Overview of Format and Topic

Transcription

1 Revenue Management Webinar Series Testing v. Shooting in the Dark July 30, 2013 This webinar series is brought to you by HSMAI University, HotelNewsNow, and STR If you need technical assistance with the webcast, contact us at and we will assist you immediately. Overview of Format and Topic Fran Brasseux Executive Vice President, HSMAI 1

2 POLL QUESTION #1 How many people are participating in this webinar at your location today? or more 3 Panel Moderator: Jeff Higley, VP, Digital Media & Communications HotelNewsNow/STR/STR Global 4 2

3 Today s Presenters: Panel Moderator: Jeff Higley, VP, Digital Media and Communications, HotelNewsNow.com/STR/STR Global Panelists: Lauren Faulkner Business Development Executive STR Janelle Cornett Regional Director of Revenue Management TPG Hospitality Kim Tranter Associate Professor/Dir of Resort, Lodging & Tourism Mgmt Programming Johnson & Wales University-Denver Dev Koushik Vice President Global Revenue Optimization InterContinental Hotels Group 5 U.S. Hotel Industry Overview HSMAI Webinar Series July 30,

4 Presentation is available for download. To view this presentation, go to the Data drop-down menu on and click Data Presentations. Total U.S. Review 4

5 June YTD 2013: Highest RevPAR Ever (First 6 Months) % Change Room Supply* 880 mm 0.8% Room Demand* 544 mm 2.3% Occupancy 61.8% 1.5% ADR* $ % RevPAR* $68 5.6% Room Revenue* $60 bn 6.4% Total U.S. Results YTD June 2013 * All Time High June 2013: Highest Monthly Room Revenue EVER ($11.5 Billion) 5

6 Favorable Supply / Demand Fundamentals for Supply Demand 7.7% 4 2.3% 0.7% -0.9% % % Total U.S. Supply & Demand % Change 12 MMA 1/1990 6/2013 ADR Growth Stalls 6.8% 7.5% 7.7% 5 4.0% 0 2.3% -5 Demand ADR -4.5% -8.9% Total U.S. ADR & Demand % Change 12 MMA 1/1990 6/2013 6

7 Positive RevPAR Growth For The Foreseeable Future % 8.6% Months 65 Months 34 Mo % % % Total U.S. RevPAR% Change 12 MMA 1/1990 6/2013 Chain Scale Review Luxury Fairmont, Four Seasons, Ritz Carlton, JW Marriott Upper Upscale Sheraton, Embassy Suites, Hyatt, Marriott Upscale Radisson, Hilton Garden Inn, Courtyard, Best Western Premier Upper Midscale Holiday Inn, Clarion, Hampton Inn, Best Western US Midscale Best Western, Candlewood Suites, Quality Inn Economy Extended Stay America, Red Roof Inn, Days Inn, Value Place 7

8 Strong Demand Growth, Supply Not An Issue Supply Demand Luxury Upper Upscale Upscale Upper Midscale Midscale Economy -1.2 Chain Scales Supply / Demand % Change YTD June 2013 ADR Growth > OCC Growth 5.5 Occupancy ADR Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Chain Scales Occ/ ADR % Change YTD June

9 RevPAR (Slowly) Catches Up To Prior Record Highs $213$ YTD June 2013 $113$117 $84 $87 $62 $63 $44 $41 $31 $29 Luxury Upper Upscale Upscale Upper Midscale Midscale Economy Chain Scales RevPAR$ YE 2007 & YTD June 2013 Segmentation Group rooms booked in blocks of 10 or more Transient third party, rack rate, government rate. Will include single business traveler and leisure traveler 9

10 Transient Drives Recovery 23.2% Transient Group 6.7% 12.9% 18.3% -0.3% -0.5% -2.4% -5.5% -2.6% -2.7% -10.5% -17.7% NOTE: Data is for upper tier hotels only (luxury chains, upper upscale chains, and upper tier independent hotels). Segmentation Demand % Change YTD June 2008 through 2013 vs. YTD June 2007 Pricing Opportunities Ahead 3.6% 5.4% Transient Group 3.8% 0.9% 0.4% 0.5% -4.7% -7.7% -2.4% -3.4% -12.7% -12.7% NOTE: Data is for upper tier hotels only (luxury chains, upper upscale chains, and upper tier independent hotels). Segmentation ADR % Change YTD June 2008 through 2013 vs. YTD June

11 YTD June ADR $ : Transient Rooms Increase Premium $180 Transient $ Group $ $174 $168 $161 $160 $159 $154 $152 $151 $146 $149 $ *Segmentation ADR $, YTD June Top Markets Review 11

12 Still Mixed RevPARRecovery Among U.S. Tracts RevPAR Recovery by Tracts % of Peak RevPAR RevPAR Peak-Trough-Recovery Timeframe San Francisco Miami Oahu Boston Nashville Los Angeles Denver Detroit Houston Anaheim Seattle Dallas St. Louis Minneapolis New Orleans Chicago Tampa New York Orlando Philadelphia Atlanta San Diego DC Norfolk Phoenix 37 mos a Actual Estimated 12

13 Pipeline & Forecasts In Construction: Ground has been broken Final Planning: Construction will begin within 12 months Planning: Construction will begin within months Pre-Planning: Construction will begin in more than 24 months Construction Accelerates Phase June 2013 June 2012 Difference % Change In Construction 76,581 59,803 16, % Final Planning 125, ,788 4, % Planning 124, ,742 10, % Active Pipeline 327, ,333 30, % Pre-Planning 71,576 87,529-15, % Total 398, ,862 15, % Total U.S. Pipeline by Phase, 000s Rooms June 2013 and

14 Under Construction Rooms Mostly In Middle Segments Luxury 6.8 Upper Upscale Upscale Upper Midscale Midscale Economy Unaffiliated Total U.S. Pipeline by Chain Scale, Rooms Under Construction ( 000s Rooms) June 2013 Some Markets are Still Hot Market Rooms % of Existing Supply New York 11, Orlando 2, Washington, D.C. 2, LA-Long Beach, CA 2, Nashville, TN 1, Houston 1, Chicago, IL 1, Denver 1, Miami-Hialeah, FL 1, Total U.S. Markets with Most Rooms In Construction June

15 Outlook 2013 Forecast 2014 Forecast Supply 1.0% 1.6% Demand 2.1% 2.5% Occupancy 1.1% 0.9% ADR 4.7% 4.8% RevPAR 5.8% 5.8% Total U.S. Key Performance Indicator Outlook (% Change vs. Prior Year) Slowly Catching Up to Prior Peaks F 2014F Total U.S. Occupancy % F 15

16 Inflation Adjusted ADRs Well Out Of Reach Nominal ADR 2000/2008 ADR Grown by CPI 2008 ADR Grown by CPI $116 $119 $ ADR Grown by CPI $102 $85 $85 $104 $107 $111 $116 Total U.S. Room Rates Actual vs. Inflation Adjusted F Note: 2012 & 2013 CPI forecast from Blue Chip Economic Indicators Takeaways Supply Growth Slowly but Surely Healthy Demand Growth Despite Everything ADR Growth Drives RevPAR Steady Outlook 16

17 Janelle Cornett Regional Director of Revenue Management TPG Hospitality 34 17

18 Testing and Measuring Case Study TPG Hospitality Case Study 35 Make the Hypothesis Over high weekday transient demand periods (based on 2012 data), with either internal or external compression it would be beneficial from both a revenue and STAR standpoint to not allow 4 night on Sunday and 3 night on Monday arrivals hotel wide. This is done to limit the number of lower rated BT occupied rooms that could be replaced by higher rated retail or other accounts

19 Timing There were several special events for 2013 identified by the city event calendar including city wide group. But also our own internal group and compression where we saw high demand due to brand loyalty and internal compression. Using tools to measure included forecasted demand, denials, BT room night displacement based on LOS restrictions. 37 Metrics What to measure against We used the following to measure our results STLY or same period with high compression Period with similar demand levels YOY Reviewing LOS patterns YOY and measuring the change in market segment mix of business over these dates STAR results 38 19

20 Measure the Results 39 Measure the Results 40 20

21 Measuring Results LOS 1-2 night down -3.6% YOY and 3 night up 5% / 4 night up 1% YOY Booking window also has changed 20% of CNR booked 21+ day vs 10% year prior. LNR 28% booked 21+ days out vs 8% year prior result in putting the restricition on prior to opening inventory YTD through June = RevPAR up 4.8% vs comp set -3.1% = Index up 8.2% YOY 41 Conclusion To get a better/different outcome you need to test and measure Understand what you are looking to change make a Hypothesis so you understand what you are trying to do Determine how long and what you will measure. Then determine the basis of the measurement Define the metrics or measurement Measure the results they may not always be positive 42 21

22 Kim Tranter Associate Professor/Director of Resort, Lodging & Tourism Mgmt Programming Johnson & Wales University-Denver 43 Application of Strategic Development, Execution, and Evaluation in the Collegiate Environment 22

23 A Hands-On, High Tech Approach Obtain on internet based revenue simulation program. Make it a team-based competition. Best with teams of 2 to 3 people. Start with a simulation orientation. Each team is given the same scenario for the property and the market. Strategy Development For A Practice Round and An Official Round Each team must make rate, channel, and marketing spending decisions for each month. Participate in a 12 month Practice Round and a 12 month Official Round. Teams develop and submit a set of strategies per month for the upcoming 12 months. Provide an incentive for winning. Since this in an internet based simulation, each team s decisions impact the others. 23

24 Executing, Modifying and Evaluating Strategic Decisions Teams are permitted to modify their strategies as the rounds proceed. They see all teams results monthly. Teams submit an analysis of their performance, addressing what they would have or should have done differently. Changes their thinking to become much more strategic. Forecasting and Strategic Development Exercise A low-tech method to integrate forecasting and strategic thinking. Create a series of monthly blank calendars. Fill in holidays, hot dates, city-wides from Convention Center and CVB websites. Create monthly forecasts. Compare to actuals. KEY: DISCUSS what strategies could have been employed to drive in more demand per day? Achieve higher rates? Action plans??? 24

25 Where We Are Headed Next Creating two different simulation scenarios: city center and resort to show differences. Plan would be to incorporate annual STR data. Using the STR data, what do the numbers really tell them? Big picture. What adjustments should they make to improve performance? Also moving to case analysis in RM course similar to the Strategic Management course. Dev Koushik Vice President, Global Revenue Optimization InterContinental Hotels Group 50 25

26 BENEFITS MEASUREMENT METHODOLOGIES 51 TEST PRE-REQUISITES Define the Metric to measure Choose Test Periods and Test hotels carefully Plan and Build Tracking Mechanisms Agree on the Process with stakeholders Plan for failures Implement and Scale successes 26

27 STRATEGY TESTING USING CONTROL PERIOD APPROACH METHOD 1 Metric Measured $1.2 $1.1 $0.9 $0.8 $0.7 Control Period The measurement model assumes that the METRIC trend continues to follow measurable seasonal trends and that any shift upwards or downwards is a result of the treatment. Treatment Applied Treatment Period Treatment Impact Expected Impact JAN FEB MAR APR MAY STRATEGY TESTING USING CONTROL PERIOD APPROACH METHOD 2 Baseline Period: Immediately prior period (equal number of days by DOW) Treatment Initialization Objective Find the most appropriate control properties for each BETA property to use in the test Address key drivers: Seasonality / Group Mix / Market Factors Process 1. Select the eligible control properties using objective criteria: Test Period: Time on Treatment Control Property Eligibility Criteria: 1.Same or similar: Brand / Size / Group Mix / Type (airport vs. non) 2.Similar seasonality 3.Control properties must be on similar systems 4.No change in Quality Scores 27

28 STRATEGY TESTING USING CONTROL PERIOD APPROACH METHOD 2 Test Results Change in Metric Control Hotels 1% BETA Hotels 5% Total Uplift: 4% Statistical Significance How confident are we that the test results are not by chance? 55 Analysis STRATEGY TESTING USING SIMULATION METHOD 3 Calculated optimal and baseline revenue scenarios to compare against actual revenue results and isolate the benefit from the test Optimal revenue scenario used a hindsight optimal rate based on actual demand observed Compared baseline, actual and optimal scenarios to measure total opportunity and percent opportunity captured 28

29 Questions? Panel Moderator: Jeff Higley, VP, Digital Media and Communications, HotelNewsNow.com/STR/STR Global Panelists: Lauren Faulkner Business Development Executive STR Janelle Cornett Regional Director of Revenue Management TPG Hospitality Kim Tranter Associate Professor/Dir of Resort, Lodging & Tourism Mgmt Programming Johnson & Wales University-Denver Dev Koushik Vice President Global Revenue Optimization InterContinental Hotels Group 57 Upcoming Webinars: Next Revenue Management Webinar: #6: Outlet and Function Space Revenue Management is Here August 27, :00-3:30 pm EDT Next Digital Marketing Webinar: #4: ebusiness Planning for 2014 September 10, :00-3:00 pm EDT 29

30 59 Don t miss - HSMAI s MEET Reserve your booth space today! Visit for more information. 30

31 Get Informed - Get Ahead Get Certified! Certified Revenue Management Executive (CRME) Certified Hospitality Digital Marketer (CHDM) Certified Hospitality Sales Executive (CHSE) Certified in Hospitality Business Acumen (CHBA) Go to For more information and downloadable applications! 61 Evaluation Please take a moment now to click on the Evaluation link in the LINKS box and complete the evaluation. Be sure to click on Submit when you have completed the evaluation to send us your responses. Your comments & suggestions are very important to us, and they help us to provide you with quality programming. Today s webinar is copyright 2013 by the Hospitality Sales & Marketing Association International with All Rights Reserved