NY Times: For the Hotel Industry, Recovery is a Long Way Off

For the Hotel Industry, Recovery is a Long Way Off

http://www.nytimes.com/2009/11/24/business/24road.html

Great article by Joe Sharkey from the NY Times, first paragraph really says it all and I can't help but agree 100%

In these uncertain economic times, I am wary when I hear someone proclaiming, “We have finally bottomed out.” After all, who knows how long we may stay on the bottom?

So that’s why I urge caution in evaluating small recent indicators that might mean better times ahead for the hotel industry.

On Monday, for example, the hotel investment services firm Jones Lang LaSalle Hotels released a survey showing that investors saw some signs of improvement for hotels, but not for at least a year.

For business travelers that means hotels will remain a buyers’ market, especially as they continue to discount rates. But because hotels have cut spending on staff, maintenance and renovations, it means the general quality of the hotel experience could continue to decline.

Every couple of months, I like to take the temperature of the hotel business because, like most business travelers, I generally like the way domestic hotels steadily improved services for about a decade. On Monday, I spoke with two experts at New York University Tisch Center for Hospitality, Tourism and Sports Management. Both say the hotel industry needs to think differently about how it does business, even after it gets back to a firmer financial footing.

Hotel operators, who recall past cycles when booming growth came after business downturns “have to get over the idea that things are going to get back to the way they were,” said Lalia Rach, the dean of the hospitality program at the Tisch Center.

She sees a number of hurdles once hotels start to recover, including improving person-to-person service, which has slipped as many hotels laid off staff and added extra work for those still on the job.

“They’ve cut so much labor that there is perhaps the question, ‘Do they really still have a customer service attitude?’ ” she said. “Do people still understand they’re in the hospitality industry?”

While traveling last week, Ms. Rach said she made it a point to observe airline workers and found them dispirited, reflecting the deteriorating condition of the airline business. “Going through O’Hare, I was struck by the realization that the airlines just didn’t care, and the workers share that attitude. There used to be a smidgen of concern for customer service, but not any more. And that’s a concern I have for the hotel industry.”

As demand improves, hotels will try to raise room rates to previous levels, she said, “but then all of these things will come back to haunt them.

“Will customers be asking, ‘You really want me to pay this kind of money — for that kind of service?’ The American consumer now really understands the quality-value price equation, and I’m not sure that has sunk into the hotel industry. That is the new normal.”

Bjorn Hanson, a clinical associate professor at the Tisch Center, said that average domestic hotel occupancy this year would be about 55 percent.

Average national occupancy has dipped below 60 percent only twice before since the 1920s, he said, during the Great Depression, and in the aftermath of the 2001 terrorist attacks.

He said that “occupancy in 2010 will almost certainly be up a little bit,” mostly because of continuing heavy discounting. Average room rates, he said, are likely to be slightly lower next year.

It has been a year since the hotel industry felt the sudden blows from the recession after a period of record prosperity.

This year, Mr. Hanson said, revenue per available room, the crucial measure of hotel performance, will be off 16 to 17 percent for all hotels — a far steeper drop than any analysts were predicting earlier this year.

For luxury hotels, the numbers are far worse.

Mostly because of the economy, but partly because of public resentment of conspicuous corporate spending, five-star hotels took the biggest hit as company travel managers cracked down on spending and luxury meetings and conference planners either canceled events or went more downscale.

For luxury hotels, per-room revenue will probably show a drop of 25 percent this year, he said.

No one expects that to change drastically anytime soon, either. Until a year ago, “there was a sense at some executive levels that there was no limit to opulence” on the road, Ms. Rach said.

The limits have arrived.

PJQS3SG3B6JB

FelCor Reports Third Quarter Results - Continues to Accomplish 2009 Goals

FelCor Reports Third Quarter Results - Continues to Accomplish 2009 Goals

Felcor Loding - FCH continues to impress as they are some of the victors in the Hotel Industry Trade-Down sell-off. With a portfolio primarily consisting of Embassy Suites Hotels, Doubletree, Hilton, Sheraton/Westin, Holiday Inn, and Crown Plazas.

Felcor Lodging is positioned perfectly in the current market for Hotels. As perfect as something can be in the Hotel Industry these days. With continued declining RevPAR's 13 months in, and no end in sight, these upscale hotels have nestled themselves in the perfect mix. They have been making huge leaps in Market Share (RevPAR Index) and flow-through by cutting expenses only 11.6%. I say only as I believe this is where Felcor can make even further gains, as my belief is, that many companies cut MORE than 11.6% in expenses, and as the market begins to recover this will only hamper the others as it will take longer for them to recover and give Felcor the edge as the market regains balance.

Another key factor helping Felcor is that by being a Upscale not luxury hotels, they have the flexibility to pick off higher rated "Trade-Down" business who was previously staying with higher rated business and is looking for a similar product but at cheaper rates. (Which are still higher than traditional Upscale rates) And the flexibility to continue to dominate the mid-range corporate business.

Some highlights from their Third Quarter Results:

Even though RevPAR decreased 17.8 percent for the third quarter at their 85 consolidated hotels. Market share increased approximately two percent for the third quarter.

“Once the economy begins to improve, we expect the lodging industry will lag behind the broader recovery. As such, there has not yet been a widespread improvement in demand trends and the shift of the customer mix continues to pressure rates." Richard A. Smith, FelCor’s President and Chief Executive Officer.

"We will continue to benefit from our high-quality portfolio, the renovations we completed in 2008 and the redevelopment of the San Francisco Marriott Union Square. As a result, we expect our hotels will continue to gain market share from their competitive sets and RevPAR at our portfolio to outperform our peer group and the upper-upscale segment."

Best of luck to Felcor with those RevPAR gains!

4 ways to rev up your RevPAR (RevPAR Guru)

4 ways to rev up your RevPAR (from RevPAR Guru CEO & Founder Jean Francois Mourier)

There are few things more important to hoteliers right now than finding ways to increase bookings. This is evident everywhere, from large chains advertising across-the-board rate discounts to boutique properties launching campaigns designed to put heads in beds. Here is a list of four highly effective tactics.

By Jean Francois Mourier

Hotels’ occupancy and RevPAR, always key metrics for the industry, are in desperate need of revitalization.

We’ve compiled a short list of four highly effective tactics that can help hotels increase both RevPAR and occupancy through the fastest-growing (and most important) sales channel currently available to them - the online channel.

1. Re-evaluate your Compset

The time-honored Smith Travel Research compset, once the only way to define a hotel’s competitors in a geographic area, has become outdated. Online Travel Agencies (OTAs) have changed the way consumers shop for hotels, so it stands to reason that the definitions of a property’s competitors should change as well. Smart travelers will compare price and star ratings to obtain a quick assessment of what they can get for their money within their location, regardless of location. Hoteliers should do the same. By being objective and realistic, looking outside the traditional or STR-dictated compset, widening the vicinity or sub-region of the hotel, comparing guest reviews, and generally expanding the amount of hotels considered competitors, a hotelier can get a more realistic sense of what their compset actually is. Soliciting an outside objective opinion of what the hotel’s compset seems to be, as well as ranging ½ star up and down in quality rating, can help complete this exercise.

2. Hands Off!

Manually manipulating hotels rates and yield is, by definition, limited. The world of electronic sales moves too quickly for sales teams and revenue managers to optimally match rates to supply and demand fluctuations. Human operators lack the capability to yield at night or during weekends when it matters most. One of the worst things a hotel can do in an era of transparent pricing is to keep rates the same, so hotels need to take the appropriate steps to yield rates in a way that doesn’t leave money on the table. The booking window is shrinking even more as consumers turn to mobile bookings, so automation becomes the ultimate yield-empowering tool. Automated revenue management systems can integrate distribution simultaneously with rate decisions so a hotel doesn’t have to compromise on rates and occupancy.

3. The Power of Page Position

Just as with search engine optimization (SEO), the order in which a hotel appears on the pages of an OTA is critical to bookings. Whether a hotel is listed at the top of the first page, or in the middle, or at the top of page 2 can mean the difference between successful occupancies and disappointing vacancies. Today, travelers use OTAs as hotel search engines- using it the way that they would use Google to see what hotel options exist in a particular destination- so a hotel’s position on these sites corresponds directly with occupancy and sales. Hoteliers must anticipate their competitors’ rapid rate changes to ensure the property does not fall off page 3 or 4, which, to online consumers, might as well mean that the property doesn’t exist. To gain maximum market share, hoteliers should calculate optimal pricing positioning by star rating, guest reviews and location. A multiple-page positioning approach can benefit a hotel’s prospects for OTA-driven bookings.

4. Monitor & Control Inventory

Hotels routinely allocate rooms to their OTA channels, but what happens if that allocation falls short of demand? What if those rooms run out on nights or weekends, when the revenue management staff is off the clock? A good hotel will take a page from big box retailers and keep their inventory out on the shelves (or available to the public through OTAs) instead of in the back storage room.

Hoteliers should allocate resources in their budgets for real-time dynamic rate optimization with automatic room inventory control. These powerful tools will ensure proper room inventories on all electronic channels day and night giving the hotel a proactive attitude versus a reactive stance. Continuously monitoring the pace of bookings and having automated GDS and OTA allocation updates can help maximize online bookings.

While these strategies cannot always guarantee profitability for hotels, they can certainly help increase bookings on that most important of sales channels: online. It is through successful electronic sales that many hotels can reach positive RevPAR and high occupancy rates.

These four strategies will most certainly rev up your RevPar, and represent a solid starting point for a comprehensive revenue management strategy that will take your property through the end of this recession and into a more profitable and long-term recovery.

Jean Francois Mourier is CEO & Founder of RevPARguru, a company that has developed an alternative type of revenue management and real-time pricing solution (combined with automated online distribution) to help hotels maximize occupancy and increase their profits.

Industry Turning Around?

What you are seeing above is for the first time in ages that Luxury and Upper Upscale Chain Scales have seen a Year over Year Occupancy Increase! On strong Occupancy, 69.1% and 71.8% respectively.

Industry Turning Around?? Lets hope so!

Revenue Management for Independent Hotels

Revenue Management for Independent Hotels

As I recently learned from the EyeForTravel conference, the Big Boys (Yeah you Hilton, Marriott, Hyatt etc.) have the advantages in automating Revenue Management features. There are umpteen different automated Revenue Management toys and tools out there these days, and without the backing of an army of team members, how can you sort through what is best for the Independents, how can they keep pace?

In an interesting interview from John Enright, Executive Director - Revenue Account Management, Preferred Hotel Group on HospitalityNet

John explains - "Small companies and independent hotel chains refer to lack of resources and a limited budget to invest in high-end technology as major challenges associated with revenue management. Key executives in such organizations manage several roles simultaneously.

They oversee all revenue divisions, including sales, marketing, e-commerce, revenue and reservations. They need to ensure that these departments are communicating and working together so that revenue can be maximized across the company. On the other hand, large hotel chains have more money to invest in technology and people, so their roles within the revenue division are more defined."

As someone who works for an Independent hotel chain I can personally testify to the truth of these statements(While I do disagree with some of the rest of his interview...), and it really requires a much more personal touch from the Revenue Managers. Working in a smaller scale does have it's advantages however, there is no one size fits all method as far as Revenue Management goes, everyone is a unique and new situation. The Roller Skating championships in Lincoln Nebraska is just never quite the same as the Outdoor Retailer's convention in Salt Lake City. While both provide huge compression in their markets, the cancellations for the SLC convention are through the roof and can be anticipated at almost a 10% of total reservations, where the Roller Skating if you get over-booked you're in trouble.

While every other day I read about another new Revenue Management product coming on board, this time with the perfect algorithm for accounting for all unconstrained demand generators, shifts in market segmentation etc. There are still some things that the Independents have advantages.

"Enright pointed out that smaller organizations are likely to be more nimble and may have less barriers for expeditious adaptation to new strategies in a rapidly changing marketplace."

The nimble and the quick still have a chance in this market, in 2010 the Year of the Travel Deal, don't forget about the little guys, they're still out there kicking, scratching and biting their way into the travel industry and looking for any advantages they can find.

John Enright is the Executive Director of Revenue Account Management for Preferred Hotel Group.

BTN Reports: Sabre Sees Disappointing September Bookings

Title says it all:
Sabre Sees Disappointing September Bookings

---Not good news as many analysts were claiming that the final 4 months of this year will really determine how the economy will affect 2010's travel numbers as a whole. As we all know September and progressing into the final Quarter of the year is when heavy RFP Season sets in, and rates are quoted and set for 2010. If the perception of the industry is still disappointing, rates will be down, leading of course to Hotel RevPAR's dropping.

Seth Harris reports for BTN Online that - "Sabre's air and hotel booking data from last month indicated little overall improvement in travel demand, as they were relatively flat, year over year, from last September's economic meltdown, which brought U.S. corporate travel to a near standstill, according to the company's top executives.
September usually is a good indicator of the corporate travel industry's performance as it is the first month of the shoulder season in which business travel traditionally increases following the summer months."

As all of us Hoteliers know, 2010 was a tough year with how Labor Day was situated as well as Religious holidays, and hopefully this was part of the reasoning's for which why September did not pick-up as many were hoping.

As actual numbers flow in from the Hotels we will keep a close eye on the most recent results, as the upcoming months will be our biggest indicators to forecasting (and budgeting) 2010.

Here's to an increasing RevPAR Q4!

Collette Vacations on Revenue Management & Pricing in Current Economy

Continuing on our subject from EyeForTravel Session 1 on "Adapt & Update Your Revenue Management & Pricing Strategy to Profit in the Current Economic Climate".
Jeff Roy, Director of Air Revenue Management from Collette Vacations brought us some great information from some of the other side, the Air Travel side which is basically a direct flow through to Hospitality Revenue Management.

The highlight I pulled from Jeff's address was this "Discounting may not stimulate demand, but it can, and will affect Market Share."

Jeff really touched on how every Revenue Manager's first reply to the infamous "What do you think about discounting?" Question, will always reply with "Discounting does not create demand!" Basically, this mentality is BS, every one of them will say that to your face, then we all watch our Competitors and Market's rate's just dive and the rate war begins. The key thing to remember is that discounting done inproperly will result in Long-Term rate loss, importance in proper fencing should never be underestimated.
Here are some strategies Jeff suggested in fencing and providing value instead of straight discounts:

• Booking Incentives: Using Pre-Pay and Extended Booking Windows to fence discounts
• Best Rate Guarantee- Rate Change Guarantee's
• Door to Door pick up shuttle services
• Various Value Adds: Internet, Meal-Plan, Drink Coupons etc.

In this difficult time, forecasting has been one of the hardest things to do, Jeff has experienced success by breaking his forecasting into different channels. Such as forecasting Internet bookings versus call-in bookings and repeat customers.
They also have established Short and Long term goals to help keep their teams motivated. Long Term goals to keep the team from panicking due to the current economy, and focused on remembering that the downturn is not permanent. The Short Term goals are to keep the team motivated in the current times and maximizing that which they still are getting now.

The absolute best measure for success in the downturn is Market Share coming out of the downturn. The validity of your pricing in the new economy can be determined by your actions in the downturn.

Do you Chase Profits or Revenue?

Revenue Management in Current Economic Climate

Adapt & Update Your Revenue Management & Pricing Strategy to Profit in the Current Economic Climate

Day 1: Meeting #1 from:
Sharon Duffy, VP Revenue Management Hilton Hotels Corporation

Sharon addressed the crowd on a multitude of topics for Revenue Management in the current economy, here were some of the key aspects I gathered from her talk.

**Key Point in addressing the current economy: “Formerly people’s perception was driven by the media, but in the current recession everyone knows someone who is out of a job or in financial hardship. It’s Personal now.”

Pricing Integrity:
Rate and Price integrity should be a top priority right now, teaching your customers to trust your Best Rate Guarantee.
Do not erode your own pricing with discounting, discounts will and do happen, but should include fencing and should NEVER erode your Best Available Rate.
Rate Integrity is one of the best ways to ensure direct bookings and get Repeat Guests, and repeat guests is the goal of our business, they are the core of our business and the cheapest source.

**Keep in mind that the downturn is not permanent!

• Ensure everything that costs can be tracked and ROI’s can be deducted.
• Opaque and Contract business is the nature of the industry right now, inventory is wide open to these outlets and should be explored.
• Know your break-even point to occupy a room.
• Understand your Pace for all of your Market Segments
• Group pace is very behind, Advance Purchase rates are very popular and helping pace. More and more hotels are now opening up to Govt. business.
• Accurate forecasting is imperative in a downtown, to be accurate may need to update daily and really understand short term trends.
• In any market you’re only as good as your dumbest competitor, we can’t all just blindly chase to be the lowest rate in the market.
• It is most important to be the best Value and hold rate integrity rather than to be the best Rate.

Not only should you be tracking and Forecasting your own hotel’s recovery, you should be analyzing and forecasting your market’s recovery. (Hotelligence reports, and Smith Travel) The problem right now is that no one is willing to believe it’s as bad as what it really is. It doesn’t help at all to say its rosy when it simply is not. Historical data at this point is very difficult to use, instead of strictly using Historical, attempt to combine it with a % off of current trending.

Understand what makes your product the one to choose – What differentiates you from your competitors and makes you the best choice for your customer. Sometimes you’re not always the best choice for EVERY customer, find the one’s whose niche you fit and make your hotel perfect for them.

Notes from Eye for Travel's 2009 North Americian Summit

I recently had the pleasure of attending the 2009 North American Travel & Distribution Summit held this past week in Chicago. I took lots of notes but I don't want to bore you all with them all at once.

Here are my top 8 items pulled from the conference:

1.) You MUST always approach your hotel from the customer's perspective. Remove the blinders and look at things from the guests perspective. If you don't you don't you will always be stuck in your old mindset.

2.) If you negotiate on price alone the price will never be low enough. You must stress the value your property brings to the table.

3.) Never ask a guest "have you stayed with us before?" You should know the answer to that question already!

4.) Apart from groceries, customers go to the Internet first before purchasing a product. Plan your marketing strategy accordingly!

5.) When given the chance, customers prefer to book directly with your brand due to perceived flexibility and options.

6.) To encourage bookings through direct channels, hotels should build strong loyalty programs and invest in comprehensive SEO and SEM marketing efforts.

7.) OTA's get first time customers in the door for new brands. They may book directly later and become loyal customers. According to a joint research project by Cornell University & Expedia, for every booking via Expedia 2 bookings are sent to your website. The "billboard effect."

8.) OTA's offer international distribution and significant marketing budgets which can supplement a hotel's marketing budget when times are lean. Small and independent hotels must ride the back of this "800 lb gorilla."

I hope you enjoyed this and I will post more as I have time to further digest all of the fantastic information. Also, if you attended this conference I would love to hear about what you took away for the conference.

Cheers to a RevPAR building day!

EyeForTravel Musings and Thoughts

So after a successful trip to EyeForTravel in Chicago, (what a great city.) I've got quite a bit to share, I'll be updating in the following days with commentary and updates I have from all of the individual meetings I was able to attend.

On a quick side note, to entertain you in the mean-time.

One of the highlights of my trip was learning of this little start-up from a great guy I got to meet.
Roman Peskin who is starting up iNNtelligenz, a Pace/Market Vision/Market Analysis tool.

http://www.inntelligenz.com/

Forget Rate Parity and Rate Integrity, let’s go to War!

Fantastic Rate Parity and Integrity Article from Patrick Landman over at Xotels Revenue Management.

Forget Rate Parity and Rate Integrity, let’s go to War!

Just about every industry expert and professional has been preaching for the last 6 months that dumping rates is not the solution to offset low demand during these challenging economic times. But to unload distressed inventory even Starwood Hotels & Resorts is cutting its prices up to 50% at approximately 600 properties worldwide.

We have been always in favor of a more long term coherent strategy and have always encouraged our clients to do the same thing. And when on the brink of giving up, we always send them the classic song, ‘Hold the Line’, by Toto to motivate them.

But does this still hold up, if a strong worldwide brand like Starwood is stepping away from what many of us have seemed to agree of being the best long term strategy. What if the large chains all start slashing their rates? What if 5 star hotels price themselves at a level where they compete with 3 and 4 star hotels? Can we throw Rate Integrity out of the window?

Rate Integrity, yes that’s a concept consumer’s value, knowing that they are buying a product of a certain value. Of course they are open to pay more or less for a room depending on the time, place and situation of acquisition. Yielding and fences are well accepted by consumers. But there is an acceptable bandwidth or psychological range.

The question many hoteliers ask us, will people accept to be paying €150 for their room, knowing or the room next door pays €75. The truth is they will never know. You will … Many hoteliers also ask us if the profile of the ‘cheaper’ guest will not disturb the more ‘expensive’ guest. We tend to see this as old school thinking, as in this day and age, you cannot tell the difference. Let’s face it, today I am wearing a suit for the first time since my wedding last year. I have been staying in and consulting for 4 and 5 star hotels going around in my ripped jeans. The world is changing …

So how does this game of Price Integrity and Rate Parity Work? From our experience we have found that hotels who have applied a more dynamic and flexible strategy are the ones achieving the best results. One cannot just work in a sense of ‘black and white’ and maintain rate strategies of another era. Nor can you throw all strategies and positioning out of the window. But realistically we are competing in a world that goes in all directions, so we have to be smart about it, not just radically discount across the board.

Ok great, well said… But what is a smart strategy? How could it work? Because in the end you still have to fill rooms. It is too easy to stand on the sidelines and say, discounting is not the solution. I hate those kinds of comments. A theory is not enough. It won’t get you there. You need to get creative, and be flexible. A Guerilla Warfare approach works best, as your competition will not be able to understand or follow …

Here an idea of a strategy that has worked very well for some of the hotels we manage;
•Rate Parity - yes, same rates, and same conditions on all public channels… but don’t let yourself be boxed in by this. It is a general strategy, not a law. And honestly we are not in rate parity for the consumer’s sake. We just know that as hotels we have to please our distributors, and without rate parity our job would become almost impossible. Flexibility and dynamism to deviate from time to time, is what builds success.
•Rate Integrity – Even though this is hard, during tough economic times. We do believe you should maintain some form of rate integrity. This does not mean you should not lower your rate. But you could be priced according to the market. You don’t have to go as low as others, neither do you have to maintain previous rates. Let’s face it, we all accept how the stock market works. The same will be accepted for hotels. Just don’t dump rates so low that you are hurting your image.
•Price Fencing - is how you can get around the whole challenge of Rate Integrity. Offer a slight discount off your BAR for 1 and 2 night stays. But be aggressive on bookings with a longer length of stay. Reservation for 3, 4, 5 nights and more can be offered steep discounts. Consider that the largest percentage of your regular guests will not see this. It is a very effective method.
•Lead Time Pricing - The Early Bird still works. Figure out your average booking window. Prior to your regular pick-up curve discount steeply. Competition is still asleep while you are building base steeling their guests.
•Opaque Pricing - Hidden discounts through non-branded offers. Use opaque channels like Priceline and Hotwire to unload distressed inventory. They provide wonderful reports showing you exactly what demand volume exists at each price point. It might not be what you really want, but you need it. And trust me opaque or hidden discounting works!
•Flexible Corporate and Consortia Pricing - Introduce them without asking the travel agency. Load your special offers minus let’s say 10% automatically. You will become much more attractive then the hotels that don’t. Especially to agencies that weren’t looking at your property before. Afraid that you are displacing current rates which are being booked by loyal corporate travel agencies. Do a query in your PMS on their IATA number and see how much they are booking your BAR and special offer rate tiers. It is a great way to introduce flexible rates to them and show the advantages. Just consider when you yield your rates; you don’t go above the contracted price in order not to upset them. It will open their mind and help you with the negotiations this fall.
•CRM Pricing - Offer leisure guests that have booked you though 3rd parties a 10% discount of your BAR, booking your hotel directly using a promo code. You eliminate agency fees of 10 to 25% and get them to book directly at a small discount.
•Corporate Guests and their Family - Offer corporate clients to book a double room with a free upgrade to a family room to accommodate their two children the next time they would like to come to your destination on holidays. Again apply a special promo code they have to insert in your online booking engine.
•Friend Rate - Send an after check-out thank you email offering a unique discount they can pass on to their friends. They email their friends a special offer which has to be booked within the next two to four weeks. You can even add a reward to it, that if they achieve a certain number of friend bookings, they will get a free stay. The promo code must thus be unique for the guest in this case. Make sure you put a Twitter and FaceBook posting button in the email as well. Imagine the viral spin-off of this.
•Add Value - Oh yes. We should not forget about this industry classic. Make a package at a slightly higher price than your room only rate and add additional services or features to the offering. Now important is we don’t try to sell the hotel again. Remember they won’t have dinner in your restaurant every night if they are visiting your destinations as tourist. They want to get out and experience the town. So for €5.00 per night include a bicycle. Or for €10 include a city wide museum ticket. Use your destination and create an offer that differentiates your hotel from the one next door. Or for €7.50 extra include and of the beaten track tour of your city. Think of things like a Upcoming Modern Art, Jazz or Gay History Tour. You can find more than enough local tour guides online that will be more than willing to work with you. Get creative, sell experience!
The above examples of price segmentation and price discrimination and guerilla tactics are very effective. You have to get creative and outsmart your competition. And if you segment, communicate and promote your offers and price strategy clearly well, you will not lose ‘price integrity’.

To avoid having to discount to deep to achieve occupancy, the name of the game is driving demand. The role of the revenue manager therefore has changed. Collaboration and working in sync with the marketing manager has become indispensible.

Rate Parity and Rate Integrity are not an objective. They are merely yield tools of your strategies. We must not lose sight of the real goal of any business, the bottom line. RevPAR is not something you can really rely on nowadays. Hoteliers should be really managing their property by GopPAR.

If you really want to win in these times, you should take it to the next level. Kill your competition. Invest in online marketing. And I mean invest. Let’s take an average scenario to define budget. A hotel of 100 rooms running at 75% occupancy at an ADR of €80, which gets 30% of its business through third party travel agencies and 15% FIT wholesaler production. Conservatively calculating the commission and net rate discounts we are talking of €180.000, at the least. Converting 10% of this business into direct sales would be acceptable at a price of €18.000 no?

We applied this approach with some hotels we manage last year. And surprise, this year their occupancy is outperforming last years. One of them generated with their website in 4 months time the same revenues as entire 2009 and another double his direct online sales. We are ignoring the direct sales through the reservation office, which is trending at a 20% spin off currently.

To win, you need to take risks, be different. Outsmart your market. Don’t just do what the rest does. Do it in stealth mode. Be a rebel, and outmaneuver your competition. And if it means going against some industry standards here and there, so be it …

Cheers!

Patrick Landman – Xotels

Why Marriott is succeeding

Great brief clip from the Economist about how Marriott is surviving even in these tougher economic times.

Conditions for Hotel Industry "RESET" May be Coming into Alignment

Great article from Hotel-Online headlines today. Reminds me of "Tipping Point" by Malcolm Gladwell, at what point will the Hotel Industry hit it's "tipping point" and get back on track.

http://www.hotel-online.com/News/PR2009_3rd/Jul09_ButlerReset.html

By Jim Butler, July 14, 2009

My friend Steve Van at Prism Hotels has a great Hotel Default Blog. His most recent article ("The Sky is Really Falling") sparked some perspective on whether the hotel industry is finally reaching a critical RESET point. Here are the latest thoughts.

Is the "RESET" at hand?

The hotel industry will not get better until we have a complete RESET, but maybe the conditions for that may finally moving into place. Here are the latest indicators:

1. The last optimist died. On July 7, 2009 Smith Travel Research threw in the towel on their formerly "optimistic" forecast and have adopted a "bleak picture" forecast for 2009, and continuing deterioration in 2010 for all three industry benchmarks (occupancy, average daily rate and revenue per available room).
2. Lenders are recognizing that hotel loan defaults are imminent. We are starting to see lenders recognize that even though a mortgage has been extended, or is performing "today." it will not perform next month or very soon. They are preparing to deal with the assets now and finding some borrowers are sanguine, but others are not. It is better to act sooner.

3. Owners aren't going to make up the shortfalls much longer. The report today that the Ilikai hotel has closed is just a high profile indicator of more closures coming. Delinquencies and foreclosures are skyrocketing, and hotels are going dark because neither the owner nor the lender will advance money to meet shortfalls to pay payroll, utilities and operating expenses.

Blessing in disguise?
Unfortunately, the hotel industry won't start to get better until well after the economy bottoms and starts to make significant and sustained improvement. With the capitulation of Smith Travel's optimism yesterday, most industry experts don't see significant improvement for hotels until sometime in 2011. And things will get much worse before they get better. But at least a realistic view of immediate prospects sets the stage for the massive RESET that must take place before the hotel industry improves -- a RESET in leverage, values and expectations. Ouch!

Still traveling for business, but carefully.

A great article from a couple of AP Writers with some updates on Business Travel in the shaky economy. Another example of the Hotel Industry imploding onto itself and how competing brands continue to bring lower RevPAR's across the board.

Still traveling for business, but carefully
http://www.chron.com/disp/story.mpl/ap/business/6525716.html
By KRISTEN A. LEE and HARRY R. WEBER AP Business Writers © 2009 The Associated Press
July 12, 2009, 12:40PM


NEW YORK — Airfare wars and room-rate promotions are usually aimed at vacationers, but airlines and hotels are resorting to similar tactics to regain their traditional cash cow — the business traveler.
Corporate travelers, who pay higher airfares when they sit in the front cabins of planes or book close to the date of travel, are flying coach more often — or not traveling at all during the recession. And their employers are booking fewer banquet halls and blocks of rooms, leaving many hotels pining for the sizable and reliable revenue that business meetings used to generate.
Partly as a result, several major airlines are expected to post losses for the April-June quarter when they report their earnings starting this week. And hotel revenue — which fell sharply in the first quarter from a year earlier — is not expected to show much improvement in the second quarter, either. Marriott International Inc.'s results are due Thursday.


Business travelers tend to generate a higher percentage of overall industry revenue than the percentage of total travelers they represent. Of the $641 billion spent by U.S residents in 2007 on domestic travel and tourism, roughly 33 percent came from business travelers, according to the U.S. Travel Association. But the number of domestic business trips accounted for less than 25 percent of that year's 2 billion total domestic trips.
Boston-based aviation consultant Mark Kiefer of CRA International said the economy is keeping a lid on business travel this year.
"We have a case of certain sectors that were consumers of a lot of business travel, like banking and so forth," Kiefer said. "The other issue we are grappling with are expectations. There is a lot of uncertainty about when the economy will turn around and by how much."
Travel companies are using a range of strategies to lure business travelers. Hotels are offering bonus room nights, free snacks and drinks, and more flexibility on booking and cancellation policies. Airlines have been offering heavily discounted upgrades and business-oriented fare sales.
Discounts have helped lure some vacationers back onto the road. Deutsche Bank analyst Chris Woronka noted that, while U.S. revenue per available room, a key gauge of the hotel industry's performance, was still down by a double-digit percentage since late June, it has shown a marked improvement because summer leisure demand has picked up.
But in a recent survey of 285 senior finance executives around the world, 87 percent said their companies plan to spend less on business travel this year. The American Express/CFO Research Global Business & Spending Monitor found 44 percent of the executives expect their companies' travel to decline more than 10 percent.
The survey did find that most companies will continue to spend on travel that could generate revenue. Frank Schnur, of American Express' business travel group, predicts that clients will continue to expect a financial return on their investments in travel, even after the economic recovery.
For now, many companies are cutting back. Drew Ramsey, a 33-year-old information security manager in Phoenix who is a Southwest Airlines frequent flier, says his company has essentially shut down business travel.
"Any business travel has to be a necessity; otherwise people are being asked to use videoconferencing or teleconferences," Ramsey said.
Traffic in high-end airline seats fell 22 percent in April, compared with the same month a year earlier, according to the International Air Transport Association. Meanwhile, the number of travelers on coach tickets rose 0.3 percent.
With a shrinking pot of corporate travel dollars, airlines like Southwest are trying new strategies to get business travelers on board. Ramsey said Southwest offered to fast-track him to "A-List" status. That provides a year of reserved-boarding privileges to passengers who belong to the airline's frequent-flier program and take a certain number of flights within a given period.
Airlines also are giving business travelers things like Wi-Fi, satellite radio, advance seat assignments and priority boarding to lure them in.
In the hotel industry, all kinds of chains that rely on business travelers are feeling the pain. Extended Stay Hotels LLC — which caters to business travelers who need longer-term lodging at lower rates — has filed for Chapter 11 bankruptcy protection, citing a heavy debtload and a sharp drop in business travel.
Starwood Hotels & Resorts Inc. is offering a 4 percent discount to business meeting planners who book an event for 10 or more room-nights at some of its brands, including the W, Westin and Sheraton chains. They also get a free snack break from PepsiCo Inc., through Aug. 31, and a hefty bonus of loyalty program points they can use for personal travel.
Hotels are not as agile because they typically negotiate corporate rates months or years in advance. So the rate cuts they're offering now could have a long term impact on revenue.
Continental Airlines CEO Larry Kellner said at a June investor conference that his airline is working its "business (traveler) side very hard because ... we could also see a recovery much more quicker if we could get the business traffic back on the airplanes."

Despite Economy Downturn, Hoteliers Are Being Resilient

Great Great article from IndiaWest here.

Despite Economy Downturn, Hoteliers Are Being Resilient
By MICHEL W. POTTS
http://www.indiawest.com/readmore.aspx?id=1290&sid=6
July 02, 2009 06:14:00 PM
GARDEN GROVE, Calif. — How the troubled economy has affected hoteliers and what they can do about it was the main topic of discussion June 18 at the annual conference of the Southern California Hotel and Lodging Association co-hosted by the Asian American Hotel Owners Association at the Crowne Plaza hotel here.During the luncheon industry leaders panel discussion, La Quinta chief development officer Rajiv Trivedi noted that “this is a different type of recession that we have experienced in a long time” with the kind of decline that has left the hotel industry in California and Florida the hardest hit. In the last six weeks, however, “from what we see in our brand, the decline has stopped,” he added. “If we compare to 2001, the leisure market started coming back first, and if we have good summer months with the leisure market, I believe we’ll see some better results for our industry starting next year.”Fred Schwartz, president of AAHOA, was more specific. Hoteliers have been enjoying 60 percent occupancy in their hotels for the last 17 out of 20 years. A recent PKF Hospitality Research said that “the 50s are the new 60s, meaning that we’re not going to see 60 percent occupancy probably until 2013,” he told India-West.According to the industry study, the larger, full service hotels, such as the Four Seasons, the Fairmonts, Ritz-Carltons, the Westins and the Sheratons, have been the hardest hit, with some of them being forced into foreclosure.Bhupen Amin, the COO of Lotus Hotels and the current CH&LA chairman until the end of the year, frankly admitted that his properties have experienced a 20 to 25 percent decline since the beginning of the recession. “We’re tightening our belts, we’re working with staff to minimize hours, trying to keep our overhead down and trying to run as efficiently as possible, but it’s tough,” he told India-West. However, according to Schwartz, “there is a silver lining in that there is a lot of pent-up demand, people want to travel, and we hope that what the pundits are saying, that the recession is bottoming out, is true and the travel industry will start to return again and pick up from the poor situation it is now.”AAHOA members “are extremely savvy operators and they have been through downturns before, but this is taking every bit of skill level to manage the downturn and we’re hoping that we’re seeing the bottom of the recession and that travel will regain again,” he added.Trivedi cautioned the hotel operators not to have a “bunker mentality” until the recession has passed. “The Carnegies and the Rockefellers were created only because they were smart enough to take a risk at the time that they took it,” he said.“So look for markets. Look at the other parts of the country where the economy is not going as bad and price value is sustained, where you can build your hotel at 20 to 25 percent less of its value,” Trivedi advised the hoteliers. He also advised them to “extract resources” from their franchisor and “make sure they are providing assistance to retain or gain market share in your area.”There is a light at the end of the tunnel, he told the franchisees. “Have a positive vision,” he urged. “Work with your team and spread the positive vision one person at a time. Focus on what you can do to get better market share and focus on preparing yourself when the upswing comes.”

Lose-Lose for Hotels

Hawaii hotels report occupancy dropping

May was fourth straight month of record lows for resorts across the state

A Great little article from Robbie Dingeman a Staff Writer over at the Honoluluadvertiser

Despite Deep Discounts on Room Rates, Hawai'i Hotel Occupancy -During May 2009 the Worst Since at Least 1987.

Ok so here's another situation of how the Hotel industry is imploding in upon itself, which could be aided by economics class 101.

This example comes to us from the formerly happy little islands of Hawaii, where high rates and high demand kept us coming and kept RevPAR's high.

"It was "a very tough month," said Joseph Toy, president of Hospitality Advisors.

Hotels cut rates an average of nearly 13 percent to attract more visitors but still saw a 6.5 percentage point decline in occupancy from a year ago.

May was the fourth straight month of record lows for occupancy in Hawai'i's hotels. Toy said the steep decline does not bode well for the rest of the summer and the rest of 2009.

"We're really hitting new lows here with the industry," Toy said. "Right now we're still seeing some strong drops. It shows that we have not hit bottom yet."

Average daily room rates fell sharply by 12.8 percent to end the month at $165.78. The combined decrease drove statewide revenue per available room -- a key measure of profitability -- to $102.67, down by 21.1 percent compared to the same period last year."

While common excuses are being placed on a lot of Meeting business being down, and the general overall state of the economy, what I think is constantly being downplayed is the lack of any Rate Integrity from the hotels.

When area Hotels all start racing in the "Discount to the Bottom" wars, the consumer wins, but at costs which are usually insurmountable for Hotels to see a return. Not only is there the smaller pie from which customers are coming, but we are seeing less ADR on that smaller pie as well. Ultimately killing overall RevPAR's.

While some optimistic reports are seeing turn-arounds in RevPAR for early 2010 and even some say Q4 2009, I'm saying that these lasting effects from the Discounting Wars will effect Hotels for at least up to 5-10 years as a new precedent of Value has been set at these hotels which are now offering heavily discounted rates.

Targeted discounts can be a great way to encourage business, but permanent discounts are no longer just a discount, they quickly become the perceived rate and value of your Hotel. Always remember, your Reputation of Value will last with you much longer than your rates do.

Assessing the True Value of Distribution Channels

Profit Means Nothing to Potential Demand.
A great article from Simon Carkeek of EyeForTravel - How to know and asses the true value of each of your distribution channels.
"A hotel must be able to distribute its products to the widest possible audience in the most profitable manner. "
Truer words were never spoken, and in the internet age right now
"A lot of people believe this to be different pricing through different channels. If one is going to break the pricing parity rule, then there is a need for a value variance strategy (or product variance strategy) to be in place to justify the pricing variable. "

"A particular channel may appear to be more expensive due to the margins, commissions, etc. However, if it requires minimal direct marketing spend and can drive large volumes in times of need, then it would be actually ranked as a highly profitable channel. Commenting on this, Shawn K. Jereb, corporate director of revenue management, Orient Express Hotels, Trains & Cruises, says, “I think this is an area we as hoteliers make a huge mistake in.” “We tend to put blinders on when it comes to cost and focus in on items such as room cost, commissions etc. and completely leave out costs such as labour management, marketing spend, participation fee’s and sales deployment costs,” said Jereb, who is scheduled to speak at EyeforTravel’s Travel Distribution Summit in London. “If you look at third party vendors in particular we rarely take into account the massive amount of money they spend to maintain cutting edge web technology, marketing spend, PPC and SEO spend etc. We just look at the higher margin. Versus a Consortia programme where we will pay a participation fee, commissions as well as deploy Sales resources against the account like sales calls, road shows, client events etc. but do not factor that into the overall cost of doing business with that source or channel,” explained Jereb. "

Shawn is hitting it right on the head here, you are essentially as a Hotelier paying these third parties for advertising but at what costs are we giving these third parties money at the expense that we could be giving directly to the consumer.

Opaque's take it even farther with extreme discounts, but at what cost to the hotel and the guest, will the front desk treat you the same as the guest checking in right before you paying twice the rate? How about to the hotel? Will Hotel's be able to afford their levels of service when guests are checking in paying 65% off regular rates? How can the Luxury market still continue to provide the flawless great service to their upscale guests if they have to stoop to hugely discounted rates to entice travelers?

Hospitality By the Numbers

HOSPITALITY BY THE NUMBERS
Hospitality: High Growth Industry
The Department of Labor counts hospitality as a "high growth" industry, and it's not hard to see why.
» 14: The percentage growth of jobs in hotels and other accommodations between 2006 and 2016.
» 11: The percentage growth of jobs in all industries combined.
» 48,062: The number of hotels in the United States.
» $1.4: The amount, in millions, spent in American hotels a minute.
» 420: The number of hotel rooms planned to be built or added in downtown D.C.
» 7,324: The number of hotel rooms added in D.C. from 2001 to 2008.
» $5.9: The amount, in millions, the Employment Training Administration has invested in the hospitality industry.
Sources: BLS, American Hotel and Lodging Association, DC BID, WDCEP.com

Smith Travel - Weekday vs. Weekend Breakdown

A great article from Amanda Hite from Smith Travel - Weekday vs. Weekend Travel

"During a downturn, a natural strategy is to modify pricing by day of the week, focusing on where you believe you have the best opportunity to maximize revenue. Typically, this will be the days where your demand, and therefore occupancy, are the strongest. "

More and more Revenue Managers are scraping the barrels looking for any last Revenue to manage. It becomes all that more important now to have a strong Revenue Management team than ever due to the current economic climate. Supply in hotels has remained the same or even increased, but the amount of demand has decreased significantly, so hotels are forced to all fight for the less amount of business coming in, at the benefit of the consumer. Whats that, you're biggest client last year paying $109 a night was just offered a room rate of $79 across the street from your competitor? Welcome to rate integrity bailout and what appears to be happening in a lot of places. Paired with Trade-Down, Luxury & Upscale brands are hurting as Corporate Transient business is trading down and becoming more cost-conscious.

One primary statistic to notice here is there is absolutely no situations where Occupancy Increases and ADR Decreases. This is very very important to the Hotel RevPAR bottom line as we know that getting back to original ADR levels after the 2001 Travel drop took us up to 6 years to bounce back rates. Midscale w/out Food & Beverage is our closest percentage by having a increase in Weekday Occupancy followed by a slightly stronger ADR increase.

"In the upscale segment, the ADR premium for the weekday is 14.7 percent. It appears this segment is dropping its rates on the weekend to drive demand, with the ADR difference in the weekday over weekend ADR at about $15. As you can see in the charts, the RevPAR premium for the weekday in this segment is 27.3 percent. It appears that by dropping the rate by $15 on the weekend, this segment isn’t driving occupancy, and the RevPAR suffers substantially compared to the weekday numbers."

The Economics of Hotel Wi-Fi Fee's

Great article this morning in the NY Times Travel Section about the Economics of Hotel Wi-Fi Costs.
The Price of Staying Connected

"WIRELESS Internet access is no longer a rarefied luxury. It’s free in cafes, parks, fast-food chains, campgrounds and gas stations — yes, gas stations. - Yet in some places travelers still must pay for Wi-Fi access, and perhaps nowhere is that more disturbing than in an upscale hotel room.
While many budget and midscale hotel chains have largely given up on charging guests for Wi-Fi, fees persist at more luxurious sister hotels — typically about $9.95 to $19.95 a day."

Interesting that the big luxury boys want to get more from their Ancillary revenue when their customers are already the ones paying the big dollars to stay in the hotel at all. Whats a little more of their discretionary income? They're rich anyhow right?

"Many guests agree. Free in-room Internet access ranked as the most desired guest-room amenity in a national survey of 800 affluent travelers conducted in August by Ypartnership.
That was above premium bedding and flat-screen TVs. A January survey of 6,300 people across 10 countries by the research firm Synovate found that 47 percent of respondents said a hotel must cater to their technology needs before they book it, with wireless access a top priority."

The new business traveler constantly needs to be connected, the iPhone or Blackberry in transit, the laptop in the hotel room. The business traveler of 2010 (What a year, still sounds futuristic) would rather sleep on a rock hard bed with their Wi-Fi than be condemned ball and chain to a cable from a wall (Heaven forbid).

"Thompson Hotels, a small group of boutique hotels that used to boast about free Wi-Fi, started charging $10 per 24-hour period earlier this year. “As rates of all of the hotels have decreased,” said Jennifer Walters, a publicist for the hotel group, “certain services that don’t affect all guests had to be altered — one such item being Wi-Fi. Not all guests use it, so to include it complimentary in the rate no longer makes sense with the consumer wanting the most attractive rates.”

Apparently Thompson disagree's with the study above clearly stating that it is a number one priority of travelers. Thompson's Portfolio includes upscale luxury hotels primarily in New York and Los Angelas. This could help explain why they decided to go back to charging for Wi-Fi, considering most all Luxury brands are charging for Wi-Fi. Interestingly in a quick scan of their TripAdvisor reviews of a few of their hotels, there is a mere one mention of spending an exhorbant amount of money to stay in the room and then being charged an additional $10 to tap into the Wireless Internet.

Some major franchises and their differing brands which offer Free Wi-Fi versus Pay for use. Image Courtesy of HotelChatter.com

"Some major chains that charge for Internet service in guest rooms have been offering free Wi-Fi in lobbies, but travelers say it’s not the same.
“Everyone has to line up in the computer room, and the hotel lobby becomes an Internet cafe, which is rather unappealing,” Kevin Leibel, president of a brand strategy company in Chapel Hill, N.C., wrote in an e-mail message from the business center at the Westin Palace in Madrid while on vacation."
"Hotels say Internet charges are driven by what the market will bear. Because travelers have been willing to pay extra at high-end properties, those hotels continue to charge. But that doesn’t much change the experience for travelers who have paid for in-room Internet service at a Hilton, for example, but received it for free at a Hilton Garden Inn. "

Once again, just emphasizing the price sensitive consumer versus the value consumer. Travelers are more price-conscious than ever right now, "free" extras that add even a few dollars to the room rate can send your customer next door to your competitors. Capital is extremely tight for owners right now so hotels that don't have Wi-Fi in rooms now won't be getting it soon. Is the Trade-off losing a few customers who see Wi-Fi as more important than saving the $10-$20 on a room rate? Mid-Scale brands seem to say yes, offer our values within the room rate and get the guests in house.

In tough economy, travel industry fighting back

In tough economy, travel industry fighting back

Great article on Travel Rally's for the 12th of May.
"They clean rooms, bus tables, drive tour buses and create great experiences for travelers and, on May 12, those whose livelihoods rely on the travel industry will speak up with one voice."

And from AHLA -
@AHLA: check to see if your city is participating in Travel Rally Day, May 12: http://bit.ly/NzKz9

Is it time to hang it up?

Came across a great article from Bob Sweeney on when is it time to hang it up.
Is It Time to Hang it Up?
Hopefully many of you aren't in this boat, but as Bob points out simply that has to be the case in a lot of situations.

"It does not matter if you have been in the business for twenty years or twenty minutes. At some point in time, changes need to be made and merging or selling might be the solution."

Does Bob have some good points here or is he trying to merely promote his own agenda...

Hotel RevPAR Background

In these tough economic times its every Hoteliers prime goal to bring in the RevPAR.
Owners and Management everywhere is now relaxing their ADR goal, or their Occupancy goal and focusing on that one key measurement, RevPAR. (Revenue Per Available Room for those not in the biz.)
How to do this, what are people doing in the industry, in this blog we'll be diving in discussing different strategies and views from across the market and seeing what's working, what's not.
Stay tuned for articles and updates!