Hotel pricing in a post-parity world

Webinar12 November 2015

Your hosts

Sean O’NeillEditor-in-Chief & ModeratorTnooz

Kevin MaySenior Editor & ProducerTnooz

Your presenters

Michael McCartanManaging Director, EMEADuetto

Etienne FaisandierVP, Rev. Management& Business IntelligenceMövenpick

Ted TengCEOLeading HotelsOf the World

Poll no. 1Where are you located?

Poll no. 2Which industry segment do you represent?

Michael McCartanManaging Director, EMEA

Duetto delivers cloud-based revenue strategy to hotels, allowing them to maximize profits through actionable data to better manage pricing, revenue and business mix decisions.

Past Experience:

What We’ll Cover

▍ Current state of rate parity

▍ Effects of parity on distribution

▍ Distribution of tomorrow

Short History

1990s 2000s 2010s

1990sHotelchainsrequirehotelstomatchanyrateofferedbyanyotherparty

2002-2003Hotelchainsimposerateparityclausestopreventmerchantsundersellingthem

December 2013HRSorderedbyBudeskartellamt toremoveMFNclauses

April 2015Booking.com“voluntarily”dropstheMFNrequirementfromitscontracts

July 2015MacronlawpassedinFrance

2015

Most Favoured Nation

▍ Clause designed by OTAs

▍ Obligate the hotel to give OTA the best price

▍ Example: Under a MFN, the seller promises Buyer A that it will not offer Buyer B better terms unless it first offers those, or better terms, to Buyer A.

Rate Parity

▍ Practice introduced by hotel chains or brands

▍ Prevent any third party selling the room at less than the company-established rate.

$149PERNIGHT $149PER

NIGHT $149PERNIGHT

Poll no. 3For hoteliers, what percentage of your

inventory is sold through OTA channels?

Distribution Landscape

12

Historically Travelers Booked Directly with Stay Brands

13

Consumer Stay Brands

Courtesy

Booking Brands Dominate Consumer Point of Entry

14

Consumer Stay Brands

Booking Brands Courtesy

Multi-Dimensional Purchase Path

6.5DigitalTouchPoints

Visitupto38Websites

Over6DayPeriod

Including10HotelWebsites

Consumer Loyalty is Changing80 million people – the largest generation in US history64% of Millennials are more or as brand-loyal as their parents

What they want from a brand▍ Authenticity (humanize your hotel)▍ Engaged on social networks

What they want from a loyalty program▍ Easy to join and easy to understand▍ Unique, relevant and unexpected rewards

What is Required to Thrive?

17

How to Thrive

Start Practicing Revenue Judo

1. Redefine revenue strategies

2. Create a culture of collaboration

3. Connect with customers in booking process

18

Redefine Pricing Strategy

▍ Dynamic free-float pricing for all segments

▍ Independently price every single segment, channel, room type and offer

▍ Leverage price elasticity regardless of market segment

19

Open Pricing Versus Rate Hurdles

▍Create a dynamic floating discount

▍Don’t close channels, instead reduce discounts

▍Maximize Billboard Effect and drive revenue

▍Combine rates like the OTAs to ensure your IBE has at least the same deal

OpenPricing

Hurdle Rates

Mon

Mon

Tue

Tue

Wed

Wed

RegionalOffice

Owner Hotel Brand

PropertyManagement

Collaborate Across the Hotel

21

Operations

Sales &Marketing Distribution

RevenueManagement

GM

Poll no. 4Whatmethodsareyouusingtodriveguest

loyalty?

WELCOME TO THE

INTERNET OF GUESTS

Today’s Undifferentiated Loyalty Isn’t Working

| Points| WIFI

| Points| Food| WIFI

| Points

| WIFI| Parking | WIFI

| Parking

| Points| WIFI

| Points| Parking| WIFI

The New Loyalty: Personalized Open PricingYour most profitable guests become direct customers for life

€195 €1811-1 rate

€199€1751-1 rate 1-1 rate Public rate

€0 €190Non-room spend

€240Non-room spendNon-room spend

Ted TengPresident and CEO

The Leading Hotels of the WorldLuxury hotel collection with morethan 400 hotels in 80 countries

HQ in New York City

Past Experience:PrimeOpusPartners,LP

Rate Rarity

▍ Selling at the same price not fair

▍ 25% margins vs. 10% commissions –who has more resources?

▍ High margin = High rate?

$149PERNIGHT $149PER

NIGHT $149PERNIGHT

What is the product?

Rate Integrity

▍ Key players: Consumers and suppliers▍ What does the consumer get?▍ More choices for consumers▍ Suppliers match inventory

to demand curve

Acquisition costs37%

20%

2009 2010 2011 2012

Commissionincrease

Revenueincrease

Control your destiny▍Lose control of distribution =

Lose control of pricing▍Hoteliers: Your inventory. Control it.

LoyaltyHow a loyalty program fits into your distribution strategy

Looking ahead…

Etienne FaisandierVP Revenue Management & Business Intelligence

Mövenpick Hotels & Resorts Upscale hotel brand and management company founded in 1973 HQ in Baar, Switzerland82 hotels, resorts and Nile cruisers

Past Experience:

Channel Overload

Regional pricing

LoyaltyHow a loyalty program fits into your distribution strategy

Revenue touchpoints

39

RevenueManagement

Sales &Marketing

RegionalOffice

Operations

GM

Owner

Distribution

Hotel Brand

PropertyManagement

Rate ParityHave recent rulings changed your approach?

Looking ahead…

Poll no. 5What is the future of rate parity?

Q & A

Thank you!

Send your questions and comments to soneill@tnooz.com

Replay and presentation will be available on www.tnooz.com