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7/30/2019 Demystifying Corporate Pricing
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Demystifying Corporate Pricing
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Reality is merely an illusion, although a very persistent oneReality is merely an illusion, although a very persistent oneReality is merely an illusion, although a very persistent oneReality is merely an illusion, although a very persistent one
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Reality What happened Last Winter?
Even if we just manage to get the 20Cr lost revenue back, it will already
- Contracted Transient Segment contributes to 47% of total room revenue.
- The segment witnessed 11% drop in RPD i.e 116 RPD less than LY.
- The segment registered no growth in ARRs.
- The Result = 11% drop in rev, i.e approx 20Cr less than SPLY.
mean a 13% growth in revenue.
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ALL OF US need to be aligned to the same REALITY, in order
to meet our common GOAL!
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Back to the Basics How do we increase
productivity from this segment?
Work on our zero mat clients to produce.
Increase productivity from existing users.
Acquire New Customers
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Work on our zero mat clients to produce.
[Q] Why doesnt a customer use us?
Inconvenient Location
No Potential
Sales Relationship
Loyalty Programs
Pricing (Expensive)
Habit
Have potential,Rate and
Location OK.
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Increase productivity from existing users.
[Q] How can we increase productivity from existing users?
GOAL Variables
Increase Revenue
Thru ahealthy
balance
of
ARR Volume
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Increase productivity from existing users.
[Q] How can we increase productivity from existing users?
Variables
ARR Volume
Premium Room
Cat Sales.
Premium Over
Competition.
Category closures.
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Before we Begin
Approx 70% of our revenue in Winter, comes from accounts that have LNR.
Only 30% of our revenue, comes from accounts that are contracted on Lanyon.
This underlines the impact of our current pricing change since it will
impact 70% of our segment revenues.
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Our Objective!
Selling the Right Room to theRight Client at the Right Moment
on e g s r u on anneat the Right Price
(Q) What is Right Price?
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(Q) What is Right Price?
Let look at an example
Consider a 100 room Hotel
With 2 room categories EC and TWR
In a an Utopian Market,
The Hotel Should sell ALL its rooms at Rack
Rates to reach maximum revenue Potential.
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The Hotel Should sell ALL its rooms at Rack
Rates to reach maximum revenue Potential.
In this Utopian Scenario the hotel can do a
maximum ofRs.23lac everyday.
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This Utopian Scenario is highly
unlikely, because
egmen s ac segmen pays a erence pr ce.
[2] Market Reality What is the customer ready to pay for?
[3] Competition How are they pricing?
[4] Demand / Supply How does this balance pan out?
[5] Misc economic conditions, industry trends, loyalty, etc.
So
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SoLets break it down
Selling ALL the rooms, at rack rate every day in the the Winter
is NOT possible!
Hence Step 1 Make a realistic Winter
Forecast.
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Step 1 Make a realistic Winter Forecast.
Where do see growth opportunity Volume or Yields?
- While preparing a forecast, do keep sight of the Budgets.
- Also consider all other factors like
- Market conditions demand /supply balance, customer expectations.
- Forthcoming city events- Last year performance, growth opportunities vis--vis the same (If we did
poorly last winter, forecasted gorwths over LY will be higher)
- Relative performance both learning from LY and targets for TY.
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Step 2 Align segment mix to meet winter targets.
- Break the forecast into individual months, evaluate each month separately with a
special focus on November and February. Have a strategy for each month.
- What is the crew occupancy going to be in winters? At what ARR? This is pre
booked, incorporate the impact of the same in your forecast.
- What does the conference calendar look like? What can we derive from past pick-uphistory?
- Forecast realistic volume and yield to evaluate growths in each segment. (Each
segment will have its own strategy)
- Have a plan to meet expected hotel RevPAR incase any one segment needs to makeup for the loss in another. (Ex- loss of crew / low conferences viz-a-vis SPLY)
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Step 3 Narrow down to Corporate Segment
Corporate Segment contributes to more than 50% ofoverall room revenue.
A pricing error made now, will be difficult to correct
until end of this pricing season.
Hence a pricing error now will impact 50% of our
overall room revenue, in the coming winter.
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Step 3 Narrow down to Corporate Segment
With our targets in place, we must look at the
Past market trends historic data
Business in pipeline
Relative performance (m-o-m SPLY)
targeted relative positioning
current market conditions
new supply expected
past booking history
Inventory mixaverage LOS city events
booking window
Sounds complex, Doesnt it?
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Now.. lets attempt to
emyst y orporatePricing
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Step 3 Narrow down to Corporate Segment
Step 3.1 Understand Past Trends
Pull out Data from STR for last 3-4 winters for Compset and Complete Market (Luxury
and Upper Upscale Hotels)..
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Step 3.1 Understand Past Market Trends
Pull out Data from STR for last 3-4 winters for Compset and Complete Market (Luxury
and Upper Upscale Hotels).
Simple xls
GraphsBase Data
Inferences
What are the inferences we can draw, Lets look at an example
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What are the inferences we can draw, Lets look at an example
- The ARR over last 3 winters for the compset is between 10-14 thousand.
- ARRs peak in November and February significantly. (how does this compare to our forecast)- Average occupancy for winters is approx. between 75 80 percent.
- Both our Occ% and ARR has always been slightly lower than compset /market throughout
winters. where is the opportunity?
- Do take into account addition of any new supply, and its impact on the market numbers.
- Do include Market (Luxuruy and Upperscale Hotels) data to analyse trend vis-a-vis market.- How does this reading compare with our Forecasted Targets?
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Step 3.2 Understand Past Hotel Perf. Trends
Look at each months VI report for Last Winter
- Spot opportunities in volume and yield growth in each month vis--vis competition.
- Take cognizance of those months where we CANNOT push Occ% or ARR any further.
- See how our approach in every month (Occ% and ARR), helped us / did not help us in
relative positing. Spot opportunities at a month level.- Each months strategy needs to be clearly defined.
- Focus specially on November and February - These two months drive maximum
revenues (Approx more than 41% of H2 revenues come from there 2 months)
- What do you expect in the coming Nov and Feb how does that compare with theforecast?
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Step 3.3 Understand Past Hotel Perf. Trends
Look at each months Segment reports for Last Winter
- Corelate monthly segment performance with the relative performance for that
month to help appreciate which segment needs to be pushed at a monthly level.
- Spot volume and yield increasing oppurtunites at a segment level Vs. SPLY.
- Which segments do we anticipate a degrowth in (Crew / Conferences)? Is there an
action plan to enhance transient delivery in those months.- Spot opportunities in volume and yield growth at a monthly level.
- Take cognizance of segments where we CANNOT push Occ% or ARR any further.
Does this increase dependence on Corporate segment?
- Focus specially on November and February - These two months drive max revenues- Plan for valleys as well as city pressure dates.
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Look at each months Room Category reports for Last Winter
Step 3.4 Understand Past Hotel Perf. Trends
- Look at numbers for SPLY, to spot volume and yield increasing opportunities at a
room cat level.
- Corelate monthly room cat performance with the relative performance for thatmonth to help appreciate which segment needs to be pushed at a monthly level.
- Devise strategies to drive optimum yields.
- Take cognizance of room cats where we CANNOT push Occ% or ARR any further
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Look at each months Rate Plan Productivity
Step 3.5 Understand Past Hotel Perf. Trends
- Check if Last winter data helped in overall strategy.- Where are the gaps?
- Did our contracted rates sell? If not, why?
- Did we overprice ourselves? If yes, how do we correct it?
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Step 4 Devise strategy to meet overall Corporate
Segment Forecast.
Corporate Segment contributes to approx 50% of overall room revenue
in winter.
Increasing CVGR Rates alone will NOT lead to higher ARRs.
The highest room nights generating contracted rate, does not mean it
is the most popular rate point. (Could be because only 1 or 2 customers
have produced big numbers at this rate)
Dropping rates alone, will NOT lead to higher volumes
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Our Relaionship customers, buy the following
rates
CV1 CV2Customized
ETVP
Generic
Step 4 Devise strategy to meet overall Corporate
Segment Forecast.
CV3
,
CS2)
ETVPCust.
[Q] Which range of rates give us
the most business ???
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Step 4 Devise strategy to meet overall Corporate
Segment Forecast.
Use Starwiz to generate LY Winter data (from the Dashboard Report).
Use the data to tabulate productivity in this format.
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Step 4 Devise strategy to meet overall Corporate
Segment Forecast.
Use this Table to- Identify highest selling price points,
and then further drilldown into
understanding these customers
w o are t ey en o t ey
produce? What are their contractedrates? Until when have rates been
contracted with them? Are the
seasonal or static for the year? What
do we expect from these customersin the coming winter.
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Identify the key
customers, basis
.
And then
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Ok we have identified and
analysed our HIGH IMPACTCustomers What Next?
What about the other Customers?
How do we optimize our CV Band
Productivity???
What different can we do?
ll
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Step 4 Devise strategy to meet overall Corporate
Segment Forecast.
New Approach - 10 CV BANDS
1Post Analysis of historic data and expected market conditions identify the
lowest Corporate Rate applicable for the coming Winter.
Divide the difference between the Highest value and the lowest value by 9,
round it off to the higher multiple of 100 to arrive at intervals for the 10 CV
bands.
2
3
4
Define the HIGHEST REALISTIC / SELLABLE CV Rate that you would like to go
with for the coming Winter. (Look at Nov and Feb separately)
Arrive at the Range of Contracted Rates (Ex. If the lowest rate is Rs.6000 and
the highest sellable rate is Rs.10,000 ; the range is Rs.6000 to Rs.10,000)
S 4 D i ll C
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Step 4 Devise strategy to meet overall Corporate
Segment Forecast.
In the previous example
Lowest Rate identified = Rs.6000
= .
Therefore difference = Rs.4000
Intervals for 10 CV bands = 4000 / 9 = Rs.444
Round offRs.444 to nearest multiple of50 = Rs. 450
Hence 10 CV Bands will read as follows
Hotels will have the freedom to round off / lower / increase the intervals as required.
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Lets take some questions now
[ ] f
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Lanyon rates which are alreadycontracted, and DO NOT fall
[Q.1] What about Lanyon rates that do not fit the CV Band
value?
Slabs (due to rate value orseasonality or rate inclusions),
will remain as customized rate
plans.
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Hotels will have the ability to add breakfast
and/or internet to any of the fixed slabs &customize it for any customer, such rate
plans will be loaded as CV1B (CV1 with b/f)
or CV1BI (CV1 with b/f & internet)
[Q.2] How we handle Value Add ons (Bf / Internet) ?
The differential for these value ad on to be
as per the Hotels brand.
The hotel should than contract with all
customers with any one of the 30 slabsonly. (10 X 3)
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It is recommended that the adjacent CV
table, be created with rates applicable untilDecember 2013.
This means we will currently load Seasonal
[Q.3] Until when do we intend to prepare a rate guideline?
Rates against these BANDS, applicable
until December 2013.
This will enable us contract with our
customers (Local and Lanyon) until Dec
2013.
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[Q.4] How will we structure the Rate Code reporting on
Opera?The reporting to market segments would be as follows:
CV1 -2 rate plans, (even the B/f & internet plans) to the CV1 market code
Similarly
This segmented structurewill enable us identify exactly what price point sells
the most for the hotel & take appropriate action accordingly.
- o e mar e co e
CV5 - 6 to the CV3 market code CV7 - 8 to the CS1 market code (also including any customized plans that fall
under this price range)
CV9 -10 to the CS2 market code (also including any customized plans that fall
under this price range)
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Something NEW
Next Slide
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NO more manual conversions from F1 to CV1 !!
[Q.5] How do we approach customers on BAR?
1 Introduce a new market code called CBAR
A CBAR rate plan will be attached to ALL customers. (both contracted on a
This will enable clean market segment data without manual intervention.
3
5
BAR, as well as customer with a locked rate plan at the hotel)
Hence for example if IBM has a locked plan attached (CV or customized), it will
also be attached with the CBAR Rate plan hence 2 rate plans. This (CBAR)
rate plan will be tagged back to market code CBAR for reporting purposes.
4Any customer now on CBAR will automatically get tagged under market code
CBAR.
[Q 5] H d h t BAR?
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IBM Booker calls Reservation
Res Agent will see 2 rates on the screen attached to IBM Profile
[Q.5] How do we approach customers on BAR?
Lets look at an example
IBM Contracted Rate
(Say Rs.7000)
CBAR = BAR of
the day.
The Res. Agent will have the freedom to sell any rate i.e whichever is lower
amongst the two.
When the CBAR is sold, the PMS will
automatically pick up CBAR market
code.
When the IBM contracted rate is
sold, the PMS will automatically pick
up the appropriate contracted market
code.
[Q 6] C d thi diff t ith K A t ?
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[Q.6] Can we do something different with Key Accounts?
Learning from Starwoods model of SP and GP accounts, where they get a % discount
off the bar, we recommend the following
1
Introduce one more new market code called CBAR5
To enable us (current only regional sales offices) to offer Key Accounts a 5% of
the BAR, at hotels wherein the customers volume does not qualify a CV rate.This is extended as a benefit on the basis of large volumes at other hotel(s).
RMs to ensure that customers attached with CBAR5 plan ARE NOT attached to
any other rate plan.
3
5
CBAR5 will be a floating rate plan at 5% off the prevailing BAR rate.
4Any customer now on CBAR5 automatically get tagged under market code
CBAR5. (Both CBAR5 and CBAR will be grouped under a new market group i.eCBAR)
[Q 5] How do we price different categories?
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The following inclusions in the service design for respective categories need to be
considered: Cost of laundry
Cost of luxury hours
Cost of breakfast
Along with the best possible realistic pricing for this winter to enhance yields it isalso important to have a optimum category differential.
[Q.5] How do we price different categories?
Cost of meeting room if used.
Cost of in room amenities & special services
Cost of internet
It is recommended that the differential to be kept at Rs 1500 - 2000
Note: if a minimum category differential (which covers such costs) is not maintained
than selling Towers may lead to lesser contribution to the bottom line than selling anEC
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