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Revenue Management Webinar Series
What Are the Best Practices in Pricing and Price Optimization?November 22, 2011
This webinar series is brought to you by This webinar series is brought to you by HSMAI University, HSMAI University, HotelNewsNowHotelNewsNow , and STR, and , and STR, and
sponsored by sponsored by IDeaSIDeaS Revenue SolutionsRevenue 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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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. Freitag
Vice President, Global DevelopmentSmith Travel Research
Kathleen Cullen, CRME
Corporate Director of
Revenue StrategiesHeritage Hotels & Resorts
Chris AndersonProfessor
Cornell University
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2011 Smith Travel Research, Inc. 7
US Overview- Trends in Pricing -
Jan D. Freitag
Senior Vice President
2011 Smith Travel Research, Inc. 8
Agenda
• Total US • US Scales• US Forecast• Channel Data
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 Presentations and t heir content. Reproduction of all or a portion of th ese presentations for any purpose without prior approval of STR is st rictly prohibited.
2011 Smith Travel Research, Inc. 9
www.hotelnewsnow.com
Click on “Industry Presentations”
Smith Travel Research, Inc. and/or STR Global, Ltd. (collectively for these purposes, “STR”) are the exclusive owners of all rights in these Industry Pr esentations and their content. Reproduction of all or a portion of these presentations for any purpose wi thout prior approval of STR is strictly prohibited.
2011 Smith Travel Research, Inc. 10
Total US - Key StatisticsYTD September 2011
% Change• Hotels 52k• Room Supply 1.3 bn 0.7%• Room Demand 814 mm 5.3%• Occupancy 61.6% 4.6%• A.D.R. $101 3.6%• RevPAR $62 8.3%• Room Revenue $82 bn 9.1%
2011 Smith Travel Research, Inc. 11
On An Annualized Basis: Most Rooms Sold - EVER
*Number of Rooms Sold, 12 MMA, 1/89 – 9/11
2011 Smith Travel Research, Inc. 12
US Scales
2011 Smith Travel Research, Inc. 13
Strong Demand Growth, Supply Not An Issue
*Supply / Demand % Change, by Scale, YTD 9/2011
2011 Smith Travel Research, Inc. 14
Will OCC Growth Lead To ADR Growth?
*OCC / ADR % Change, by Scale, YTD 9/2011
2011 Smith Travel Research, Inc. 15
OCC: Lower End Of The Market Still Missing Out
*Absolute OCC %, by Scale, YTD 9/2011
2011 Smith Travel Research, Inc. 16
ADR: Towards A Two Class Society?
*Absolute ADR $, by Scale, YTD 9/2011
2011 Smith Travel Research, Inc. 17
US Forecast
2011 Smith Travel Research, Inc. 18
Total United StatesKey Performance Indicator Outlook (% change vs. Pri or Year)2011 - 2012
2011Forecast
2012Forecast
Supply 0.7% 0.9%
Demand 4.7% 1.1%
Occupancy 4.0% 0.2%
ADR 3.6% 3.7%
RevPAR 7.7% 3.9%
2011 Smith Travel Research, Inc. 19
Hotel Industry Forecasts – STR Revisions
2012
Demand ADR
Jan 11 2.2 6.8
Jun 11 2.5 6.0
Aug 11 2.5 4.9
Nov 11 1.1 3.7
2011 Smith Travel Research, Inc. 20
Total United StatesChain Scale Key Performance Indicator Outlook
2011F by Chain Scale
Chain Scale
Occupancy
(% chg)
ADR
(% chg)RevPAR (%chg)
Luxury 5.0% 6.1% 11.3%
Upper Upscale 2.5% 3.8% 6.4%
Upscale 3.7% 3.4% 7.3%
Upper Midscale 5.0% 3.3% 8.5%
Midscale 2.7% -0.9% 1.8%
Economy 3.6% 2.0% 5.7%
Independent 4.1% 3.3% 7.6%
Total United States 4.0% 3.6% 7.7%
2011 Smith Travel Research, Inc. 21
Total United StatesChain Scale Key Performance Indicator Outlook
2012F by Chain Scale
Chain Scale
Occupancy
(% chg)
ADR
(% chg)RevPAR (%chg)
Luxury 1.3% 5.5% 6.9%
Upper Upscale -0.6% 4.0% 3.4%
Upscale 1.4% 4.2% 5.7%
Upper Midscale -0.2% 3.8% 3.6%
Midscale 1.0% 0.8% 1.8%
Economy 0.6% 2.3% 3.0%
Independent -0.6% 3.0% 2.4%
Total United States 0.2% 3.7% 3.9%
2011 Smith Travel Research, Inc. 22
US Demand and Revenue By Channel
- A First Look -
2011 Smith Travel Research, Inc. 23
Absolute Revenue for Total US by Channel Annual 2009 & 2010, in billions of dollars
2011 Smith Travel Research, Inc. 24
ADR ($) for Total US by Channel
2011 Smith Travel Research, Inc. 25
ADR ($) for Total US by OTA Business Model
2011 Smith Travel Research, Inc. 26
www.hotelnewsnow.com
Click on “Industry Presentations”
Smith Travel Research, Inc. and/or STR Global, Ltd. (collectively for these purposes, “STR”) are the exclusive owners of all rights in these Industry Pr esentations and their content. Reproduction of all or a portion of these presentations for any purpose wi thout prior approval of STR is strictly prohibited.
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Chris Anderson
Professor
Cornell University
Two Hotelies in trouble
Mario and Hilary are suspected of a crime committed
by two persons. They are being questioned by
authorities in two separate rooms.
Each is being encouraged to cooperate (confess).
There is very little evidence so if neither confess they
will get off w/ small fine.
Two Hotelies in trouble
M: Small FineH: Small Fine
M: Long PrisonH: Free
M: FreeH: Long Prison
M: Short PrisonH: Short Prison
Mario
Hilary
Don’t Confess ConfessConfess
Confess
Don’tConfess
Likely Outcome?
M: Small FineH: Small Fine
M: Long PrisonH: Free
M: FreeH: Long Prison
M: Short PrisonH: Short Prison
Mario
Hilary
Don’t Confess ConfessConfess
Confess
Don’tConfess
Price Cut/War!
Mario
Hilary
Hold Cut
Cut
Hold
Price Cut/War!
M: Moderate ProfitH: Moderate Profit
M: No MoneyH: Big Profit
M: Big ProfitH: No Money
M: Tiny ProfitH: Tiny Profit
Mario
Hilary
Hold Cut
Cut
Hold
Calculate the minimum sales volume necessaryfor the volume effect to balance the price effect.
Price
Service/Rooms
Demand
Variable Cost
P1
P2
Q2Q1
∆P
∆Q
A
B
Contribution margin (CM)CM = P – VC
A = CM lost B= CM gained
Pricing Actions
• General posted price changes
– Prompt response
– Require greater demand response than price
decrease (only elastic segments will be non
dilutive)
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Pricing Actions
• General posted price changes
– Prompt response
– Require greater demand response than price decrease (only elastic
segments will be non dilutive)
• Pricing actions need to be targeted
– (elastic segments)
• Non-blanketed
– Avoid response
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Non-Dilutive Pricing
• Opaque (Priceline,Hotwire,TopSecret)
• Membership selling (Tzoo, Jetsetter, Groupon, LivingScocial…)
• Search (SEO/SEM)
• Mobile (HotelTonight, Tonight Only)
• OTAs
• Penny Auctions (Off & Away)
• …..
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Opaques
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Opaque Differences
• Hotwire – 1 offering per star per area
• TopSecret – lists all inventory
• Priceline – random allocations
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Kathleen Cullen, CRME
Corporate Director of Revenue
Strategies
Heritage Hotels & Resorts
Membership Selling
• TZoo
– Direct marketing
• FlashSales
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TravelZoo
TravelZoo
Jetsetter/Flash Sales
Organic and Paid Searches
Organic Results
Organic Results
Paid Results
Organic
Results
Local
Results
Organic
and Paid
Searches
Implications
• Positives
– Numerous (and growing) ways to creatively reach
customers
– Many partially disclosed
• Negatives
– Channel/program management
– Email/offer fatigue
– Scale
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Questions? Questions? Panel Moderator: Jeff Higley, VP, Digital Media and Communications, HotelNewsNow.com/STR/STR Global
Panelists:
Jan D. Freitag
Vice President, Global DevelopmentSmith Travel Research
Kathleen Cullen, CRME
Corporate Director of
Revenue StrategiesHeritage Hotels & Resorts
Chris AndersonProfessor
Cornell University
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Upcoming Webinars:
The HSMAI University 10-part 2011 Revenue Management Series –
Next Sessions:
• What is the Future of Distribution? – November 29, 2 011• What Will the Revenue Manager of the Future Look Li ke? – December 20, 2011
•December 6 – Distribution Channel Analysis, with Cin dy Estis Green and Mark Lomanno•December 8 – Taming the Email Beast, with Randy Dean•December 13 – Digital Marketing webinar with expert panel
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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