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!