for revenue managers
If you haven’t learned your own lessons during the treacherous year that was, then you may as well stop reading now. You’re like my neighbor’s dog; no matter how many times he’s been shocked by his electric fence, he still charges at me every day during my morning run. Bark … charge … ZAP! … whimper.
For the rest of us, periods of crisis not only force us to adapt and sharpen our skills in the moment, but they also help us prepare for future crises to come.
Sheryl E. Kimes of the Cornell Nanyang Institute of Hospitality Management understands as much. And during December 2009 and January 2010, she put those principles to work, asking more than 3,000 revenue-management professionals what they did to survive the recent economic downturn and whether or not their tactics worked.
Her findings, which you can (and should) access here, reveal that while discounting was the most frequently used strategy, marketing approaches (e.g. developing new market segments, using pay-per-click advertising, developing other revenue streams) were the most effective.
Kimes also identified seven key lessons all revenue-management professionals should remember in future downturns:
1. Be prepared. The foremost piece of advice respondents shared was to be prepared and to have a plan. When devising your plan, keep long-term goals in mind, Kimes said. How will your plan impact customer satisfaction, employee satisfaction and the long-term image of your hotel or chain?
2. Don’t panic. Stay calm and look for solutions. Don’t compare downturns periods with previous good periods. Think more in terms of long-term decisions.
3. Be wary of broad-scale discounting. Respondents were least likely to recommend this tactic for the future. It takes years to recover from carte-blanche discounting.
4. Don’t cut your marketing budget. If you cut your budgets, you won’t be able to develop the packages and promotions to keep current guests and attract potential guests.
5. Consider marketing approaches. Respondents reported high success targeting smaller, less price-sensitive market segments. Another popular tactic was to develop new revenue streams (e.g. food, spa) within the hotel, as were Web-based marketing approaches such as pay-per-click advertising.
6. Consider rate-obscuring practices. There’s a difference between your public rate and your private rate. Respondents were generally pleased with the performance of opaque distribution sites.
7. Service, service, service. Are you really surprised? While budget cuts typically are unavoidable, never do so at the cost of service.
For the rest of us, periods of crisis not only force us to adapt and sharpen our skills in the moment, but they also help us prepare for future crises to come.
Sheryl E. Kimes of the Cornell Nanyang Institute of Hospitality Management understands as much. And during December 2009 and January 2010, she put those principles to work, asking more than 3,000 revenue-management professionals what they did to survive the recent economic downturn and whether or not their tactics worked.
Her findings, which you can (and should) access here, reveal that while discounting was the most frequently used strategy, marketing approaches (e.g. developing new market segments, using pay-per-click advertising, developing other revenue streams) were the most effective.
Kimes also identified seven key lessons all revenue-management professionals should remember in future downturns:
1. Be prepared. The foremost piece of advice respondents shared was to be prepared and to have a plan. When devising your plan, keep long-term goals in mind, Kimes said. How will your plan impact customer satisfaction, employee satisfaction and the long-term image of your hotel or chain?
2. Don’t panic. Stay calm and look for solutions. Don’t compare downturns periods with previous good periods. Think more in terms of long-term decisions.
3. Be wary of broad-scale discounting. Respondents were least likely to recommend this tactic for the future. It takes years to recover from carte-blanche discounting.
4. Don’t cut your marketing budget. If you cut your budgets, you won’t be able to develop the packages and promotions to keep current guests and attract potential guests.
5. Consider marketing approaches. Respondents reported high success targeting smaller, less price-sensitive market segments. Another popular tactic was to develop new revenue streams (e.g. food, spa) within the hotel, as were Web-based marketing approaches such as pay-per-click advertising.
6. Consider rate-obscuring practices. There’s a difference between your public rate and your private rate. Respondents were generally pleased with the performance of opaque distribution sites.
7. Service, service, service. Are you really surprised? While budget cuts typically are unavoidable, never do so at the cost of service.
Revenue management: Selling value over price
Customers want the best price they can get in any economy, but that statement holds particularly true in a downturn. Looking at many industries today, one may be left to believe that offering a low price is required to be successful. That works well if you can stand on the fact that you are the lowest-cost provider and that you are willing to go to the lengths necessary to remain in that position. Selling on cost is an uncomplicated form of marketing. It doesn’t require much thought or effort and it’s quick to market, but it’s typically not sustainable, nor do most of us strive to be the low-cost leader. Anyone can lower their price. We’ve probably all done it in one form or another in order to win business or gain market share, but it simply doesn’t work well as a long-term strategy.
Time and time again we have been shown the dangers and effects of cutting our prices. When you slash your prices, customers may perceive it as your admission that your prices were too high all along and that you’ve been gouging them. In good times, your customers may know that lower prices are possible. They may delay their buying decision or put you through rounds of negotiation to see just how low your prices can go.
Unfenced discounts may also give your customer the impression that your product is inferior. Long-term discounting leads to lower margins, revenue and profit. So what can you do to keep or gain customers without discounting?
Basing your success on price alone ignores the fact that people don’t make buying decisions based on price alone. Decisions are also based on value. Value is the one thing that separates one product from another and never before has the consumer looked more to that value in making their buying decision. This means that you must have some benefit other than price in order for the consumer to feel they have received any benefit from your product.
Learning how to establish and communicate your value proposition—your differentiator—is key to earning and keeping your customers. If your customers can’t perceive the value that you provide, then it probably doesn’t exist.
If you are competing on price alone, you likely will never achieve maximum profitability. You will be forced to ride the constant rate roller coaster, reacting to the market and actions of your competitors. If price is one of your advantages, that’s great; but you need something that will sustain that advantage and secure your relationships for the future. If it has been awhile since you sat down with other key stakeholders, especially those in sales and marketing, and discussed and solidified these success attributes, now is the time.
We need to look for ways to create meaningful value and significant impact for our customers. If you can build value on the front end, price becomes less of an issue on the back end.
Selling based on value requires that you do everything possible to communicate your value proposition to potential customers before price becomes an issue. Selling on value requires confidence that you can deliver on your promise. If you’re unsure about the validity of your claims and the payback that the customer will be able to achieve, selling on value will be very difficult. In turn, establishing value isn’t any easy task. It takes time to develop, sell and bring awareness to your value proposition. Items that are physical such as location or a historic building are a bit easier, but using a value proposition such as service or the beds in your rooms is much more difficult to achieve.
Begin by evaluating the value proposition of your competitors and determine what it is that you can do or offer that your competitors cannot. What sets you apart? If you can’t find a unique value, then what can you do or offer that, though your competitors can do it as well, your offer is superior to theirs. While not an easy process, once established, your value proposition is something that you can play off of for years to come.
Your attributes must be tangible and true points of differentiation. Once you agree on a value proposition, make sure the hotel staff, marketing pieces, Web site, etc., sell the message at every possible touch point with your current and potential customers. Use testimonials to back up your offering and know what your customers are saying about you on sites such as TripAdvisor, Twitter and Facebook. These social media sites serve as excellent platforms on which to sell your value proposition with immediacy and a targeted approach. Tweets or posts on Facebook should be aimed at selling your value proposition. If you are a hip boutique hotel focused on young business travelers, your posts and offers should be directed at selling that uniqueness.
Like any effort, your value proposition must be analyzed. Do your customers perceive the value that you are offering? Do they put as much value in it as you do? Does it influence their buying decision? What does it take to keep them coming back for more? You must look through the eyes of your customers to ensure you are delivering the value that they bought into and that they can achieve and measure it. You must also create a means of continuous feedback to ensure you are closing the value gap.
When you discover what sets you apart and you sell it, you can put more focus on competing on your uniqueness rather than competing on price. When you have a value proposition that you can sell and that your customers recognize, that value can help to sustain you through almost any economic condition. The best way to avoid being just another hotel is to sell value to your customers.
Time and time again we have been shown the dangers and effects of cutting our prices. When you slash your prices, customers may perceive it as your admission that your prices were too high all along and that you’ve been gouging them. In good times, your customers may know that lower prices are possible. They may delay their buying decision or put you through rounds of negotiation to see just how low your prices can go.
Unfenced discounts may also give your customer the impression that your product is inferior. Long-term discounting leads to lower margins, revenue and profit. So what can you do to keep or gain customers without discounting?
Basing your success on price alone ignores the fact that people don’t make buying decisions based on price alone. Decisions are also based on value. Value is the one thing that separates one product from another and never before has the consumer looked more to that value in making their buying decision. This means that you must have some benefit other than price in order for the consumer to feel they have received any benefit from your product.
Learning how to establish and communicate your value proposition—your differentiator—is key to earning and keeping your customers. If your customers can’t perceive the value that you provide, then it probably doesn’t exist.
If you are competing on price alone, you likely will never achieve maximum profitability. You will be forced to ride the constant rate roller coaster, reacting to the market and actions of your competitors. If price is one of your advantages, that’s great; but you need something that will sustain that advantage and secure your relationships for the future. If it has been awhile since you sat down with other key stakeholders, especially those in sales and marketing, and discussed and solidified these success attributes, now is the time.
We need to look for ways to create meaningful value and significant impact for our customers. If you can build value on the front end, price becomes less of an issue on the back end.
Selling based on value requires that you do everything possible to communicate your value proposition to potential customers before price becomes an issue. Selling on value requires confidence that you can deliver on your promise. If you’re unsure about the validity of your claims and the payback that the customer will be able to achieve, selling on value will be very difficult. In turn, establishing value isn’t any easy task. It takes time to develop, sell and bring awareness to your value proposition. Items that are physical such as location or a historic building are a bit easier, but using a value proposition such as service or the beds in your rooms is much more difficult to achieve.
Begin by evaluating the value proposition of your competitors and determine what it is that you can do or offer that your competitors cannot. What sets you apart? If you can’t find a unique value, then what can you do or offer that, though your competitors can do it as well, your offer is superior to theirs. While not an easy process, once established, your value proposition is something that you can play off of for years to come.
Your attributes must be tangible and true points of differentiation. Once you agree on a value proposition, make sure the hotel staff, marketing pieces, Web site, etc., sell the message at every possible touch point with your current and potential customers. Use testimonials to back up your offering and know what your customers are saying about you on sites such as TripAdvisor, Twitter and Facebook. These social media sites serve as excellent platforms on which to sell your value proposition with immediacy and a targeted approach. Tweets or posts on Facebook should be aimed at selling your value proposition. If you are a hip boutique hotel focused on young business travelers, your posts and offers should be directed at selling that uniqueness.
Like any effort, your value proposition must be analyzed. Do your customers perceive the value that you are offering? Do they put as much value in it as you do? Does it influence their buying decision? What does it take to keep them coming back for more? You must look through the eyes of your customers to ensure you are delivering the value that they bought into and that they can achieve and measure it. You must also create a means of continuous feedback to ensure you are closing the value gap.
When you discover what sets you apart and you sell it, you can put more focus on competing on your uniqueness rather than competing on price. When you have a value proposition that you can sell and that your customers recognize, that value can help to sustain you through almost any economic condition. The best way to avoid being just another hotel is to sell value to your customers.
8 things to look for when searching for a GM
The general manager is the “CEO” of your multi-million dollar asset. What they do and how they lead determines the success and profitability of your property. The following is a list of eight proven skills you should look for when you are trying to bring on a new leader or to measure the one you have in place.
Look for someone with:
1. Proven leadership as a GM. Preferably in the same segment as the hotel they will be leading.
2. A commitment to success. Take a look at their track record and their attitude. Ask questions that allow them to give examples of their past success and how they achieved it.
3. A service mentality. Do they always do their best to take care of the guest and to make sure the rest of the team does? Are you likely to see them out of their office meeting guests during key periods of the day such as check-in, check-out or breakfast?
4. A focus on quality. When they walk across a hotel, even one that is not theirs, do they pick-up
trash and not even break stride? Do they expect everyone else to do the same?
5. Sales expertise. Your GM should have a firm understanding of all aspects of sales from rate-setting, to account management to knowing what questions to ask the sales team. They should be available to assist the sales teams as needed with top accounts. Ideally, they have been in sales.
6. Excellent communications skills. Good GMs can communicate well with guests, employees and clients at all levels. They should be able to communicate clearly, concisely and in a positive way. They should be able to communicate with their management company or owner as well as their brand team.
7. A coach/mentor mentality. A good coach or mentor is not afraid to lead by example; they see opportunities for improvement in all departments and employees. They know how to council and train to improve performance and they know when to remove an employee that is holding the team back by not responding to the coaching (by choice or ability).
8. Understanding of a property-level business plan. They have the ability to measure against benchmarks and then adjust resources and the annual plan accordingly throughout the year to meet goals.
Maximizing your property’s bottom line often ties directly to the leadership and the experience of your GM. By focusing on proven traits you will maximize your revenue and minimize the risk of shortchanging your property, your guests or your bottom line. Is your multi-million dollar asset in the right hands?
Look for someone with:
1. Proven leadership as a GM. Preferably in the same segment as the hotel they will be leading.
2. A commitment to success. Take a look at their track record and their attitude. Ask questions that allow them to give examples of their past success and how they achieved it.
3. A service mentality. Do they always do their best to take care of the guest and to make sure the rest of the team does? Are you likely to see them out of their office meeting guests during key periods of the day such as check-in, check-out or breakfast?
4. A focus on quality. When they walk across a hotel, even one that is not theirs, do they pick-up
trash and not even break stride? Do they expect everyone else to do the same?
5. Sales expertise. Your GM should have a firm understanding of all aspects of sales from rate-setting, to account management to knowing what questions to ask the sales team. They should be available to assist the sales teams as needed with top accounts. Ideally, they have been in sales.
6. Excellent communications skills. Good GMs can communicate well with guests, employees and clients at all levels. They should be able to communicate clearly, concisely and in a positive way. They should be able to communicate with their management company or owner as well as their brand team.
7. A coach/mentor mentality. A good coach or mentor is not afraid to lead by example; they see opportunities for improvement in all departments and employees. They know how to council and train to improve performance and they know when to remove an employee that is holding the team back by not responding to the coaching (by choice or ability).
8. Understanding of a property-level business plan. They have the ability to measure against benchmarks and then adjust resources and the annual plan accordingly throughout the year to meet goals.
Maximizing your property’s bottom line often ties directly to the leadership and the experience of your GM. By focusing on proven traits you will maximize your revenue and minimize the risk of shortchanging your property, your guests or your bottom line. Is your multi-million dollar asset in the right hands?
Friday, April 2, 2010
How to compete successfully in a hotel price war
Drops in occupancies, ADR and RevPAR in 2009 have been widespread in the hotel industry and the trade press has been filled with articles discussing the downturn and proposing possible tactics for surviving it.
Not surprisingly, hotel owners and hotel operators have disagreed on how best to manage during a recession as owners try to maintain sufficient cash flow to cover their costs while operators attempt to maintain service levels and long-term brand equity.
One of the keys to success in a down market is to avoid offering across the board price cuts, but to instead focus on particular market segments and distribution channels. An ADR is just that, an average, and care should be taken to keep your ADR at near or above the average of your competitive set.
Research has shown that hotels with an ADR significantly lower than that of their competitive set have an inferior RevPAR performance relative to their competitors. This relationship has been shown to hold true across all hotel market levels.
For example, in the luxury market, hotels that have an ADR that is higher than their competitive set have the same or slightly lower occupancies, but have a 8- to 14 % higher RevPAR than their competitive set. Conversely, hotels that have a lower ADR than their competitive set have about the same to slightly higher occupancy levels, but report a RevPARs of 3- to 9-percent lower than their competitive set.
Given that knowledge, the challenge for hotel managers is how to compete in a price war. Essentially the two ways this can be done involve either non-price methods or price-related methods.
Non-price methods include competing on the basis of quality, creating strategic partnerships, leveraging your loyalty program, developing additional revenue sources and developing ad¬ditional market segments.
Price-based methods consist of offering packages, using opaque distribution channels and offering discounted rates to selected market segments. It’s not that hotels shouldn’t discount - it’s that they should do so in an intelligent and strategic way.
The intent of this study is to determine what tactics hotels used during the economic downturn and to evaluate the performance of these tactics. In addition, the study sought to solicit advice on how to approach future economic downturns so that it could develop specific advice for hoteliers on how to approach the next economic downturn.
Not surprisingly, hotel owners and hotel operators have disagreed on how best to manage during a recession as owners try to maintain sufficient cash flow to cover their costs while operators attempt to maintain service levels and long-term brand equity.
One of the keys to success in a down market is to avoid offering across the board price cuts, but to instead focus on particular market segments and distribution channels. An ADR is just that, an average, and care should be taken to keep your ADR at near or above the average of your competitive set.
Research has shown that hotels with an ADR significantly lower than that of their competitive set have an inferior RevPAR performance relative to their competitors. This relationship has been shown to hold true across all hotel market levels.
For example, in the luxury market, hotels that have an ADR that is higher than their competitive set have the same or slightly lower occupancies, but have a 8- to 14 % higher RevPAR than their competitive set. Conversely, hotels that have a lower ADR than their competitive set have about the same to slightly higher occupancy levels, but report a RevPARs of 3- to 9-percent lower than their competitive set.
Given that knowledge, the challenge for hotel managers is how to compete in a price war. Essentially the two ways this can be done involve either non-price methods or price-related methods.
Non-price methods include competing on the basis of quality, creating strategic partnerships, leveraging your loyalty program, developing additional revenue sources and developing ad¬ditional market segments.
Price-based methods consist of offering packages, using opaque distribution channels and offering discounted rates to selected market segments. It’s not that hotels shouldn’t discount - it’s that they should do so in an intelligent and strategic way.
The intent of this study is to determine what tactics hotels used during the economic downturn and to evaluate the performance of these tactics. In addition, the study sought to solicit advice on how to approach future economic downturns so that it could develop specific advice for hoteliers on how to approach the next economic downturn.
Thursday, April 1, 2010
Google adds new level of rate transparency
Google is working with select hotels on a pilot project to include hotel rates in Google Maps’ searches. So when a user searches for a hotel on Google Maps, they can enter the dates they plan to stay and see real-time room rates. Users can also click on the rate to see a list of advertisers—third-party travel providers—who have provided pricing information for that hotel.
So far, the test includes a “limited number of advertisers” and is visible only to a “small portion of users,” according to a Google Maps blog.
“We’ll evaluate the usefulness and effectiveness of this new feature, based on both data and feedback, and hope to make it available to more users and offer prices from more partners over time,” the blog reads.
It is unclear how long the Google Maps’ hotel rate test will last and when it will be expanded. “We don’t have a timeline for ending or expanding the experiment at this time,” Google spokeswoman Elaine Filadelfo said.
In a random test example, Google Maps’ blogs displays nightly room rates from third-party travel companies, along with several New York hotels. Those hotels included the Pennsylvania Hotel, Gramercy Park Hotel, Millennium Hotel New York, and Embassy Suites New York.
“It is tied to SEO (search engine optimization). If you are performing well with Google Maps, they are adding on additional features,” said Jim Zito, VP, interactive marketing, for Morgans Hotel Group in New York.
Some Morgans hotels are involved in the test by default, Zito said, because of their performance on Google Maps.
Zito said that as he understands the test, a small percentage of Google Maps’ searchers are able to see the lowest starting rate next to the hotel listing, and click through to a sponsoring third party travel company.
“It is too early to tell (how it is performing) because we can’t differentiate the traffic from those searches,” Zito said. And Zito has not been able to try the hotel rates tool because it is available to a small portion of users.
However, hoteliers that are not currently involved in the test are looking forward to using the Maps’ hotel rates service in the future.
David Doucette
executive director, Internet marketing
Fairmont Hotels and Resorts
“Google Maps is a very useful way to get exposure for our hotels and to drive traffic to Fairmont.com,” said David Doucette, executive director, Internet marketing, for Fairmont Hotels and Resorts in Toronto. “We have contacted our representatives with the Google Travel team and expressed interest in getting involved.”
Joie de Vivre Hotels in San Francisco, which typically adopts new online marketing tools early, also wants to get involved in the new service.
“I could see how the value of including hotel listings would make it even easier for the destination hotel shopper to find where they want to go in just one stop,” said Ann Nadeau, corporate director of marketing at JDV Hotels. “The addition of hotel listings met with the familiarity of Google Maps, (could make Google Maps) the first stop on the journey to find your hotel.”
Marketing executives with Highgate Holdings, of Irving, Texas, are also closely watching the hotel rates test. “I do think including rates on Google Maps is an interesting feature and could indeed result in increased guest room bookings,” said Victoria Grodzki, area director of marketing for Highgate Holdings’ New York office.
However, the new tool may not be useful to every hotel company. “It is not a priority for us at this point,” said Barry Goldstein, chief revenue officer and chief information officer for Dolce Hotels and Resorts in Montvale, New Jersey. For most of Dolce’s guests, Google Maps is a complementary tool they may use once they have chosen where to go, not where they originally find hotels, he said.
“Our properties are in secondary cities, not in city centers, so we tend to have people looking for driving directions, rather than mapping directions,” Goldstein said.
Still, Dolce has found a great way to use Google Maps for internal sales. “We are in the early stages of using things like Google Maps to really look at where our customers’ offices are, relative to our hotels,” Goldstein said. With that information, Dolce can book group business by letting companies now how convenient it is to schedule meetings near their offices.
So far, the test includes a “limited number of advertisers” and is visible only to a “small portion of users,” according to a Google Maps blog.
“We’ll evaluate the usefulness and effectiveness of this new feature, based on both data and feedback, and hope to make it available to more users and offer prices from more partners over time,” the blog reads.
It is unclear how long the Google Maps’ hotel rate test will last and when it will be expanded. “We don’t have a timeline for ending or expanding the experiment at this time,” Google spokeswoman Elaine Filadelfo said.
In a random test example, Google Maps’ blogs displays nightly room rates from third-party travel companies, along with several New York hotels. Those hotels included the Pennsylvania Hotel, Gramercy Park Hotel, Millennium Hotel New York, and Embassy Suites New York.
“It is tied to SEO (search engine optimization). If you are performing well with Google Maps, they are adding on additional features,” said Jim Zito, VP, interactive marketing, for Morgans Hotel Group in New York.
Some Morgans hotels are involved in the test by default, Zito said, because of their performance on Google Maps.
Zito said that as he understands the test, a small percentage of Google Maps’ searchers are able to see the lowest starting rate next to the hotel listing, and click through to a sponsoring third party travel company.
“It is too early to tell (how it is performing) because we can’t differentiate the traffic from those searches,” Zito said. And Zito has not been able to try the hotel rates tool because it is available to a small portion of users.
However, hoteliers that are not currently involved in the test are looking forward to using the Maps’ hotel rates service in the future.
David Doucette
executive director, Internet marketing
Fairmont Hotels and Resorts
“Google Maps is a very useful way to get exposure for our hotels and to drive traffic to Fairmont.com,” said David Doucette, executive director, Internet marketing, for Fairmont Hotels and Resorts in Toronto. “We have contacted our representatives with the Google Travel team and expressed interest in getting involved.”
Joie de Vivre Hotels in San Francisco, which typically adopts new online marketing tools early, also wants to get involved in the new service.
“I could see how the value of including hotel listings would make it even easier for the destination hotel shopper to find where they want to go in just one stop,” said Ann Nadeau, corporate director of marketing at JDV Hotels. “The addition of hotel listings met with the familiarity of Google Maps, (could make Google Maps) the first stop on the journey to find your hotel.”
Marketing executives with Highgate Holdings, of Irving, Texas, are also closely watching the hotel rates test. “I do think including rates on Google Maps is an interesting feature and could indeed result in increased guest room bookings,” said Victoria Grodzki, area director of marketing for Highgate Holdings’ New York office.
However, the new tool may not be useful to every hotel company. “It is not a priority for us at this point,” said Barry Goldstein, chief revenue officer and chief information officer for Dolce Hotels and Resorts in Montvale, New Jersey. For most of Dolce’s guests, Google Maps is a complementary tool they may use once they have chosen where to go, not where they originally find hotels, he said.
“Our properties are in secondary cities, not in city centers, so we tend to have people looking for driving directions, rather than mapping directions,” Goldstein said.
Still, Dolce has found a great way to use Google Maps for internal sales. “We are in the early stages of using things like Google Maps to really look at where our customers’ offices are, relative to our hotels,” Goldstein said. With that information, Dolce can book group business by letting companies now how convenient it is to schedule meetings near their offices.
Monday, March 29, 2010
The pending PIP monster
Most brands have been forgiving in terms of property-improvement plans, and the expectation is that it will continue through this year, but that only delays the inevitable monster waiting on the sidelines. As time passes, more renovation will be required because almost all available cash these days is being used to cover debt and meet operating costs. The more a property is struggling, the less money is going to even routine maintenance. In some cases, lenders and servicers are allowing a deferral of furniture, fixture and equipment reserves to allow debt to be covered.
Buyers need to be sure to do careful due diligence on any asset they are acquiring because the deferred routine maintenance may not be apparent. It is not just the obvious lobby and room cosmetics. It might be a systems issue.
There essentially is no cash flow and no financing for this work to get done by current owners in the near term. Silverton Bank and many other lenders that had been funding this work are gone. Local banks are unlikely to be willing to add to the already over-extended debt burden of an existing loan. New acquisition lenders are not likely to fund it because they are only funding against cash flow. The Small Business Administration might do a little, but it is very limited in size of loan so it will not be useful for any midsize or larger deal.
The acquirer must take this into account when buying an asset. Sellers or special servicers need to clearly understand that whatever a smart buyer might pay for an asset will get reduced by the full cost of the property improvement plan. The pending PIP is as much a part of the investment as the purchase price and anyone who does not include the PIP as part of his investment cost basis is going to find he has a potentially bad investment.
As time goes by and no funds are available to do the work, more and more owners are going to be under growing pressure from both lenders and brands to do it or be in default. If the property is allowed to deteriorate too much, it is possible a lender could claim waste and try to trigger the waste clause under the carve outs, which would make the borrower personally liable. This is a potentially major issue for owners. I would not expect the brands to provide any cash to do the work in most cases, and where a loan has been extended, this PIP requirement is the snake hiding in the shadows waiting to bite you.
A major source of funds for the PIP work may well be the well-capitalized funding sources and owners who will offer to step into such situations with senior equity or mezzanine loans to fill the gap, and possibly to negotiate a reduced and extended loan on the outstanding principal as the extend and pretend deals start to explode on everyone with new maturities then looming. It is going to be impossible for most extend-and-pretend participants to find both the funds to pay off the extended loan, even if it had been reduced with a previous equity infusion from the borrower. Now the borrower is faced with no more extension time and the PIP. The borrower will find that the equity infused into the property in 2009 or 2010 will be gone, along with his original equity, and they cannot pay off the remaining balance and the PIP. It will mean there is no further pretending and reality will arrive.
A lot of borrowers forgot about PIPs and assumed the world would be all better, and values back to where they had been during 2006 and 2007at the end of the two-year extension. Really dumb fantasy. This is why the industry has a very long way to go to sort out who the real owners will be when all of this finally gets resolved, and why it is going to take years to work through. That extension period goes a lot faster than many had hoped.
Hotel owners need to be finding the payoff and PIP money at least six months before the restructured maturity date in order to be able to hope to have funds available by the maturity date. If you are smart, you will be looking one full year ahead because it will be nearly impossible to find. When you do find a possible source, the due diligence and commitment period will be far longer than anything you experienced over the past 15 years—and then you can’t count on most lenders to commit these days. You also need to be gathering additional equity because the new loan proceeds are not going to be sufficient to pay off even the restructured loan amount and surely not the PIP. As we already see, 2010 is not going to generate any material cash flow to help you. There goes one full year of the extension period.
Buyers need to be sure to do careful due diligence on any asset they are acquiring because the deferred routine maintenance may not be apparent. It is not just the obvious lobby and room cosmetics. It might be a systems issue.
There essentially is no cash flow and no financing for this work to get done by current owners in the near term. Silverton Bank and many other lenders that had been funding this work are gone. Local banks are unlikely to be willing to add to the already over-extended debt burden of an existing loan. New acquisition lenders are not likely to fund it because they are only funding against cash flow. The Small Business Administration might do a little, but it is very limited in size of loan so it will not be useful for any midsize or larger deal.
The acquirer must take this into account when buying an asset. Sellers or special servicers need to clearly understand that whatever a smart buyer might pay for an asset will get reduced by the full cost of the property improvement plan. The pending PIP is as much a part of the investment as the purchase price and anyone who does not include the PIP as part of his investment cost basis is going to find he has a potentially bad investment.
As time goes by and no funds are available to do the work, more and more owners are going to be under growing pressure from both lenders and brands to do it or be in default. If the property is allowed to deteriorate too much, it is possible a lender could claim waste and try to trigger the waste clause under the carve outs, which would make the borrower personally liable. This is a potentially major issue for owners. I would not expect the brands to provide any cash to do the work in most cases, and where a loan has been extended, this PIP requirement is the snake hiding in the shadows waiting to bite you.
A major source of funds for the PIP work may well be the well-capitalized funding sources and owners who will offer to step into such situations with senior equity or mezzanine loans to fill the gap, and possibly to negotiate a reduced and extended loan on the outstanding principal as the extend and pretend deals start to explode on everyone with new maturities then looming. It is going to be impossible for most extend-and-pretend participants to find both the funds to pay off the extended loan, even if it had been reduced with a previous equity infusion from the borrower. Now the borrower is faced with no more extension time and the PIP. The borrower will find that the equity infused into the property in 2009 or 2010 will be gone, along with his original equity, and they cannot pay off the remaining balance and the PIP. It will mean there is no further pretending and reality will arrive.
A lot of borrowers forgot about PIPs and assumed the world would be all better, and values back to where they had been during 2006 and 2007at the end of the two-year extension. Really dumb fantasy. This is why the industry has a very long way to go to sort out who the real owners will be when all of this finally gets resolved, and why it is going to take years to work through. That extension period goes a lot faster than many had hoped.
Hotel owners need to be finding the payoff and PIP money at least six months before the restructured maturity date in order to be able to hope to have funds available by the maturity date. If you are smart, you will be looking one full year ahead because it will be nearly impossible to find. When you do find a possible source, the due diligence and commitment period will be far longer than anything you experienced over the past 15 years—and then you can’t count on most lenders to commit these days. You also need to be gathering additional equity because the new loan proceeds are not going to be sufficient to pay off even the restructured loan amount and surely not the PIP. As we already see, 2010 is not going to generate any material cash flow to help you. There goes one full year of the extension period.
Friday, February 26, 2010
Bill for U.S. travel promotion group headed to Obama's desk
(CNN) -- A bill that will create a tourism promotion organization for the United States has received its final passage in the Senate.
The Travel Promotion Act calls for a nonprofit Corporation for Travel Promotion that will promote the United States as a travel destination and explain travel and security policies to international visitors.
"This is a historic victory for the U.S. economy and one in eight American workers whose jobs depend on travel," Roger Dow, president and CEO of the U.S. Travel Association, said in a statement.
President Obama is expected to sign the bill, which the Senate passed 78-18 Thursday, in the next 10 days, according to the travel association.
A $10 fee charged to visitors from countries included in the Visa Waiver Program will partially fund the public-private organization. These visitors will pay the fee every two years when they register online using the Department of Homeland Security's Electronic System for Travel Authorization.
The rest of the funding will come through a matching program of up to $100 million in private sector contributions. If the corporation is able to raise the projected $200 million annually, the organization would be the largest national tourism communications program in the world, Dow said.
National tourism organizations in countries including Greece, Australia and Mexico each spent more than $100 million on tourism marketing in 2005, according to the U.N. World Tourism Organization. The United States spent about $6 million the same year -- the last year for which figures are available.
Oxford Economics, an economic consulting and forecasting company, estimates a well-executed promotional program would draw 1.6 million new international visitors annually and generate $4 billion in new visitor spending.
Some opponents of the legislation said that charging overseas visitors a fee to promote the United States will deter them from visiting.
"We don't want foreigners to have to jump through so many hoops that they just give up and don't bother coming to the U.S.," Steven Lott, a spokesman for the International Air Transport Association, told CNN before final passage of the bill. The IATA represents airlines around the world.
Lott said improving entry and exit procedures would help U.S. tourism more than a promotional organization.
Dow acknowledged the legislation is not a magic bullet for the industry.
"Let's not be naive here. Travel promotion is not a panacea for our international travel issues. There's many things we have to continue to work on such as ... continuing to improve our visa process and all the entry processes."
The Travel Promotion Act calls for a nonprofit Corporation for Travel Promotion that will promote the United States as a travel destination and explain travel and security policies to international visitors.
"This is a historic victory for the U.S. economy and one in eight American workers whose jobs depend on travel," Roger Dow, president and CEO of the U.S. Travel Association, said in a statement.
President Obama is expected to sign the bill, which the Senate passed 78-18 Thursday, in the next 10 days, according to the travel association.
A $10 fee charged to visitors from countries included in the Visa Waiver Program will partially fund the public-private organization. These visitors will pay the fee every two years when they register online using the Department of Homeland Security's Electronic System for Travel Authorization.
The rest of the funding will come through a matching program of up to $100 million in private sector contributions. If the corporation is able to raise the projected $200 million annually, the organization would be the largest national tourism communications program in the world, Dow said.
National tourism organizations in countries including Greece, Australia and Mexico each spent more than $100 million on tourism marketing in 2005, according to the U.N. World Tourism Organization. The United States spent about $6 million the same year -- the last year for which figures are available.
Oxford Economics, an economic consulting and forecasting company, estimates a well-executed promotional program would draw 1.6 million new international visitors annually and generate $4 billion in new visitor spending.
Some opponents of the legislation said that charging overseas visitors a fee to promote the United States will deter them from visiting.
"We don't want foreigners to have to jump through so many hoops that they just give up and don't bother coming to the U.S.," Steven Lott, a spokesman for the International Air Transport Association, told CNN before final passage of the bill. The IATA represents airlines around the world.
Lott said improving entry and exit procedures would help U.S. tourism more than a promotional organization.
Dow acknowledged the legislation is not a magic bullet for the industry.
"Let's not be naive here. Travel promotion is not a panacea for our international travel issues. There's many things we have to continue to work on such as ... continuing to improve our visa process and all the entry processes."
Thursday, February 18, 2010
Does social media matter? Not yet
Social media has gotten a lot of attention at trade shows and in the trade press in the past year, but how important are the likes of Facebook and MySpace when it comes to influencing whether or not a traveler stays at your hotel?
The short answer: Not much. At least not now, anyway.
According to the most recent travelhorizons survey, which is co-authored by Ypartnership and the U.S. Travel Association , only one in 10 Facebook users seeks advice about either destinations or travel service suppliers, and just one in 20 has joined a community of users who share a common travel interest.
Some key stats from the survey:
11 percent ask advice about a destination
8 percent ask advice about a travel supplier
6 percent learn about travel deals
5 percent get updates on destinations and travel suppliers
5 percent have joined a community with like travel interests
These findings intrigued me. After attending conference panels and reading articles (even from HNN) that laud social media as an indispensable means to reach guests, why are so few consumers reciprocating these efforts?
To find the answer, I conducted an incredibly unscientific survey in which I asked a few out-of-industry peers, all of whom travel at least five times a year, whether they use social media for travel-related purposes and, if not, why.
The most common response dealt with access and credibility. Instead of using social media to read up on their next travel destination, they more commonly used Google searches or visited Web sites that they knew had the information they wanted. And if not searching online, they were just as likely to call a friend—we all remember that anachronistic telephone device, don’t we?—to research or ask for advice.
With better sources of information out there, social media quickly fell to the wayside.
Or as one friend put it, “I’d rather use Facebook to find girls we graduated with from college than to look for hotel deals.”
So am I saying that the social-media revelation is a dismissible myth? No. As the technology and its uses evolve, it could very well become that “indispensable means” we so often hear about.
Peter Yesawich, Ypartnership’s chairman and CEO, explained as much in a recent blog: “How quickly (these survey results) may change is a matter of considerable speculation given the remarkable rate of penetration these sites have achieved in such a short period of time. Yet, for now, consumers continue to seek and respond to information about travel services and suppliers from more established offline and online media sources.”
And now if you’ll excuse me, I must visit the South Carolina Department of Tourism’s Web site to plan my summer vacation …
The short answer: Not much. At least not now, anyway.
According to the most recent travelhorizons survey, which is co-authored by Ypartnership and the U.S. Travel Association , only one in 10 Facebook users seeks advice about either destinations or travel service suppliers, and just one in 20 has joined a community of users who share a common travel interest.
Some key stats from the survey:
11 percent ask advice about a destination
8 percent ask advice about a travel supplier
6 percent learn about travel deals
5 percent get updates on destinations and travel suppliers
5 percent have joined a community with like travel interests
These findings intrigued me. After attending conference panels and reading articles (even from HNN) that laud social media as an indispensable means to reach guests, why are so few consumers reciprocating these efforts?
To find the answer, I conducted an incredibly unscientific survey in which I asked a few out-of-industry peers, all of whom travel at least five times a year, whether they use social media for travel-related purposes and, if not, why.
The most common response dealt with access and credibility. Instead of using social media to read up on their next travel destination, they more commonly used Google searches or visited Web sites that they knew had the information they wanted. And if not searching online, they were just as likely to call a friend—we all remember that anachronistic telephone device, don’t we?—to research or ask for advice.
With better sources of information out there, social media quickly fell to the wayside.
Or as one friend put it, “I’d rather use Facebook to find girls we graduated with from college than to look for hotel deals.”
So am I saying that the social-media revelation is a dismissible myth? No. As the technology and its uses evolve, it could very well become that “indispensable means” we so often hear about.
Peter Yesawich, Ypartnership’s chairman and CEO, explained as much in a recent blog: “How quickly (these survey results) may change is a matter of considerable speculation given the remarkable rate of penetration these sites have achieved in such a short period of time. Yet, for now, consumers continue to seek and respond to information about travel services and suppliers from more established offline and online media sources.”
And now if you’ll excuse me, I must visit the South Carolina Department of Tourism’s Web site to plan my summer vacation …
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