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Revenue Management Webinar Series
Session 4: How Will You Measure Your Success?
This webinar series is brought to you by This webinar series is brought to you by HSMAI University, HotelNewsNow, and STR, and HSMAI University, HotelNewsNow, and STR, and
sponsored by IDeaS Revenue Solutionssponsored by IDeaS Revenue Solutions
Overview of Format and TopicOverview of Format and Topic
Webinar Moderator
Fran Brasseux
Executive Vice President, HSMAI
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POLL QUESTION #1POLL QUESTION #1
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this webinar at your location today?
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We are very grateful to our sponsor for this
Revenue Management Webinar Series:
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Panel Moderator:
Jeff Higley, VP,
Digital Media &
Communications
HotelNewsNow/
STR STR/STR Global
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TodayToday’’s Presenters: s Presenters: Panel Moderator: Jeff Higley, VP, Digital Media and Communications, HotelNewsNow.com/STR/STR Global
Panelists:
Jan D. FreitagVice President, Global DevelopmentSTR
Apo Demirtas
CEO & Cofounder
R&D Intelligent Hospitality
Klaus KohlmayrSenior Director, ConsultingIDeaS –A SAS Company
Rao AvasaralaVice President, Enterprise SolutionsTravelclick
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The US Hotel Industry
- How Will You Measure Success -
Jan D. Freitag
Senior Vice President
STR
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Agenda
Total US OverviewChain ScalesMarkets
Smith Travel Research, Inc. and/or STR Global, Ltd. (collectively for these purposes, “STR”) are the e xclusive owners of all rights in these Industry Presentation s and their content. Reproduction of all or a port ion of these presentations for any purpose without prior approva l of STR is strictly prohibited.
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www.hotelnewsnow.com
Click on “Industry Presentations”
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2011 –Recovery?
or Recovery!
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Total US - Key StatisticsYTD June 2011
% Change• Hotels 52k• Room Supply 874 mm 0.8%• Room Demand 517 mm 5.8%• Occupancy 59.2% 5.0%• A.D.R. $100 3.3%• RevPAR $59 8.5%• Room Revenue $52 bn 9.4%
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On An Annualized Basis: Most Rooms Sold - EVER
*Number of Rooms Sold, 12 MMA, 1/89 – 5/11
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If year 2000 ADR had increased by CPI each year…
Note: 2011 & 2012 CPI forecast from Blue Chip Economic Indicators
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Chain Scales
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• Luxury – Four Seasons, Ritz Carlton, W Hotels, InterContinental
• Upper Upscale – Hyatt, Embassy Suites, Hilton, Marriott, Sheraton
• Upscale – Hyatt Place, Hilton Garden Inn, Courtyard, Hotel Indigo
• Upper Midscale – Best Western PLUS/Premier, Hampton Inn
• Midscale – Best Western, Country Inn & Suites, La Qu inta Inn
• Economy – America’s Best Inn, Econolodge, Red Roof, Days Inn
2011 STR Chain Scales(Selected chains from each segment)
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Luxury Leads Recovery.Supply Growth in Upscale / UpMid.
*US Chain Scales, Supply & Demand % Change, YTD 6/11
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Healthy OCC Growth “Should” Lead to ADR Increases
*US Chain Scales, Occupancy & ADR % Change, YTD 6/11
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Selling 7 out of 10 Rooms “Should” Lead to ADR Increases
*US Chain Scales, Absolute Occupancy % , YTD 5/11
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After 4 Years Prior Peak ADRs Still Elusive
*US Chain Scales, ADR $, YTD 6/07 vs. YTD 6/11
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Markets
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Demand Recovery Evenly Distributed (not so Post-9/1 1)
-11.6%
7.8%
*Selected Geographies, Demand % Change, 12 MMA 1/00 – 6/11
8.8%
-7.8%
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What is “Low Occupancy”? Well, Who Is Asking…?
68.6%
*Selected Geographies, Absolute Occupancy %, 12 MMA 1/00 – 6/11
52.2%
57.2%
63.9%
57.4%
60.1%
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Being in Non-Top 25 Markets Is A Good Hedge
*Selected Geographies, Absolute ADR $, 12 MMA 1/00 – 6/11
$142
$88$93
$116
$104
$167
$184
$123
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www.hotelnewsnow.com
Click on “Industry Presentations”
Smith Travel Research, Inc. and/or STR Global, Ltd. (collectively for these purposes, “STR”) are the e xclusive owners of all rights in these Industry Presentation s and their content. Reproduction of all or a port ion of these presentations for any purpose without prior approva l of STR is strictly prohibited.
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Klaus KohlmayrSenior Director of ConsultingIDeaS – A SAS Company
A Simple Argument for Measuring Your Success
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“A sub-optimal decision in time
is better than an optimal decision too late.”- Dr. Ravi Mehrotra, President and Founder of IDeaS
Common measurements = Common success
A new way to look at RevPar Index
RevPar Index
– Understand the
underlying behavior
– Understand trends
– They 5 why’s
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Who is the better manager?
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-
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Sum of RGI Is>100 Sum of ARI Is>100 Sum of MPI Is>100
# o
f d
ay
s w
ith
KP
I >
=1
00
Number of Days with KPI >= 100 by DOW
Sun Mon Tue Wed
Thu Fri Sat
Forecast Accuracy vs. Forecast
Performance
• Takes into account the
inherent volatility of the
business
• Considers quality of
inputs
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In closing
• Focus & Alignment
• Keep it simple and short
• Its not the “what” but the “why”
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Rao AvasaralaVice President, Enterprise SolutionsTravelclick
Measuring Success:Keeping it simple & powerful
Measuring success begins with clear definition of goals
Followed by a rigorous and disciplined process for
performance focus
Measurement is about impacting the results – not
limited to keeping score
1. “In-Market Measurement”
a) Monitor and measure while
actions are in play
b) Fine tune actions, course correct
2. Retrospective Measurement
a) Ensure you reached your goals
b) Review “final tally”
c) Implement learning for
upcoming goals
Measure in the context of your competitive set…
• Relative performance:
– Benchmarking against competitive set
– Utilizing Share and Index measures
• Identify right competitive set
– Chain Scale
– Property/Portfolio characteristics
– Location
Measuring performance while actions are “in-play”….
• Provides us the ability to fine tune & course correct
– Business Mix & Strategy
• Targeting growth in specific channels (e.g. Brand.com) and segments (e.g.
Transient)
– Pricing Actions:
• Occupancy/room night pace
• Occupancy/room night share
• Price Position
– Promotion Actions:
• Fair Share YoY variance
• Competitive matching
Example: Measuring Success – While pricing action is in
play…
Arrival Date Criteria Occupancy ADR
Fri Jun-10-2011 My Prop 53.1% $223.30
Comp Set 81.1%
Index 65%
Rank 7 of 7 1 of 7
Sat Jun-11-2011 My Prop 55.1% $223.53
Comp Set 79.4%
Index 69%
Rank 7 of 7 1 of 7
Sun Jun-12-2011 My Prop 72.4% $222.94
Comp Set 62.0%
Index 116%
Rank 2 of 7 1 of 7
Mon Jun-13-2011 My Prop 76.6% $227.82
Comp Set 67.1%
Index 114%
Rank 2 of 7 1 of 7
“As of date” = June 5th
• Price Position: Does not have to be constant
– Monitor pricing action and modify as needed
Example: Promotions behave differently based on
property, competitive matching, promo duration
Promotion / Price Sale
# of Arrival Dates(Weekend only)
Occupancy Fair Share Var YoY
Occupancy Market Share Var YoY
Promotion 1 32 - 3.56 - 0.40
Promotion 2 24 - 1.37 - 0.15
Promotion 3 18 5.58 0.61
Key Takeaways
1. Execute a rigorous process for
performance measurement
2. Measure relative to market /
competitive set
a) Share, Fair share
3. Measure while action are “in-play”
(forward looking) and retrospective
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Apo Demirtas
CEO and Cofounder
R&D Intelligent Hospitality
Revenue Management: The Misunderstood
Measuring the Success of RM
• Starts with the definition of the discipline
– Cliché: Asking the right price, at the right time, to
the right customer
versus
– My personal: The application of microeconomics
to trade
RM: Taking it beyond price optimization
• Using the broader – in my mind – the right
definition and view:– Challenge the notion of using traditional ways
• What’s one of the main coefficient factors the auto industry uses
in determining demand and price
Consumer Confidence Index (CCI)
• Where is the CCI used in the hotel industry
Nowhere!
The Broader Application and
Success and the New
• Price to Value Ratio (PVR)
– Pricing
– Sales
– Marketing
– Operations
– Brand Management
– Asset Management
The Broader Application and
Success and the New
• Price Confidence Index (PCI)
– Pricing
– Sales
– Marketing
– Brand Management
– Asset Management
The Broader Application and
Success and the New
• Space to Occupancy Ratio (SOR)
– Catering
– Sales
– Inventory Management
– Asset Management
The Broader Application and
Success and the New
• Room Revenue Multiplier (RRM)
– Catering
– Sales
– Inventory Management
– Pricing
The Broader Application and
Success and the New
• Negotiated Production Density (NPD)
– Pricing
– Sales
– Inventory Management
The Broader Application and
Success and the New
• Price Position Index (PPI)
– Pricing
– Marketing
– Asset Management (through asset value)
The Broader Application and
Success and the New
• Balance Scorecard – Beyond the tradition
– PVR
– PCI
– SOR
– RRM
– NPD
– PPI
It’s about the application of
microeconomics to trade!
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Questions? Questions? Panel Moderator: Jeff Higley, VP, Digital Media and Communications, HotelNewsNow.com/STR/STR Global
Panelists:
Jan D. FreitagVice President, Global DevelopmentSTR
Apo Demirtas
CEO & Cofounder
R&D Intelligent Hospitality
Klaus KohlmayrSenior Director, ConsultingIDeaS –A SAS Company
Rao AvasaralaVice President, Enterprise SolutionsTravelclick
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Don’t miss -
HSMAI's MEET NationalDate: September 7, 2011 - September 8, 2011, Washington DC
The Hospitality Sales & Marketing Association International (HSMAI), announces a new way to MEET. Building on more than 20 years of success with connecting planners and suppliers and adding to its efforts this year to rebrand the organization's mission and focus, HSMAI's renowned Affordable Meetings® conference and exhibition is taking on a new name and a new vision.
Starting with its National show, Sept. 7-8 in Washington, D.C., meeting and event professionals will be invited to join their hospitality industry colleagues at HSMAI's MEET: Meetings, Events, Education, Technology.
Reserve your booth space now for 2011 to secure prime positioning.
Visit www.hsmaimeet.com for more information.
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Upcoming Webinars:
The HSMAI University 10-part 2011 Revenue Management Series –Next Session:
Session 5 on August 30 - How Can You Get the Most From the Data You Have?Special rates for registering for entire series
Best Practices in Creating a Marketing Plan – August 2, 2011
Best Practices in Creating a Digital Marketing Plan – August 16, 2011
To register for these and more, please go to www.hsmaiuniversity.org.
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TodayToday’’s webinar is copyright 2011 by the Hospitality Sales & Marketings webinar is copyright 2011 by the Hospitality Sales & Marketing Association International with All Association International with All Rights Reserved.Rights Reserved.
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