NASHVILLE, Tennessee—Hotel revenue managers can learn a lot from looking at outside influences and their impact on hotel performance.
During the “Data discovery: Complementing your story by going beyond the basics” session at the Hotel Data Conference, STR’s SVP of Operations Bobby Bowers and Hilton VP of Analytics Jess Petitt looked at New York City’s hotel market performance and examined external factors like distribution mix, currency exchange rates and guest experience that could explain some inconsistencies in a property’s performance. (STR is the parent company of Hotel News Now.)
Petitt stressed the importance of looking at outside influences when describing how the role of a revenue manager has evolved.
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“Today, you think about how analytics teams tend to work, and they tend to be very siloed,” he said. “At the large hotel companies, there’s a team dedicated to revenue and a team dedicated to marketing, and they’re all kind of split apart. At the hotel level, you have a revenue-management team that’s focused on top-line revenue typically, but they’re not thinking about guest experience and the things that are actually going to drive that revenue over the long term. We need to break down those silos.”
The revenue-management discipline also needs to look more toward predictive-pricing methods, Petitt said.
“We also need to start getting more predictive,” he said. “How often are we talking about (revenue per available room) index results like they happened to us and not because we were actually predicting what was going to happen based on the market forces that were going on? That’s something that’s possible, and we need to as an industry focus more on trying to predict what’s going to happen, and when it doesn’t happen try to understand why.”
New York insights and ADR stagnation
On a 12-month moving average through June, New York’s hotel market has seen 1.4% occupancy growth to 87.4%, 0.9% ADR growth to $259 and 2.3% RevPAR growth to $226, Bowers said. He added the market has struggled with growing rate “for a long, long time,” and that it’s just now experiencing a RevPAR recovery.
(Source: STR)
“If you go back and look at RevPAR growth, it’s a little different from the U.S. as a whole—about 57 months in the last cycle,” Bowers said. “But RevPAR growth has been negative in the market and has just in the last five months broken into a positive 2.3%.”
Petitt said the low ADR growth in New York is evidence of hotel revenue managers focusing too much on occupancy.
“Where our industry has gotten really good is efficiency in how we handle demand,” he said. “Our revenue-management systems and our revenue managers tend to do a really good job of figuring out ways to fill the hotel in whatever way possible. What we haven’t figured that out, and what I think we’ve made even more complicated is how we raise our rates.”
Petitt pointed to more pricing transparency with consumers and said it’s important to test raising rates “until we actually see some sort of decline.”
“We should just be thinking about this kind of picture, which says we should have some space, and I’m not sure our customers are really going to push back on us,” Petitt said.
OTAs losing steam
Through its “Stop Clicking Around” direct-booking campaign, Hilton generated much more website traffic and converted bookings, Petitt said. While Booking.com has grown its share of the distribution mix, Petitt said the hotel industry is beginning to get the upper hand on the OTAs.
“I can tell you at Hilton we were seeing greater than 20% growth from Booking.com in the U.S. in the first few months of this year, but we’re starting to see that turn. And the OTAs are starting to see that their marketing strategy is not as effective as they’d like, and they’re not making as much money off of hotels as they have in the past,” he said.
“We’ve seen just in the last few months stabilization and downward movement of OTA business, which is an interesting dynamic. If we don’t capitalize on that somehow and fill that vacuum of leisure customers, I think we’ll have made a big miss.”
Inbound travel and currency rates
A gateway market like New York tends to see more inbound international demand, which is something hoteliers can somewhat predict by monitoring currency conversion rates, Bowers said.
“The dollar strength has been pretty significant across the board now,” he said. “I think the point of what you want to see here is depending on the market you’re in and depending on how much inbound you get internationally that is another issue you want to factor into any evaluation that you do.”
(Source: STR)
Petitt said Hilton has used this method to anticipate spikes in inbound international demand.
“The booking window is a little longer for international travelers—about a two- to three-month window,” he said. “When currency fluctuations happen from any of these countries, we see a significant shift in markets that tend to have those countries as feeder markets. It is an important thing to keep track of, not just in major gateway cities, but it can be something that impacts other markets as well that depend on leisure travel.”
Guest experience
There are some strong correlations between RevPAR index and guest satisfaction scores on sites like TripAdvisor, Petitt said. He gave an anonymous example of a Hilton property in New York that wasn’t generating enough return guests.
“700,000 customers tried this hotel for their first stay in New York, and of those about 105,000 returned; that’s relatively consistent for what you’re seeing for returning customers,” Petitt said. “But of those, about 70% decided to return to this hotel while 30% decided to stay somewhere else with Hilton but not with this particular hotel, and that says something. They wanted to stay in brand, but their experience at this individual hotel wasn’t one that stood out. That continues to erode over time.
“At each of these steps, we’re losing 70% of our guests in this particular property, which to me is a direct correlation to guest experience. Are we actually thinking about the decisions that our guests are making that then drives ADR that then drives demand and RevPAR? This is our simple way of trying to break that down and whether guests are choosing to come back.”