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Hotel Business Intelligence Software Articles

Net Operating Income (NOI): What is it? How Do You Calculate it?

by
Hotel Tech Report
3 weeks ago

We love metrics in hospitality and real estate. From RevPAR to ADR, tracking key metrics are what allows us to understand our performance, improve operations and ultimately drive profitability for management and owners. But what's the point of working so hard operating a hotel if you are not making money once all expenses are paid? Cash flow is king! That’s where net operating income comes in: it shows you how well you’re doing at managing expenses and turning top-line revenue into bottom-line profit. In this article, you’ll see the value of NOI by learning both how to calculate it and how to translate it into operational improvements at your hotel. What is NOI (Net Operating Income)? NOI, which stands for net operating income, is the amount of money left after you have paid out all of your expenses. It's a profitability metric that shows you how well a hotel operates, from both a total revenue standpoint and total expenses standpoint. NOI is less prone to manipulation than other metrics, as you can’t really perform too many tricks to inflate income or reduce expenses. You may also see this metric as net operating profit, or NOP.   Understanding the NOI Formula (NOI Calculations) NOI = Gross Operating Income - Operating Expenses and can be found at the very bottom of your income statement.  Property owners focus on this metric because it tells them a lot about property value, potential rate of return on investment and even impacts financing costs like mortgage payments since banks and lenders want to know that there's enough income to cover interest payments. NOI can also be expressed as a percentage of total revenue, which is how hotel management can easily identify upward and downward trends in profitability. In that case, the formula is: NOI = (Gross Income - Operating Expenses/Gross Income)*100. Gross income would include all potential rental income a property generates, from both rooms and non-room lines of business. Operating costs are all expenses necessary to maintain and operate the business. Among these expenses are insurance, brand fees, property management fees, utilities, property taxes, repair cost and maintenance (even preventive maintenance), payroll, commissions and anything else related to day-to-day operations.  Not included here are any expenses related to debt payments, income taxes, capital expenditures, depreciation and amortization.  Given the relationships in the formula, you can increase net operating income in two ways: increase revenue or reduce expenses. Ideally, you'd like to do both! If you successfully increase income and reduce expenses, you'll see a much more powerful impact on NOI than doing one over the other. Other factors that influence NOI include a property’s ADR, the market segment it serves and the property’s characteristics, such as age, amenities and location -- all things that affect a property’s income potential and overall cost structure.    Why is NOI so Important to Commercial Real Estate Owners? Every facet of real estate investment is based around NOI since investment properties are valued and compared by a metric called capitalization rate (cap rate).  We'll get deeper into cap rate in a future article but the value of a hotel can generally be measured by dividing NOI by cap rate.  Let's say a hotel does $1M in NOI and it's located in downtown San Francisco with a cap rate of 6%.  That hotel's value would likely hover around 1,000,000/.06 or $16.7M.  See why NOI is so important to hotel owners? But wait, there's more.  It's not only real estate investors care about NOI - lenders typically base their willingness to lend on the amount of earnings before interest (EBIT) that a property can generate.  EBIT is equal to NOI + interest expense + taxes.  Whether you own a hotel, rental property or own any other kind of commercial property, understanding the net operating income formula (and how to grow NOI) is critical to your success. Ultimately we use a lot of terms and acronyms in real estate investing but ultimately we want to know how we're doing relative to comparable properties.  Understanding NOI informs our investment decisions and are more important now than ever before. How to Influence Your Hotel’s NOI Since NOI is a fundamental metric for calculating a hotel's ability to generate profit, it correlates directly to hotel valuation -- and thus a focus for owners and management: Hotels with healthy/growing NOI will be valued more highly than those with low/diminishing NOI. And those with negative numbers? That would be Net Operating Loss, or NOL. Not a place ownership wants to be! Here are three tactics to influence your hotel’s net operating income and make your boss happy! Expense Reduction's Impact on NOI NOI benchmarks operational efficiency and helps you identify areas for improvement in your hotel operations. A simple way to turn NOI into a powerful tool for expense management is to track variable costs as percentages of revenue. You won't do this with your fixed costs, as those don’t fluctuate with occupancy. It’s your variable costs, which go up or down alongside occupancy, that you have direct control over each day.  For instance, rent, management payroll and other overhead expenses are fixed; they don’t change each month and you have little control over them. But, for expenses that you can influence, such as front-line labor, linen usage, third-party commissions and cleaning supplies, you can control these on a daily basis.   By tracking these variable costs as a percentage of revenue, you can easily see trends and catch runaway costs before they become problematic and depress NOI. For the most precise control over expenses, monitor your NOI on a daily basis so that you can adjust operations on the fly and keep your finger on the pulse of profitability.  RevPAR's Impact on NOI Growth Of course, increasing revenue also has a positive impact on NOI. After all, you can only cut expenses so far because each property has fixed overhead costs. And aggressively slashing costs can negatively impact the guest experience -- a short sighted move that ends up making it more difficult to maintain desired occupancy levels. Work closely with revenue management and marketing to create compelling campaigns that are targeted to the right people. That means that you aren’t just discounting rates in pursuit of occupancy. You are carefully marketing your hotel in a way that attracts the best guests who are paying rates that don’t jeopardize your pricing power.  Marketing to your most loyal guests is a great way to both boost occupancy and preserve ADR. These guests are already familiar with your hotel, so there’s less education needed. And, even better, these guests are often less price-sensitive than transient guests booking via a third-party. So you have an easier path to booking, one that doesn’t require “race to the bottom” discounting.  NOI Can Benefit Greatly From Upsells and Ancillary Add-ons The third tactic to influence net operating income is to increase income from other areas of the property beyond just putting more heads in beds. This can include a variety of initiatives, such as focusing on upselling guests after booking and offering incentives to book packages that include ancillary services.  You should also do what you can to maximize revenue from guests once they have arrived on property. You've got a relatively captive audience; thoughtfully optimize the on-property experience to entice guests to spend more during their stay. This could include things like a generous happy hour at the bar, merchandising efforts to highlight your property’s culinary delights or a welcome drink that gets guests ready to grab a bite.  NOI During A Pandemic or Downturn Major asterisk: the pandemic has dramatically restricted the ability of hotels to increase revenue. There's not just lower demands but there's also limited capacity. In this environment, NOI is even more valuable. To stay afloat with revenue harder to come by, you must assiduously track expenses. Those that carefully manage expenses will be more likely to survive than those without a strong focus on NOI.  

Here’s How Hoteliers Can Attract New Travelers in the Post-COVID Era

by
Kamesh Shukla
1 month ago

COVID-19 has had deep and far-reaching impact on the tourism industry. And, while the world waits for a universally-safe vaccine, most businesses – especially hotels – are starting to plan for the future. How will consumer tastes change as a result of the pandemic? The “new guest” of the immediate post-COVID era will have different needs and expectations of their hotel stay. Property managers can start building services and amenities that meet the demands of the first influx of travelers to arrive after the lifting of COVID travel restrictions now – because only by investing in the right tools and technology today can you get an edge on your competition then. Here’s how traveler expectations have changed during the COVID-19 pandemic and what your hotel needs to do to win more bookings in the future.   Who is the Traveler of the Future? Travelers are paying close attention to how all brands – and especially hotels – are communicating and reacting to the pandemic. Brands that are perceived as “insensitive” to keeping guests safe, or seen as not taking precautions seriously, will be punished in the post-COVID era. There are a few data points from RateGain that demonstrate this point. First and foremost, guests are putting health and safety first. Hotels can expect to see a 4x increase in questions around property restrictions and safety procedures. If your property can’t give a satisfying answer to how it’s keeping guests safe, your brand will suffer: 60% of travelers punished brands for being insensitive in their response to the pandemic. The guest of the future is also turning to social media to learn more about your hotel’s safety protocols, as well as room availability. RateGain found that 65% of Indian travelers prefer getting brand updates on Facebook. In fact, few travelers are turned off by brands that advertised during the pandemic – 92% of those surveyed by RateGain said they could understand the economic stress the pandemic caused and didn’t feel that it was inappropriate to advertise during the crisis. What does this mean for your hotel? The post-pandemic guest is looking for balance in the way your property communicates. More communication is definitely preferred – guests want to hear from your hotel regarding availability, safety protocols, and opening/closing restrictions. This guest wants your property to acknowledge the severity of the crisis and to show how your team is taking every precaution to stay open to travelers responsibly. This guest is open-minded when it comes to marketing messages; they won’t punish your property for continuing to run promotions, so long as you demonstrate you’re putting the guest’s needs first and foremost. On social media especially, your marketing team must strike the right balance between promotion and precaution.   Building the Digital Experience Before the pandemic, guests interacted with a hotel brand primarily through the physical experience (e.g., how comfortable was the bed?) and the service experience (e.g., how easy was the check-in process?). Now, there’s a third layer through which the hotel will leave an impression with a guest: the digital experience. All three pillars will be important to meeting the needs of the post-pandemic traveler, but hotels are currently least equipped to capitalize on the digital experience. The digital experience incorporates technology and online platforms to meet guest needs virtually – before, during and after their stay. The digital experience is the primary way to make a post-pandemic guest feel seen, heard, and cared for by the hotel’s physical and service experiences. Here’s what this means in practice.   Drive Revenue by Prioritizing Guest Safety Integrating this digital experience with a property’s amenities and service offerings is key to driving revenue. For a general manager, winning the guest of the future starts by clearly following global health and safety standard operating procedures – and communicating these measures as transparently as possible using social media and email to win guest trust. Digital tools can simultaneously reduce variable costs at the property while meeting guest demand for social distancing measures. In your operations, implement touchless check-in and contactless room-service for your F&B team. Shut down buffet-style dining options and add healthy meals to your menu. Augment the service experience with immunity-boosting in-room snack options. And, evolve the physical experience by creating a safe in-room experience and offering a digital concierge. These measures both personalize the guest experience and drive revenue by supplying amenities that guests actually want. Sales and marketing teams should focus their effort on improving your hotel’s reputation using guest feedback. This team must communicate what is being done to improve safety at your property as well as to promote user-generated content, providing social “proof” that your hotel is being honest and transparent in its effort to keep guests safe. Harness positive customer reviews to win trust with travelers by showing, rather than telling. Make sure you’re regularly updating your social media profiles, OTA listings, and website with all precautions your property is taking. Finally, revenue managers will play an outsized role in attracting new travelers following the pandemic. New data from RateGain shows how the market has become much more dynamic since COVID-19 started:  A hotel changes its room rates 5x per day 60% of users seek to access content via mobile 45% of activities can be automated using technology That technology can lead to 50% cost savings 26% of work is accomplished outside traditional work hours What do these numbers mean for revenue managers? The digital experience isn’t just for guests: revenue managers need a reliable rate intelligence platform that can integrate with your existing Revenue Management system to optimize rate shopping and monitor real-time rate changes, improving your price strategy accordingly. You also must be able to capture mobile-first guests – otherwise, you’re missing a massive competitive advantage.   Three Ingredients to Attracting Post-COVID Travelers It’s hard to know when the pandemic will be over, but it’s possible to start pivoting your hotel’s operations and outreach to be prepared for that inevitable eventuality. The new guest will expect to have consistent, positive service, physical and digital experiences with your hotel. Focus now on three key investments which will help your hotel win more bookings from post-pandemic travelers:  Cognitive revenue management: how can a digital revenue management tool help you optimize pricing in a dynamic market? Can you improve competitive intelligence and use booking data to show the guest you know and anticipate their needs? Smart distribution: how can your brand partner a channel manager to simplify room distribution? How can you improve discovery with OTAs and other new channels? Targeted social media: how is your brand listening to customers on Facebook and other platforms? How are you sharing your safety measures transparently? How can you build your brand reputation using customer reviews and other user-generated content?  By focusing on the digital experience, your hotel can drive revenue and increase brand trust with the first post-pandemic travelers.  

What is Average Daily Rate (ADR)? How is it Used in the Hotel Industry?

by
Hotel Tech Report
2 months ago

RevPar may be the hotel industry's favorite KPI (see: What’s RevPar?) but ADR (average daily rate) is a close second! And the truth is that they are closely intertwined. So, even if you are still confused about the jumbled terminology of hotel revenue management, we're here to sort you out! By the end of this article, you'll understand how to calculate ADR and how to interpret and influence it in your hotel’s revenue management strategy.  Average daily rate metrics aim to help business owners understand the average price rooms are being sold for in isolation.  By pulling metrics apart we are better able to identify problems and opportunities to forge stronger revenue strategies.   What is ADR? (Average Daily Rate) ADR stands for average daily rate and is widely used in the lodging industry as the best indicator for hotel room rate quality since total revenue metrics can be obscured by other factors like ancillaries or food and beverage. For real estate businesses and specifically hotel operators with perishable inventory, pricing strategies can make or break profitability.  The formula for ADR is simple - just divide the total rooms revenue at your hotel by the total occupied rooms.  So if you have $10,000 in rooms revenue and 100 rooms sold, your ADR is $100.  The "A" in ADR stands for "average" because you'll usually be looking at YTD (year to date) or TTM (trailing twelve months) averages.  You can really use this metric for any given time period but you'll need to make sure key performance indicators are always being compared apples to apples for a time perspective.  It's a common mistake to divide rooms revenue by total number of rooms - this methodology can lead to artificially deflated RevPAR since it accounts for unoccupied and complimentary rooms. ADR= Room Revenue/Occupied Rooms ADR shows hospitality industry revenue managers how well they are doing at maintaining the pricing strength of their properties. An ADR that's trending upwards or downwards can be a worrisome sign or it can be the result of a clear revenue management strategy. Evaluated on its own and out of context, ADR doesn't tell the full picture of a property’s performance.  Context comes from using ADR as a performance benchmark for comparing one hotel against another.  Hotel revenue manager will create a “competitive set,” made up of hotels that attract similar types of guests, and then track the performance of the individual property compared to the comp set. If your hotel’s ADR is higher than other properties in your compset, it may have resulted in fewer bookings (i.e. lower occupancy) because you are less price competitive than other hotels all else equal. In other words, when a traveler compares your hotel to similar hotels, the lower rate will entice them to book with a competitor. Generally, this is a bad thing; you want your hotel to be competitively priced so you don’t lose bookings! In general, lower rates will result in higher occupancy and higher rates will result in lower occupancy. However, this is a bit simplistic, as we’ll cover in the next section on tactics to influence ADR. Generally speaking there is no such thing as "good ADR" in isolation because you'll also need to consider and compare occupancy with historical results and the compset to see how your property is doing.   ADR is a component of RevPar Alongside occupancy rate, a property's ADR impacts RevPar (or revenue per available room), a key industry metric that tracks interactions between a hotel’s ADR and its occupancy rate. Hoteliers love RevPar because it shows how well they’re doing relative to similar hotels when adjusting for the number of available rooms. It's also a helpful revenue management signpost, showing how well a hotel generates revenue from its rooms.  To boost RevPAR, you can increase ADR and/or occupancy; a higher ADR and occupancy rate means more revenue per available room. However, as we mentioned already, there’s a breaking point where a higher rate reduces demand.  In general, you increase your rates too much, your occupancy will go down. This can actually be a net positive for revenue, as long as you’re increasing your rate enough to account for the lost occupancy. But it can also cause a dip in occupancy that can’t be made up with higher rates.  For example, let’s say you decide to push your RevPar up by increasing ADR from $120 to $140. The occupancy at your 100-room hotel goes from 60% to 50%, which means your RevPar goes from $75 to $70. But now you are servicing 10 fewer rooms, which can save you money on the operations side. And, you can then target guests at that $140 rate and rebuild your occupancy. If the initiative succeeds, your RevPar ends up at $84 ($140 ADR*60% occupancy). Win! The effect of increasing or lowering prices on reducing or increasing demand is known as the price elasticity of demand. Thankfully, price isn’t the only thing that affects hotel revenue. Factors such as geography, traveler demographics (income, etc), hotel category and macroeconomic trends also affect the relationship between rate changes and occupancy.  Sometimes, a higher ADR results in more bookings and a higher RevPAR. Like during periods of high demand, when inventory is constrained in the local market and consumers are far less price-sensitive. Or, as we saw in our example, a hotel can take steps to position itself as a more premium brand to increase ADR  without necessarily decreasing occupancy. The complex dynamics and interplay between pricing and demand is the cornerstone of revenue management.   Tactics: How to Influence Hotel ADR ADR is a fairly straightforward hotel performance metric: to increase it, raise your rates! However, as we saw above it's important to consider the impact of rate increases on your hotel’s overall revenue potential. Blindly increasing rates to boost your ADR can reduce occupancy and thus revenues. On the other hand, strategically increasing rates can actually lead to more revenue! It's a bit counterintuitive but it's true.   Tactic #1: Brand Marketing Thus the top tactic to influence your hotel’s ADR is to focus on brand marketing. There are three reasons why investing in premium brand positioning can be the most rewarding tactic in the long-term: You can command higher rates. If your brand is perceived as premium,  You can set your right tire without risking occupancy dips. In some cases, higher rates of loan can make your brand seem more premium! Pricing psychology is a funny thing! Loyalty is more profitable. If your brand fosters strong loyalty with past guests, you’ll rely less on public discounting and promotions. Rather, you can market directly to past guests and offer exclusive discounts and promotions that don't require you to pay commissions. You'll also notice that strong loyalty supports strong price position, as you won't have to publicly discount rates to generate business. Self-reinforcing cycle. As you build your book of higher-end guests, your premium positioning will build on itself. A strong brand also acts as a buffer to any downward pressures. That way,  if you have had ones, your brand is already well-positioned in the eyes of consumers and won't necessarily have to resort quickly to blanket discounts.   Tactic #2: Segmentation Another way to influence ADR is to segment your marketing so that you are better matching message to each audience. By segmenting in this way, you’ll be able to yield higher rates because you’ll speak more directly to each guest segment.  The best example of this is with targeting past guests with loyalty marketing. These guests already know you’re property -- and hopefully love it! That means they are not just more likely to book direct but also less price-sensitive overall. These guests aren’t just looking for deals, they’re looking for predictable and familiar experiences that fulfill their expectations. In general, capturing more revenue from past guests also lowers your distribution costs and increases your net ADR (see next tactic).  Since segmentation allows you to have different messages for different audiences, you can also section off certain cohorts for a more premium offer while keeping discounts focused elsewhere.  One lever to achieve this price-based segmentation is to leverage the power of package promotions. The benefit of packages is that you’re able to hide the actual rate of the room within the broader package. This is a fantastic tool to boost ADR, as you can create “value-added” packages that don’t actually cost you much more to deliver, such as a complimentary welcome drink or meals included. Once you subtract the true cost of delivering these add-ons, you’ll be left with a healthier ADR.   Tactic #3: Distribution Costs All revenue is not created equal. Each channel that sells your hotel rooms has its own associated costs. So one approach is to focus on Net ADR, or the amount of money that your hotel keeps after paying all distribution costs for each booking. While this won’t be a metric you can use for benchmarking against your compset, its great for internal tracking of how profitable your distribution strategy is. By optimizing your channels, you reduce commission costs and increase net revenue. This will have a direct impact on profitability. And it will also make you more competitive in the marketplace; since you are securing bookings more profitably, you’ll have more pricing power when it comes to setting your rates against your competitors!   Tactic #4: Upsells and Rate Restrictions Another path to higher ADR is to sell more to upcoming reservations and current guests. By convincing guests to upgrade to a higher category of room, you’ll increase your ADR without having to increase the public rates. This avoids the occupancy issues of increasing your public rates and keeps your hotel competitive in the marketplace. When setting up your automated upselling initiative, consider doing more than just upgrades to bigger rooms. Can you create a package that offers exclusive access to amenities or some sort of upgraded experience beyond a bigger room? These are often seen as more valuable by guests, who then are willing to pay a bigger price premium than you may get from category upgrades alone. Rate restrictions are also a powerful tool, especially non-cancellable rates. Since guests aren’t able to cancel the booking, you can offer a better rate. This appeals to value-minded guests and reduces annoying last-minute cancellations, which can wreak havoc on yields. Length of stay is also another rate restriction to experiment with. Try different LOS requirements, such as a Friday/Saturday night stay, to better yield longer stays. While encouraging longer stays may not necessarily increase ADR (last-minute and weekend bookings are usually more expensive), it can help you maintain occupancy and keep supply low enough to merit higher ADRs.  

What Is RevPAR? Breaking Down the Hotel Industry's Favorite Metric

by
Hotel Tech Report
1 month ago

Anybody who's worked in the hospitality industry knows that we are prone to confusing terminology. Terms like CPOR, ADR, GSS, NOI, GOPPAR leaves hotel students dizzy studying for final exams.  There's good news though, by the end of this article RevPAR will be a breeze. RevPAR is the queen of all hotel management KPIs (key performance indicators) because it helps us compare different hotels apples to apples.  If your hotel's occupancy is higher than the next property in your compset it may be because your rates were too low and vice versa.  RevPAR or revenue per available room helps us understand performance by combining both occupancy and ADR (average daily rate). Hoteliers love using RevPaR because it helps us understand in a single metric how we're doing relative to similar hotels when adjusting for number of rooms.  When RevPAR is growing our hotel revenue is increasing; however, a rise in average room rate may actually not increase revenue if occupancy has fallen In this article we'll show you how to calculate and interpret RevPAR with ease and this article is designed for both industry veterans and those who are newer to the hotel industry.   What is RevPAR? (Revenue Per Available Room) RevPAR is a straightforward hotel performance metric that tracks how much money a hotel is making on its rooms. It’s correlated directly with a hotel’s Average Daily Rate (ADR) and its Occupancy Rate.  For a given period, you can calculate hotel RevPar using these RevPAR formulas: RevPAR = ADR x Occupancy Rate OR RevPAR = Total Rooms Revenue /  Total Rooms Available During Period To influence RevPAR, you can increase ADR and/or occupancy. In general, a higher ADR and occupancy rate means more revenue per available room. There’s a limit, however. At some point, the higher rate will reduce demand and push occupancy down.  The way consumers respond to pricing is known as the price elasticity of demand. Hotel prices are fairly elastic, which means there are other factors that influence hotel demand curves: Income, geography, macro employment levels and hotel category also shape how rate changes occupancy rate (and thus RevPar).  In other words, it's complicated. Sometimes, a higher ADR results in more bookings and a higher RevPAR. Like during periods of high demand, when inventory is constrained in the local market and consumers are far less price-sensitive. Luxury hotels also have more pricing power than budget hotels.  Even within luxury different types of hotels will command different rates based on attributes like amenities and reviews.  Similarly branded properties (all else equal) typically command higher RevPAR than independent boutique hotels (assuming it's with a strong brand). To see how this plays out, let's consider a scenario. You’re the revenue manager at a four-star hotel in New York City. Business has been slow and so you're considering dropping your rates to increase occupancy. Your RevPar for the same period last year was $280 ($350 ADR * 80% occupancy) but you’ve been running 20% under year-over-year occupancy for the past 6 weeks. Your forecast for the next month shows a RevPar of $180 ($300 ADR * 60% occupancy).  To close this revenue gap, you decide to drop your average rates to $250. Over the next week, bookings accelerate and forecasted occupancy goes up to 70%, which means RevPar is now $175 ($250 * 70%).  Wait, what?  Yep, you dropped your prices and now you're actually making a bit less money per available room than you were before. This might not seem like a big deal; more revenue is good, right? Wrong. You need to keep profitability in mind so that you don't drop rates to increase occupancy...and actually make less money because it costs a fixed amount of money to service each additional room. As you can see, revenue management strategy is complex; you need to make sure that pricing decisions don’t inadvertently affect overall profitability. RevPar is one data point within a broader analysis. You must have a broad base from which to gather real, accurate insights on your hotel’s performance -- and which revenue strategy works best for a given period of time and for specific business goals.   RevPAR Variants: NRevPAR and TRevPAR To get more nuance from RevPar as a core hotel metric, consider its siblings: Net Revenue Per Available Room (NRevPar) and Total Revenue Per Available Room (TRevPar). These variations can help you maintain an accurate and useful analysis of your current revenue strategy.   NRevPAR  This metric is total room revenue minus the cost of distribution. Here’s how to calculate a hotel’s NRevPar: NRevPar = (Total Rooms Revenue - Related Distribution Costs) / Total Rooms Available This metric could be calculated for a specific time period, channel or segment. For instance, you could track your net revenue from OTAs and then compare it to direct bookings. This is a helpful comparison, as direct bookings also have a distribution cost. From the technology required to handle direct bookings to performance marketing and other demands generation efforts, direct booking certainly isn’t free.  NRevPar aligns revenue, marketing and management around profitable distribution. All things equal (such as demand and caliber of guest), inventory should be allocated to the lowest-cost channels first and then onwards based on the overall cost of each booking.   TRevPAR  Many hotels aren't just places to sleep; guests can eat in a restaurant, enjoy happy hour at the bar, relax at the spa or book a tour at the concierge. To get a more accurate picture of the hotel’s overall performance, use TRevPAR, which is the total revenue per available room.  Here’s how to calculate TRevPAR: TRevPAR = Total Revenue During a Period / Total Rooms Available You can use this metric to see how well you were doing at generator incremental revenue from food and beverage and other on-site amenities. The higher the number, the more money you are capturing from each guest. And if TRevPAR is trending lower, it's time to do a deep dive and investigate the root cause.   Tactics: How to Influence Your Hotel’s RevPAR There are two ways to increase your hotel’s RevPAR: Increase your room rates (higher ADR) or put more heads in beds (higher occupancy %). As we saw earlier, there's a delicate balance at play. If you increase your rates too much, you risk lower occupancy. If you focus on occupancy only, you'll likely need to lower your rates. Here are some tactics to help you maintain this balance. Ultimately the top way to improve RevPAR is by utilizing a revenue management system like BEONPRICE which can help you price rooms more efficiently and maximize the balance between occupancy and average daily rate.   Tactic 1: Increase ADR (Average Daily Rate) You don't necessarily need to remodel your hotel operation to increase ADR, even minor (yet targeted) improvements to the guest experience can boost online review scores which help prospective guests justify paying more for your rooms relative to the competition. Optimize your channel mix. Frequent data-driven channel optimization is a great way to boost ADR. Make it a habit to compare your average rates across your major booking channels so that you can focus on higher rate channels first. This comparison not only includes your OTAs and metasearch but also direct bookings. Use that comprehensive benchmark of channel performance to prioritize channels that deliver a higher ADR. For instance, if metasearch is performing well, you may want to reallocate Facebook ad budget to TripAdvisor.  Upsell more. Are you doing enough to maximize revenue from every booking that you earn? Effective upselling is one of the most straightforward and impactful ways to increase average rates. Among the most effective upsell techniques is email marketing, which can be automated to send pre-arrival emails that entice guests to upgrade their experience. Each upgrade, whether sold prior to arrival or at the front desk, pushes your ADR up.   Tactic 2: Increase Occupancy Adapt to demand. It's pretty easy to increase your rates when your market is busy. It's during those slow periods where you may want to focus more on your occupancy rate. Talk to your OTA market managers about running promotions. Build outreach campaigns targeted to specific segments, such as groups and corporates, that can efficiently fill rooms. Also, be sure to let automation amplify your efforts: revenue management systems like BEONPRICE will automatically make pricing decisions based on real-time market- and property-level data. Your prices will be based on the latest data and you can make adjustments as needed Market to loyal guests. Your most loyal guests can bring your occupancy up (and are often less price-sensitive than a transient guest from an OTA). Nurture these relationships over time so that you stay top-of-mind. Then, when you’re looking at a less-than-desirable forecast, create a promotion for past guests. By focusing on this segment, you can put heads in beds without resorting to discounts on third-party channels.  

Hospitality Innovation is Thriving Despite the Crisis (Q2 Innovation Report)

by
Jordan Hollander
2 months ago

Innovation is alive and well in hospitality. Don't believe us? Check out the 47 new hospitality innovations that we cover in this report.  In the age of coronavirus we all catch ourselves thinking that the world is coming to an end from time to time. Don't worry, this article has nothing to do with coronavirus (but it's hard not to address the elephant in the room these days). In order to keep this article COVID free, let's run a scenario analysis using Hotel Tech Report's Innovation Wager™.  The wager considers four alternate universes based on two axes.  On our X axis we consider two worlds: Scenario A considers optimal decision making if the hotel industry does not recover, Scenario B considers what to do if you believe that it will. On our Y axis we consider what happens if we improve the way we do business with new technology and processes.  The wager shows us that in any potential outcome, it's always in our interest to improve the way we operate our businesses.  The only unacceptable outcome is the one where the world does not come to an end and we do not improve our tech and hotel operations processes.   So the next question is how did we choose our Y axis (i.e. update my hotel's tech and operations)?  The math is simple, if your hotel group's breakeven is at 25-30% occupancy and you're currently running at 0% you are essentially racing against time to hit that occupancy.  Global travel demand is unfortunately out of your control, so what can you do to get there as quickly as possible? You can improve your margins to lower your breakeven occupancy by getting more efficient at your property.  For this you may explore technology like keyless entry or staff collaboration tools to help your slimmed down team do more with less.  You can sell long term group business today to bring deposit revenue in ahead of those bookings and for that you'll need airtight sales tech and processes.  You could also get more efficient at acquiring guests to hit that 25-30% occupancy rate faster. In this article, we showcase 47 hospitality innovations that have been launched in the crisis.  As you explore ways to improve your margins, get smarter at guest acquisition and more - this list can put you on the cutting edge.  We've divided the article into five categories: Revenue Management Innovations Marketing Innovations Operational Innovations Guest Experience Innovations Sales and Meetings Innovations     BONUS: Look for the contactless badge next to products in the innovation report to identify technologies that will help your hotel go contactless, boost your recovery efforts and prepare now for the inevitable changes that are coming.  The tools have functionality that will enable you limit human physical contact to pre-emptively prepare for new government regulations and even more importantly, guest expectations.   Q2 Innovations in Revenue Management   1. OTA Insight Market Insight Tool OTA Insight’s Market Insight tool offers a smarter way to predict demand and price your rooms accordingly. Market Insight gathers and analyzes data from hotel web searches, flight data, events, holidays, online reviews, weather forecasts, and alternative lodging inventory to give your revenue team location-specific insights segmented into different customer groups. Learn more about your target guest’s booking intent and use real-time market trends to capitalize on revenue opportunities before your competition. 2. SiteMinder Insights SiteMinder Insights allows hotels to be smarter about their sales and marketing strategies while maintaining their brand integrity. This tool has monitoring and reporting capabilities that provide hoteliers a single place to access clear and actionable data on their local market, business performance and guests. This integration can help hoteliers make more informed decisions about hotel pricing and distribution, based on impartial data, as well as reveal insights that help get ahead of the competition. 3. Infor Price Optimizator Infor Hospitality Price Optimizer (HPO) is a mobile-first app that helps hotels price their rooms in a more accurate and timely manner. The algorithms that drive the app replicate the approach the guest takes to book a room: the system data from star ratings, location, pricing, and reviews to select which hotels are the valid competitors that should influence the pricing decision. he system automatically detects seasons and events for a dynamic pricing solution that updates throughout the day as needed.   4. HotelIQ Monthly Forecasting HotelIQ has been working on a Monthly Forecasting & Budgeting Tool that can generate forecasts and budgets for up to 12 months at a time. The platform pulls your real-time PMS data to use as a baseline, automating the burdensome task of maintaining spreadsheets and forecasting by hand. Easily edit figures, track performance, and generate market segment level forecasts and budgets.   5. IDeaS RevPlan IDeaS RevPlan is a total revenue forecasting, planning and enterprise consolidation tool. RevPlan can automate scientific forecasting, budgeting and financial submission for your entire property – from rooms to food & beverage and other income revenue streams. Save time and manual effort while driving greater profitability: RevPlan provides hotels the ability to forecast accurately and precisely.   6. RateGain MarketDRONE RateGain is launching MarketDRONE, a new feature for its rate intelligence platform OPTIMA. MarketDRONE tracks intra-day rates and rate-plan changes by hotels in real-time. Whenever a competitive hotel makes a rate change, your revenue manager receives an alert. Hotels are constantly changing rates for existing plans and introducing new rate plans close to check-in-date to sell off their unsold inventory and maximize revenue. As such, a revenue manager, on an average, may lose $1,000 or more per day by not acting on these intra-day market changes in real-time. With MarketDRONE, revenue managers do not have to pull out rate shopping reports on a daily basis to make the strategic decisions. The instant alerts provide them the market insights on the fly and basis that they can take the recommended actions on the go.   7. HotelTime Instant Reporting HotelTime Solutions is debuting Instant Reporting, a reporting and forecasting tool that helps revenue managers working at multi-location properties get a clear picture on their distribution. It aggregates data on key metrics across different properties. This tool makes it easy to get accurate reports, merging revenue center statistics at the chain level.   8. Hotelchamp Demand Tracker Hotelchamp’s new demand tracker will give revenue managers insight into how much demand there is predicted for future stay dates in their hotel. Set up automatic alerts to be notified when demand increases for a specific stay date. Get insights for a specific demand period to better predict trends in revenue.   9. HotelPartner Synergy Model HotelPartner’s synergy model is a new service offering for individual hoteliers that combines manpower, technology, and expertise in one package. The firm will offer a revenue management tool as well as the team to use it; the synergy model offers a blend of consulting, technology, and a revenue management solution tailored to your property.   10. 5stelle Business Intelligence 5stelle* is introducing a new business intelligence tool that provides 18 interactive dashboards. Get reporting on your reservation lead time, month-to-date revenue and occupancy, RevPAR analysis, and more all in one place.   11. Fairmas Advanced Revenue Planner Fairmas Advanced Revenue Planner simplifies the planning and controlling of all hotel revenues, either by market segment or by account line item, on a daily or monthly basis. The platform is built for different user groups – from department managers who need to plan on the operational level, to revenue managers for a detailed view of the total hotel, and to the general managers who can refer to its consolidated view. The  Pickup Planning feature allows a different way of planning that may be a more realistic approach depending on the day-to-day situation (e.g., How many more rooms do I still need to pick up to achieve my goal?).     Q2 Innovations in Hotel Marketing   12. Revinate Guest Data Platform Revinate’s Guest Data Platform is another take on consolidating guest information to deliver the insights hotel managers can use to drive direct bookings, provide a great guest experience, and increase profit. The Guest Data Platform combines guest data into rich, unified profiles that can inform your sales and marketing campaigns.   13. SHR Maverick CRM SHR Maverick™ CRM by Sceptre Hospitality Resources LLC is a new CRM system that unlocks information from third-party providers. This CRM shows your hotel data about customers no matter where they booked: direct, or through an OTA. Maverick gives hoteliers access to clean, consolidated guest data, including user behavior and booking habits. The platform includes a loyalty and rewards platform and integrates with Windsurfer CRS, Windsurfer CRO, Windsurfer IBE, and a built-in Campaign Management Platform.   14. D-EDGE CRM D-EDGE launched Guest Management, a CRM tool that integrates with the brand’s existing CRS product. Guest Management offers hoteliers a way to centralize data from your PMS, CRS, website, and other sources into one guest profile. By consolidating all data about each guest in one place, your team can more easily send specific, customized offers to guests, driving guest satisfaction and loyalty. 15. Dailypoint Content Bot The dailypoint Content Bot is a tool which pushes email communication finally to an individual experience with each guest. The bot pulls data from guest profiles in dailypoint to select content pieces from a library, offering individualized, concierge-style recommendations based on each individual’s unique needs. Content Bot allows your marketing team to get hyper-focused with messaging. Send a newsletter customized per person, rather than per target group.   16. Suiteness OTA Distribution Suiteness launched a partnership with Booking.com for travelers to book connecting hotel rooms and suites through Booking.com. When connecting rooms are available, they are booked 3.3x more often than multi-bedroom suites in the same hotel. Customer segments like families and groups are heading to AirBnB in droves because they demand more space and don’t want to risk showing up at your property only to find out they can’t get connecting rooms. Give them peace of mind and you’re more likely to win their booking.   17. RoomRacoon Integrated Upselling RoomRaccoon is developing an integrated upselling tool for its hotel management system.  This will allow clients of its HMS to offer add-ons like breakfast or room upgrades prior to arrival.  While there are quite a few standalone upselling tools on the market, RoomRaccoon is one of the first HMS players to offer this functionality.   18. AskSuite Booking Engine Chatbot AskSuite’s latest integration syncs your booking engine with their chatbot to recapture a guest who may be having trouble booking directly. For instance, if a traveler tries to book a room on an unavailable date, the chatbot will automatically respond with a message that there are no rooms available and suggest the next earliest date with availability. Or, the chatbot can be set up to suggest a nearby property from the same chain that does have availability. This integration helps your reservation team work more productively, captures more direct bookings, and standardizes customer service messaging on your site. Asksuite is also in the process of building a Smart Chat Distribution tool that can matches a reservation agent to an open chat, helping large reservation teams coordinate their responses to individual customers. Your property defines specific rules – using triggers such as language, communication channel, type of inquiry, and more – and the algorithm uses these qualifiers to send an open request to the right customer service representative. The goal is to improve your property’s customer service and make it easier for your team to work efficiently.   19. Profitroom WebAssistant Profitroom’s WebAssistant is a new tool for creating and maintaining your hotel website. The tool is built specifically for the hotel industry, with templates designed to set up booking pages that drive direct bookings as well as unlimited data transfer and automated free updates. This website builder is an option for hotel properties that do not have the budget to work with a digital marketing agency to set up their site.   20. Quicktext Lead Generation Quicktext’s chatbot aims to improve your sales cycle by generating new leads for your sales team. When a customer engages with this chatbot, the program checks your CRM to see if this user exists; if they do, the tool will add any missing contact details and customer interests as determined through the chat interaction. If this is a new customer, the bot will upload insights into your CRM that can be used by your sales and marketing team to send more personalized offers and marketing messages. The Quicktext bot interacts with 9% of online visitors each month; if you have 3,000 visitors every month, Quicktext will create 270 new leads to whom your team can market.   21. myhotelshop GmbH Link Travel Ads myhotelshop GmbH recently launched Link Travel Ads, a metasearch marketing platform for hotel chains, booking engines, and hotel marketing agencies. This tool is built specifically for properties that have struggled to run, manage and report metasearch marketing campaigns. Link Travel Ads will take you through the process from start to finish. With this tool, one account manager can manage campaigns for more than 500 different properties, with reporting and invoicing all in one place.   22. Experience Hotel Dedupe Experience Hotel, like D-EDGE, is trying to solve the problem many hotels have: multiple entries for the same guest. Hotel brands that have multiple properties with multiple data sources (the restaurant, spa, reservation system, etc.) tend to have duplicate profiles for the same guest in their PMS. Experience Hotel’s approach is Unified Customer Repository (UCR), a system that can identify all the duplicates in your guest list and combine every guest's details in one single profile. This allows your team to see an entire guest history in one place, and use insights from multiple sources to deliver personalized messages and offers.   Q2 Hotel Operations Innovations   23. hotelkit Facility Management Hotelkit debuted a new Facility Management platform that enables maintenance teams to  plan, schedule, and track corrective and preventive maintenance tasks. The tool help maintenance managers allocate resources such as time, money, and employees more effectively, and can automate and oversee daily maintenance routines. Get data and reporting on energy consumption or wear and tear of equipment to predict future expenses.   24. Mews Online Check-Out Mews Systems now offers an online check out feature aimed at reducing lines at the front desk and streamlining your property’s operations. Guests can checkout online without having to stand in a queue before departure; the platform sends housekeeping an alert once the guest has left, and your revenue managers can start upselling early check ins. Mews Online Checkout gives time back to guests and hoteliers alike with essential automation to guests who are in a hurry and hotels who are trying to turn around rooms.   25. HelloShift Inventory Management HelloShift is introducing Inventory Management to systemize the process of ordering and maintaining your stock of hotel supplies – parts, tools, equipment, linen, guest amenities, and more. Store detailed information about your supplies (warranty, brand, model, etc.), automate reordering, and reconcile inventory levels with regular checks. Reduce error that can lead to over and under-stocking, and reduce costs associated with ordering the wrong amount of supplies.   26. Bookboost Multi-Property Inbox Bookboost Guest Messaging added an all-in-one inbox with multi-property function that integrates messages from a number of channels into one inbox. Manage messages from your website, email, Facebook Messenger, Whatsapp, and more in one platform. This allows one team member to oversee one unified inbox – a big gain in efficiency, especially for multi-property hotels.   27. Sertifi eConfirmations Sertifi eConfirmations allows travel companies to send payment digitally to travel suppliers (e.g., your hotel). Receive corporate credit card payments, virtual card payments along with the corresponding payment instructions, and guest information, such as check-in time and room preference, all at once – quickly and securely. All payment data is tokenized and transferred in a PCI compliant manner. Offer a smooth, hassle-free payment experience for corporate travelers.   28. Beekeeper Task Management Beekeeper’s Whispr Partnership will help frontline workers learn their job duties more quickly and help add consistency to your operations. Whispr transmits “motivational audio messages”, as well as work instructions in your employee’s preferred language through Beekeeper’s operational communication platform. Facilitate communication between your housekeeping team and management in an innovative and authentic way.   29. Telkonet Ecoinput Telkonet introduces EcoInput, a simple way to save energy and reduce your costs. EcoInput turns any light switch into an energy management device. Using the Zigbee wireless protocol, lighting can be controlled locally – e.g., guests can use the light switch as normal – or remotely via software or mobile control. Add sustainability and energy savings to your property without sacrificing guest experience.   30. Hoxell Quality Operations Hoxell has a new tool called Quality Operations. With Quality Operations, members of your team can send messages, create and assign tasks, and digitize workflows to improve productivity. The platform aims to streamline housekeeping activities, create direct communication channels, and improve reporting by reducing friction in communication and knocking down siloed reporting structures.   31. Mister Booking Payment Automation Mister Booking’s Payment Automation feature offers a simple way to process payment from your Hotel Management System. All credit cards collected as guarantee from OTA or booking engine can be verified and pre-authorized directly from the PMS. Automate advanced payments for all non-cancellable and non-refundable reservations, according to their payment conditions. It will save your team time by automating the administrative burden of payment verification.   Q2 Guest Experience Innovations   32. Crave AppLess Mobile Crave unveiled AppLess™ Mobile, a tool that gives guests access to guest services through location-specific QR codes. Guests simply scan a QR code and choose from the services you offer. Create multiple custom QR codes and post them at different points throughout your property: for instance, a QR code for ordering drinks at the bar, a QR code for catering in a meeting room, a QR code for more towels by the pool. AppLess™ enables frictionless digital experiences for consumers to access services on their own devices, without the need to download a mobile app. Includes payment technologies such as Apple Pay and Google Pay.   33. SuitePad Premium Docking Station SuitePad has two new products to share, the SuitePad Premium Docking Station and the SuitePad 10" Tablet. The SuitPad 10 is a premium version of their previous model, featuring a 1920 x 1200px resolution screen, larger battery for longer use, and 2GB of RAM for smoother content delivery. The docking station includes new features such as a bluetooth speaker, in-room presence sensor, and telephone handset. These features increase your property’s ability to send offers to guests at the right moment, and provide a premium in-room technology experience.   34. Volara Google Interpreter Volara introduced Google Assistant Interpreter Mode for Hospitality, a partnership with Google that facilitates real-time conversations with guests through instant translation. The tool translates between 29 different languages to help your staff welcome guests from diverse language backgrounds. Improve the guest experience and solicit reviews in multiple languages with this quick and easy translation platform. 39. TrustYou On-Site QR Feedback TrustYou’s On-Site Solutions Beta is a new product that solicits feedback during the guest stay using a QR code or short URL. This survey tool proactively asks each guest about their stay, escalating any issues occurring at your hotel for immediate attention. One hotel property that tested this product was able to increase their post-stay review scores by 3.8 points by asking for feedback in real-time.   35. Travel Appeal Destination Report Travel Appeal’s On-demand Destination Reports are tailor made for independent and chain hotels, DMOs, and tour operators looking for deeper information about their territory. These reports are available for any city, region, or territory within a few days, and can be used to analyze visitor groups, sentiment scores, trends, competitors, online channels, seasonality, and more. Compare different time periods (up to three years back) and learn about the reputation of the destination, individual sectors (F&B, retail, experiences, and more), and what topics are most discussed in relation to your specific area. Know what to highlight in your marketing campaign and help your concierge team craft the perfect experience for your guests.   36. LoungUp WhatsApp Messaging LoungeUp debuted its new WhatsApp Messaging function, adding a new way to communicate with guests. Use this tool to initiate contact with each customer before they arrive over WhatsApp. Send guests a way to check-in in advance, pay their deposit, book a shuttle to the hotel, or offer an upgrade. Automate some of the time-consuming administrative process and offer real, conversational exchanges with guests. With 1.5 billion worldwide users per month (as of January, 2019) worldwide, WhatsApp is the number one messaging platform, ahead of Facebook Messenger (1.3), Wechat (1.1), Skype (0.3), Snapchat, Viber and Line.   37. Zaplox Mobile Check-in Zaplox Premium iterates on Zaplox’s original product with new mobile-check in and mobile key functionality. This app integrates with most leading PMS and lock systems to streamline check-in. The custom-branded app allows your property to connect with guests before, during, and after their stay. Guests can use the Zaplox app to check-in, preauthorize their credit card, and complete the guest registration before they arrive at the hotel. Includes mobile keys with integration with lock vendors ASSA ABLOY, dormakaba and SALTO systems as well as large PMS providers, such as Oracle, Agilysys, protel, StayNTouch, Maestro, and more.   38. MyStay Mobile Check-in MyStay Check-in Agent is a tablet-based software solution that can make your check-in process 100% digital at the front desk and anywhere at your hotel. The tablet scans guest documents, and then prompts the guest to add missing information, agree to house rules, and sign the check-in card. This increases the accuracy of your guest data, streamlines the check-in process, and allows your team to focus on the guest experience rather than data entry.     Q2 Sales & Group Travel Innovations   39. OPERA Sales & Event Management Oracle’s OPERA Sales and Event Management Cloud (OSEM) helps hotels reduce the extra time spent managing data entry related to events. OSEM provides a single view of all a hotel’s event booking details and revenue across rooms and event spaces for easier audit and analysis. Properties can increase their event revenue by optimizing inventory, bookings, streamlining logistics and providing smooth event logistics. The tool helps streamline operations, increase communication and cooperation across departments, and respond faster to customers.   40. Atomize Group Booking Pricing Module Atomize announced fresh updates to its Group Booking Pricing Module with a tool that helps revenue managers to instantly calculate the optimal rate for groups. This module now presents both the total recommended price and displaced transient revenue for the group, along with details such as prices per room type and date. A separate module introduces the ability to email yourself the group pricing recommendation for future reference.   41. MeetingPackage Analytics MeetingPackage has a new analytics extension for meetings and events bookings that allows you to advertise your meetings and events the same way you would advertise your hotel rooms. The analytics extension allows Google Analytics to track the full customer journey, capturing the total revenue of the meeting/event. Measure the booking process from the very first ad click until the event date, and make smarter marketing decisions on Google, Facebook, and LinkedIn to drive valuable direct traffic.   42. SABA Hospitality Digital Conference Tool SABA Hospitality’s SABA Conference is a digital conference tool that provides automatic answers to the questions and requests of conference hosts and attendees directly to their mobile devices. From conference information, directions and amenities, and information on the surrounding area, all information is easily accessible in multiple languages, and can be presented in any format (e.g. links, videos, text, maps and images). Users don’t need to download a thing, making it easier for conference organizers to ensure all relevant information is received by attendees. Hosts and property operators simply enter the relevant information, and the platform presents it in a branded and engaging way.   43. EVENTMACHINE Instant Quote EVENTMACHINE IQ Instant Quote automatically plans and quotes events based on a few simple inputs, like date or event type. Rather than tasking an event manager to manually select and calculate event spaces, catering and equipment. Eventmachine IQ can reduce that manual effort. Get instant, custom quotes emailed in a professional PDF proposal.   44. Get Into MoRe Strategy Dashboard Get Into MoRe has built a new Strategy Dashboard advises whether or not you should allow an inquiry to proceed with booking your events space. One small event could easily reserve a space and prevent a more profitable, large event. Strategy Dashboard uses a red light/green light system to tell you if an inquiry is worth accepting – or if you should hold out for another booking request.   45. THYNK Meetings Management THYNK has a new product, MYCE, a customer-centric meeting events and venue management system. The flexible, cloud-based system uses Salesforce to automate the sales process follow-up with task automation and two-way integration with your PMS, POS, and other applications. Assign tasks across departments and add the group booking module to make it easier to manage event bookings.   Q2 New Innovations in Food & Beverage   46. Bbot Smart Ordering System Bbot Smart Ordering system allows guests to order room service on their phone from their room without downloading an app or signing up for a new service and integrates with popular hotel PMS and POS systems.  Guests order and pay for food + drinks right from their room without having to call down, which means you save on labor and menu management.  Bbot recently rolled out new PMS integrations including Mews & Opera.                   47. Apicbase's Production Planning Tool Apicbase’s Production Planning tool streamlines kitchen operations at your property by making food production reliable and repeatable. Save money and reduce food waste by up to 30% with automated to-do lists, real-time inventory updates, and a function that allows your team to predict how many quantities will be needed at each meal. Prep only what you need and make the most of ingredients in your pantry to lower your food budget.  

The 10 Most Important Hotel Tech Stories From Last Year

by
Hotel Tech Report
2 weeks ago

2019 was a big year for hotel news and the hospitality industry as a whole. From OYO’s aggressive global expansion to Google’s full-fledged hotel search product, there were some significant stories unfolding around the world.  Given the recent coronavirus scare originating from China, it can be hard to remember that while times like these are extremely painful for our industry - they are still temporary.   The impact of covid-19 on hotel groups, airlines and cruises around the world has been devastating as evidenced by the hotel stock index falling more than 30% in the last 30 days kept by hotel data analytics firm STR. During the media frenzy around the virus, we wanted to take a step back and reflect on the biggest news stories of last year which we believe will have a long term impact on our industry. To put these developments into perspective, we’ve combed through the archives and picked out what we think are the most impactful hotel news stories of last year. To make the cut, we looked for stories that resonated far beyond the news itself. Stories that reflected trends, revealed truths, and highlighted evolving dynamics and the industry’s trajectory in the years ahead covered on the top hotel news sites. So what do these top stories mean for you? Read on to find out what makes each story important, why you should care, and understand the long term implications for the hotel industry. In no particular order, here are the top 10 biggest hotel news stories of 2019. We'll be watching throughout the year to see how these stories set the scene for this year’s wave of major hotel news stories.   #1: Google Puts (More) Pressure on TripAdvisor and the OTAs In 2019, Google’s full ambitions came into focus: the company released its full-featured hotel search product, Google Hotel Search. This was huge news because it was an entirely new metasearch channel for hotels to leverage. It also put competitive pressure on the major OTAs. Then, later in the year, Google then put all of its travel products into a single interface, further challenging the OTAs’ core brand proposition as a “one stop shop” for all things travel. And it’s working: Google Hotels and Flights had 674 million visits in 2019 compared with Expedia’s 360 million, Booking’s 333 million and Tripadvisor’s 207 million. What makes this such a big story? Google is the dominant global search engine. As a monopoly, it exerts immense leverage over the attention of millions of consumers. The fact that it’s going head-to-head with its major advertisers in travel means puts it in direct conflict with not just those advertisers but also with regulators investigating Google’s monopoly on search. What is the overarching trend behind the story? Disintermediation can come from anywhere -- and there’s no such thing as a static digital marketing channel. Frenemies are a standard facet in the travel industry, but what happens when a frenemy simply becomes an enemy?   Why should every hotelier care about this? Existential threats to the OTAs is a good thing for hoteliers. It puts competitive pressure on the duopoly to provide better terms, improve their products, and generally be more responsive to hoteliers’ needs.  What are the implications for the hotel market? This is a fundamental reshuffling of the competitive core of the hotel industry. Hotels now have another marketing channel to leverage and that means that there’s a new way to engage consumers and potentially reduce reliance on commision-based intermediaries. However, there’s also the chance that Google’s dominant position will simply add another formidable force to the equation. As that translates into bookings, Google will exert (even) more power over the industry and raise rates for Hotel Ads.    #2: SiteMinder Became a Hotel Tech Unicorn At the tail end of 2019, rumors began that Siteminder’s latest round would value it at AUD $1.1 billion. The AUD 100 million round, which closed in early January of this year, indeed pushed the company into unicorn territory -- a rare feat in travel tech, where there are around 34 unicorns out of a global total of 400, per CB Insights. This milestone was reached amidst the backdrop of record-breaking levels of Investments and travel and Hospitality startups: USD 5.7 billion in 2018 and over USD 6 billion in 2019. What makes this such a big story? Unicorn status confers momentum, legitimacy and a sense of inevitability on a startup. Yet there really aren't that many travel tech unicorns (let alone hotel tech); it's a tough industry to break into and get to sufficient scale, so the fact that SiteMinder got there is a story in and of itself.  Hotels are about 10 years behind but we are entering the era of SaaS and APIs - we anticipate a slew of new hotel tech unicorns to follow. What is the overarching trend behind the story? Hospitality technology is increasingly seen as a promising sector by investors, who like the margins and resilience of a B2B play. In 2019, hotels also planned to increase their own technology budgets by 54%, with only 8% decreasing. With a growing market, well-funded startups like SiteMinder, with both traction and a global operations, are ideally positioned to thrive. Why should every hotelier care about what’s happening here? As more funds flow to the sector, hotels can expect greater innovation, better pricing, and more choice from their vendors. When companies reach unicorn status, hotels must also learn to shift their thinking and stay up to date with the latest tech. What are the implications for the hotel market? Higher valuations entice new entrants. And more competition is always a good thing for an industry that often sees competitiveness threatened as power is consolidated into fewer and fewer hands. Another thing: as more technology innovations become available, hotels of all sizes will feel greater pressure to adopt technology to compete effectively.   #3: CoStar Acquired STR STR has long enjoyed its central status among hoteliers worldwide. Its STR reports (known as star reports) have been benchmarking industry trends for decades. Its companion news site, Hotel News Now, is also a prominent industry resource. This well-groomed reputation led it to be acquired for a whopping USD 450 million in cash by CoStar Group, a real estate data and analytics firm. What makes this such a big story? It's not often that a major industry resource,  used globally by nearly every hotel, changes hands.   What is the overarching trend behind the story? The multiple was a big part of the story: STR earned USD 16 million of profit from USD 64 million in revenue in 2019. With a purchase price of USD 450 million, that’s a significant multiple on earnings. There’s clearly extraordinary value of hospitality data and analytics --  especially in an environment where the next biggest competitor has a single digit share of the market. Why should every hotelier care about what’s happening here? This tie-up could be especially helpful for hoteliers looking to understand the dynamics of hospitality real estate within the context of other retail and office buildings within a market. These insights could reshape how STR products are used by hotels. STR will also be better positioned in Asia, where its saturation is only one-fifth of that in the U.S. What are the implications for the hotel market? There was the typical hand-wringing and fretting over the impact of the acquisition. While it's too soon to tell what this means for the hotel market, it's hard to imagine that the new owners would quash something so integral to the industry. And it seems like a good fit, as the two brands clearly align on providing actionable data to specific industry segments.   #4: Aimbridge and Interstate Hospitality Merged Aimbridge, North America's largest independent hotel management firm, merged with and Interstate Hotels & Resorts, an independent multinational hotel operator. Together, the new entity became a global force in third-party hotel management services, with a combined portfolio of over 1,400 branded and independent properties in 49 U.S. states and 20 countries worldwide. What makes this such a big story? Mergers like this don’t come around every day: The deal formed a major global contender in the hotel management space, which employs 60,000 people worldwide.  What is the overarching trend behind the story? The Aimbridge and Interstate Hospitality tie-up was the the first of two big mergers of the year, both of which created major new players In their respective segments. It's another example of rising pressures on firms to maintain competitiveness through consolidation.  Why should every hotelier care about what’s happening here? Any time two medium-sized players combine to create a much larger competitor, it changes the dynamics. Other hotel operators must pay attention to see how the combined entity manages to deliver benefits from its newly scaled and global platform, as well as how the larger team competes more effectively for business in both existing and new markets.  What are the implications for the hotel market? The larger hotel operator can  leverage its size to attract even better talent, provide more services, and deliver more value to hotel owners. At the very least, it's another option for asset owners  looking for an operator with global scope.   #5: Eldorado Merged with Caesars In one of the biggest hospitality deals in recent memory, Eldorado merged with Caesars. In fact, it was Eldorado Resorts that bought Caesars Entertainment, which had been struggling under a mountain of debt. Another notable element of this deal was that it was backed by activist investor Carl Icahn, who is known for shaking up underperforming businesses. What makes this such a big story? The USD 8.6 billion price tag (plus nearly USD 9 billion in debt) certainly got the world’s attention! And the merger also created the largest owner and operator of gaming assets in the United States, which is a major re-centering of industry dynamics. Icahn called this deal “transformational. What is the overarching trend behind the story? A key trend at play is private equity,  which bought Caesars in a leveraged buyout in 2008 and left it with that mountain of debt that pushed it towards consolidation as a strategic move to maintain competitiveness. Since the newly-enlarged entity can leverage greater strategic, financial, and operational advantages, the economies of scale favor larger operators and encourage further consolidation. The cycle continues!  Why should every hotelier care about what’s happening here? Any hotel that has exposure to markets in which Caesars and Eldorado compete will face stiffer competition from the larger entity. And since the combined company has 60 casino-resorts across 16 states, the impact will be felt far and wide. What are the implications for the hotel market? As gaming companies become gaming, hospitality, and entertainment conglomerates, it  reshapes expectations from several stakeholders: hotel guests, loyal gamers, investors, and employees all have different perceptions of these larger entities.    #6: IHG Acquired Six Senses In early 2019, IHG further expanded its footprint in the luxury segment by acquiring Six Senses for $300 million in cash. The move came on the heels of a 51% majority stake in Regent International, and follows the major Kimpton acquisition back in 2015. This further consolidates IHG’s perception as a luxury brand focused on wellness, health and sustainability. What makes this such a big story? Since acquiring Kimpton IHG has undergone a total luxury makeover. It's successfully acquired its way to becoming one of the top luxury portfolios with properties focused on different subsets of high-end travelers.  What is the overarching trend behind the story? There are three trends at play here: continued consolidation of brands under IHG, Marriott and Hilton; the expansive impact of private equity in buying and flipping businesses; and the increasing focus on the luxury traveler.  Why should every hotelier care about what’s happening here? Of those three trends above, the growing focus on the high-end of the market.  For years the global economy has experienced what we call a “band stretch” where ultra luxury like Six Senses and ultra economy like OYO (more on that below) have both experienced massive growth but undifferentiated and generic products that deliver questionable value in the middle get squeezed out of existence.  This will continue to put pressure on both independent and branded economy/midscale properties (especially because of their rapid expansion in the last two decades and what we at Hotel Tech Report believe is a massive oversupply). What are the implications for the hotel market? The USD 60 billion dollar luxury market is alive and well! Hospitality brands that served that segment have proven to be very popular with the developers, investors and asset owners. Landing management contracts thus requires brands that appeal to these investors and most see luxury brands as great investments.   #7: The Rise and Fall of OYO Rooms OYO’s bold global ambitions, coupled with a 20-something founder, was an irresistible story for both mainstream media, hospitality trades, and conference organizers. Yet, amidst this massive global expansion, OYO reported a $355 million loss in 2019 -- more than six times its $52 million loss in 2018. The media began correlating the ballooning losses at the Vision Fund-backed company with the implosion of WeWork, another Vision Fund investment. What makes this such a big story? OYO’s $10 billion valuation puts it in the big leagues, valued at double Wyndham Hotel’s market capitalization. The sheer scale, scope, and level of investment makes this a major storyline industry-wide and with mainstream media. What is the overarching trend behind the story? OYO appears to be another example of a “disruptive” startup coming into a “legacy” industry and facing a wall of challenges that threaten its very existence. These challenges include self-inflicted wounds resulting from a superficial understanding of industry dynamics and hyper-growth over proper fundamentals. Why should every hotelier care about what’s happening here? It’s a juicy story! Beyond that drama, OYO now handles 43,000 hotel rooms worldwide. They’re a global contender that can reshape local markets wherever they enter.  For example, by empowering independent hotels with modern design and technology, they become more competitive against other local properties. But beware: not all owners are happy with OYO’s business practices. What are the implications for the hotel market? OYO’s business model is noteworthy by its uniqueness: for a percentage of revenue that’s lower than typical franchising fees, it offers budget properties standardized design, modern technology and other services. Up to this point, independent owners of hotels and motels had no options outside of franchising, which is an expensive investment.  If OYO does implode, there could be serious damage done to independents left without promised support.   #8: Plastics Got Banned and Flights Got Shamed Rising awareness of the immense impact of plastics on our environment (90% ends up as trash) has led many hotels to accelerate sustainability efforts. Local governments further accelerated these efforts by banning plastics altogether, including several in the U.S. that also banned single-use toiletries at hotels. “Flight shame” also became a thing this year. as more travelers came to terms with the fact that aviation is a major contributor of carbon emissions. To mitigate that impact, many travelers pledged to eliminate or reduce air travel, which has led to dipping aviation demand in certain countries. What makes this such a big story? Images of the Great Pacific Garbage Patch have unleashed a new wave of awareness around the impact of plastics on the world. And climate activists have captured worldwide imagination with global walkouts and major demands on reducing global emissions. What is the overarching trend behind the story? The climate crisis has put sustainability at the forefront of global consciousness. It's no longer possible to ignore the likely industry-wide disruptions caused by climate change. Why should every hotelier care about what’s happening here? With movements like flight shame reaching across cultures, more consumers seek sustainable options when traveling. While it's harder to stop flying, it's easier to stay with hotel brands that put that sustainability ethos front and center. Hotels may be unevenly pressured to help travelers reduce/offset carbon emissions while in-destination, since they can't easily cut out flights. What are the implications for the hotel market?  Plastic bans and flight shame affect Two major parts of  the hotel business: operations and demand. As Travelers expect more sustainability from their lodging, hotels will have to invest in upgrading properties and providing sustainable amenities and operations. And any reductions and flights means fewer potential guests.   #9: AirBnB Acquired Hotel Tonight Airbnb closed its acquisition of Hotel Tonight in April of 2019. Prior to HotelTonight, Airbnb had already expanded into in-destination activities, restaurant reservations and luxury vacation homes. The purchase was the first major move to expand its foothold into hotels and add more diversity of supply to its offering. What makes this such a big story? At an estimated USD 400 million, this was Airbnb’s largest acquisition to date, which on its own is newsworthy. But in the context of Airbnb's always-rumored “imminent” IPO, this became even more newsworthy because it signaled Airbnb’s ambitions to expand beyond hosted homes and vacation rentals to further “professionalize” its supply before going public. What is the overarching trend behind the story? Expedia and Booking are up against Airbnb and Google as the titans vie for supremacy in an all out battle to become an “end-to-end” travel platform. HotelTonight was also mobile-first and mostly last-minute, which provided a major leg up for Airbnb to boost its own mobile and last-minute bookings, which are a growing global trend. Why should every hotelier care about what’s happening here? Airbnb's push to become more of an OTA-like platform gives hotels a new distribution channel. As the company becomes more sophisticated with its advertising business, there will also be new revenue/marketing opportunities. Hoteliers must keep a close eye on developments here to stay on top of Airbnb as a reliable and affordable source of demand. What are the implications for the hotel market? Airbnb has obviously been a major challenge to the traditional hotel business. It captures a significant chunk of travel demand  and this will only increase as Travelers learned that they can start their searches on Airbnb  rather than Google or an OTA. Even so, greater competition among intermediaries is good for everyone. As these major players battle for supply, hotels will have more leverage to negotiate better terms.   #10: Thomas Cook Collapsed Last but definitely not least was the extraordinary collapse of UK-based Thomas Cook. As one of the oldest travel brands in the world, it was nearly unfathomable that a brand with such heritage could tumble so quickly. And it happened in an environment that was actually expanding: in 2018, 60% of the British population took a holiday abroad, up 3% from the year before. Even as the brand struggled to regain its footing over the past few years, the collapse took many by surprise and became a major story affecting travelers across the globe. What makes this such a big story? The visuals were stark: passengers stranded around the world, employees without information, local subsidiaries left in the dark. It was one of those catastrophic train wrecks that no one could look away from. What is the overarching trend behind the story? In addition to a poorly managed merger and excessive debt, Thomas Cook failed to navigate a changing industry. Namely, it didn’t adapt well to the internet, continuing to rely on expensive storefronts under-investing and its digital presence. Thomas Cook became a classic case study of a once-formidable company that failed to adapt  as the world changed around it. Why should every hotelier care about what’s happening here? First, there’s the lesson around crisis planning: you must be prepared to have a plan for every contingency. Second, there's the lesson about relying too much on a single demand channel. In some countries popular with summer vacationers, such as Greece, Spain and Turkey, Thomas Cook accounted for over 25% of their business. Many other destinations relied on the brand for double-digit percentages of demand. Whenever you start to see a single non-direct channel dominate your channel mix, it's time to consider tweaks to your mix. At the very least, make a contingency plan in case of an unexpected drop in that demand.  What are the implications for the hotel market? The global industry lost a major source of bookings. It will need to work diligently to recapture that demand and maintain existing relationships between individual destinations and their loyal travelers. The collapse also highlighted the fact that proper technology is essential for maintaining competitiveness in a global marketplace.  

The Evolution of EBITDA in the Hotel Industry

by
Hotel Tech Report
4 months ago

In 2019, Hyatt Hotels posted an EBITDA of $707 million. Choice Hotels reported an EBITDA of $291 million. Hilton Hotels came in with an impressive $2.04 billion EBITDA (Q3 TTM). If you’re not sure what EBITDA stands for, let alone what your hotel’s EBITDA is, these numbers won’t mean anything to you. The EBITDA calculation is one of the simplest and most powerful ways to measure your property’s financial performance. The EBITDA margin can be used to improve your total revenue management approach – bringing better profitability and financial growth to your hotel management business. Here’s what EBITDA is and why you should pay attention to this key performance indicator.    What is EBITDA? EBITDA stands for earnings before interest, taxes, depreciation, and amortization. It’s a basic measure of profitability and can be used as an alternative to simple earnings or net income. The easy way to calculate EBITDA is to start with operating profit – earnings before interest and tax (EBIT) – and then add depreciation and amortization. There is an EBITDA formula, which is: EBITDA = Total Revenue – Expenses (excluding interest, taxes, depreciation, and amortization). You will find your earnings, taxes, and interest on your hotel’s income statement. Look for depreciation and amortization in the notes to your operating profit report or cash flow statement. Why do companies use EBITDA instead of a more comprehensive profit margin calculation? EBITDA became a popular calculation in the 1980s as investors began to look at distressed companies in need of financial restructuring. EBITDA was a way to ascertain whether or not a company could pay back interest on a financing deal. Today, investors use EBITDA to evaluate businesses with different capital structures, tax rates, and depreciation rules. It’s a good way to assess the earning potential of a start-up or a newly restructured company that may have a lot of debt. EBITDA strips out costs that can hide how a company is really performing; some analysts use it as a proxy for cash flow.    Applying the EBITDA Formula to Your Hotel Business EBITDA is a particularly useful formula for the hotel industry where many properties have a large number of assets. EBITDA allows you to demonstrate potential profitability and show creditors the amount of money available to pay interest when financing and accounting decisions are taken out of the equation. If you manage a hotel with locations in other countries or regions, EBITDA is a good formula for comparing financial performance without the complication of different tax rates. To apply the EBITDA formula to your hotel, start at the top of your profit and loss statement (P&L). The first section of your P&L will show revenue: total income generated from rooms, food and beverage, and other hotel services – the spa, gift shop, lobby shop, or events. As you continue down the statement, you’ll reach expenses: what you’ve spent on things like payroll, inventory, cleaning and laundry, and other purchases. These are your operational expenses. There will also be some fixed costs and “undistributed costs”, such as marketing costs and OTA fees. To get your EBITDA, simply take the total revenue (from the first section) and subtract your total expenses (from the second section).    The Evolution of EBITDA in Hotels Any examination of EBITDA in the hotel industry needs to start with rooms revenue and lately alternative accommodations like Airbnb are making room revenue harder to earn. As a result, hoteliers are turning to new revenue streams, like food and beverage earnings and lobby shops, to increase profitability. “We’re talking about revenue generators—beverage is back with a vengeance,” one hotelier told Hotel Business. “We’ve done three rooftop bars and have four more in the process—great margins, very socially acceptable, makes the hotel stand out. Those are the kinds of things that people are buying into now." Earnings equal revenue minus expenses and on the other side of the P&L calculation, expenses are increasing in key areas. Rising labor costs are weighing on hotels as minimum wage hikes take effect this year in many states. This year, 21 states have raised their minimum wage; states like Massachusetts and Washington require hourly rates as high as $13.50. Payroll accounts for more than 42% of a hotel’s total operating expenses, which means even incremental changes can impact your EBITDA dramatically. Other big changes relate to the exclusions from EBITDA. Hotel financing has evolved, changing the interest calculation for many hotels. Hotels are taking short-term loans: $31.7 billion of which are due this year. These loans were taken as the result of “heavy acquisition and brand consolidation activity,” reports ReBusiness Online. Taxes have also increased in the hospitality sector. The average state lodging tax revenue grew 2.92% from 2017 to 2018; this tax is imposed as a flat dollar rate per night. This tax is passed through to the guest. High taxes discourage guests from staying longer – or at all. This impacts your hotel’s revenue streams and may also change where you make your incremental profit. Lastly, depreciation and amortization have remained relatively constant variables. Amortization is similar to depreciation, but it applies to an intangible asset – a patent, trademark, or franchise agreement, for instance. Franchise fees are obviously very relevant in the hotel industry; these fees include charges for royalties, marketing, frequent traveler programs, sales and reservations, and other miscellaneous fees. In 2010, franchise fees averaged 6.8% of room revenue; fees increased to 7.2% in 2016. Increasing taxes, interest, and franchise fees can’t be ignored when planning your hotel’s operating budget. But, for the purposes of EBITDA, removing these costs gives you a clearer picture of your property’s financial health.    How Tech Can Help Your Hotel Better Optimize EBITDA These changing variables mean that hotels must deploy a total revenue management approach to optimize their EBITDA. Total revenue management refers to managing all revenue sources in your hotel – not just room revenue, but food and beverage, spa and gym, events, and tours. Start by optimizing your rooms revenue using a pricing and yield management tool like Duetto’s GameChanger. GameChanger is a powerful revenue management system that simplifies pricing to capture the best revenue possible for your room inventory. Duetto reports that GameChanger customers see an average RevPAR Index increase of 6.5% from using the platform. The tool allows revenue managers to drive direct bookings through enhanced pricing, setting rates and offers at a price point that makes you the most money while still converting. Next, dive into your F&B revenue. Lobby bars have blown this revenue stream wide open. As Hotel Business reports, “lobbies are being redefined, many without registration desks and many that put a focus on the lobby bar. ‘The way we approach it is we see every seat in the lobby as a revenue seat. Why put seats there for people to sit in? Put seats there for people to sit in and buy something.’” Revenue management systems like Duetto meeting this trend by getting better at pricing tRevPAR. This gives your team a better understanding of how to price rooms based on expected F&B revenue, allowing you to optimize total profitability by guest. And finally, don’t ignore your data. Business intelligence tools like Duetto ScoreBoard take total revenue management a step further, allowing hoteliers to make more data-driven decisions with granular real time data around key facets of the business like channel mix and profitability. ScoreBoard provides performance forecasts and analysis across your portfolio, updating in real-time to show you how your different revenue streams are performing. Optimize your decision making to drive revenue through the best booking channel while saving costs from areas that aren’t working. Your EBITDA will thank you for it.  

How to Read a STR Report (Hotelier Step-by-Step)

by
Hotel Tech Report
2 weeks ago

STR stands for Smith Travel Research, a hospitality analytics firm founded in 1985.  STR was recently bought by real estate data firm CoStar Group for a massive $450M all cash deal.  But what does STR do? STR has a genius model where hotels pay a monthly fee to see competitor data like occupancy rates, RevPAR and ADR.  The genius part of STR's model is that these hotel customers also contribute their own performance metrics which STR then packages and resells to competitors and investors.  Every Tuesday STR customers receive a "STR Report" showing their hotel's performance against a local compset so they can see how they're doing on a relative basis.  STR also packages this data for investors, hotel tech companies and other industry stakeholders. If you haven't seen a STR report we'll walk you through what one looks like. For those of you who get STR reports, have you ever looked at a STR report (pronounced Star Report) and felt like you were trying to read a different language? Between all the hotel industry acronyms and numbers, it’s easy to feel a little lost. In this article, we’ll share some tips on unlocking the treasure trove of data within your STR report whether hotel business is in North America, Europe or Asia Pacific. STR reports are not to be confused with hotel star ratings, they help us understand financial performance of an asset rather than guest sentiment. Once you can read a STR report, you can apply your knowledge about your hotel markets compset and market trends to your own hotel’s strategy, which will help you meet your revenue and occupancy goals. But the STR report isn’t the only tool you can use to take your hotel’s performance to the next level.  Once you’ve mastered this one, you’ll want to dive into more detailed real-time data from a business intelligence solution, such as Revenue Insight, or a live rate shopping tool like Rate Insight.   What is a STR Report? Let’s rewind a bit; what exactly is a STR report? Developed by the hotel management analytics firm Smith Travel Research, the STR report is a benchmarking tool that compares your hotel’s performance against a set of similar hotels. The report is usually released every Tuesday and is delivered in a digital format, though you can also receive reports on a monthly or yearly basis. In order to receive your STR report, hoteliers must submit performance data (like daily occupancy and ADR) to Smith Travel Research, who then compiles all of the data they receive into the nicely presented STR reports. You can find your own hotel’s data in your property management system, so the real advantage to looking at a STR report is understanding how your hotel is performing against other properties. To do this, STR uses anonymized data from your competitive set, which is a group of hotels that you choose for comparison purposes. We’ll talk more about choosing a compset below. The STR report uses a variety of metrics to show performance data. Here are a few of the main terms that you’ll see throughout the report: Occupancy = Rooms Occupied / Total Number of Rooms. Occupancy is expressed as a percentage, like 78%. ADR (Average Daily Rate) = Total Revenue / Number of Rooms Sold. ADR is the average room rate sold for a given time period. RevPAR (Revenue per Available Room) = Total Revenue / Total Number of Rooms. RevPAR can also be calculated as ADR x Occupancy. You’ll also see your hotel’s performance calculated as an index, which shows you whether your hotel is performing better or worse than average within your competitive set. An index is calculated by dividing your hotel’s data (occupancy, for example) by the competitive set’s data (the average of all the competitive set’s occupancy numbers), then multiplying by 100. If your hotel scores higher than 100, then you’re outperforming your compset, or capturing more than your fair share. If your index is below 100, then you’re not earning your fair share and have some room to improve.   Select the Optimal Compset In order for the STR report to provide relevant information, you need to select an appropriate competitive set. Hotel management teams can easily get tricked by a STR Report if they have picked the wrong compset. You should pick a compset that most closely resembles your hotel type. A strong compset should include 3 to 5 hotels with the following characteristics: Located within the same geographical area (exceptions could be for hotels located in very remote areas or certain airport hotels which compete with different markets) Selling similar rates Offering similar amenities Targeting the same type of guests (for example, an extended-stay hotel would want to include other extended-stay hotels) Keep in mind that you can always change your competitive set, so it’s okay if your first iteration isn’t perfect.   How to Read a STR Report Once you’ve chosen a solid competitive set and have received your new report, it’s time to dive into the data. But with so many numbers to look at, where do you start? We’ll explain a few strategies to reading a STR report effectively, like looking for trends, comparing year-over-year numbers, and taking notes so you can get the most out of the report. Look for trends Let’s start on the “Glance” sheet, which follows the Table of Contents. On this sheet, you’ll see occupancy, ADR, and RevPAR broken down by each day in the last week. There’s a row for your, your compset, and your index. Again, if the index number is over 100, you’re doing better than your compset average, and if it’s below 100, you can room to grow. By taking a quick look at this sheet, you can easily see if your indexes are above or below 100, in general, as well as if your performance changed positively or negatively over the last week. What trends do you see? Is your performance up or down? How about your compset? Is a particular day of week performing better than others? Compare to last year and try to make inferences Looking at the percent change compared to last year can also provide insight into your performance. By looking at the RevPAR totals, you can get a quick snapshot into your hotel’s and your compset’s year-over-year performance for that week. Did the week perform better than last year? Or worse? And was your performance in line with the compset or different? Think about why that could be, perhaps a special event happened last year that didn’t return this year, or maybe several new hotels opened in the area which would lead to lower occupancy overall. On subsequent sheets you can explore further into your year-over-year trends to pinpoint which metrics were affected. For example, maybe your occupancy stayed the same, but your ADR decreased. When you look on your “Segmentation at a Glance” sheet, you might notice that your group segment grew while your transient segment decreased. Since the transient segment generally has higher ADR than group, that might explain why your ADR was down overall. Knowing this, you could start to brainstorm strategies to attract more transient guests. Take meticulous notes in your analysis so that you can track trends over time As you study your STR report, we recommend taking a lot of notes about your observations and explanations. You might add notes about a group booking that cancelled last minute as a cause for low occupancy numbers, or maybe a hotel next door had a power outage and you received a lot of unexpected business that led to higher RevPAR on a particular date. A year from now, when you wonder why your year-over-year numbers look the way they do, you can look back and thank yourself for taking detailed notes! While the STR report shares a lot of valuable data, it’s purely quantitative. It tells us the “what” but not the “why.” To really understand what’s happening in your hotel’s performance and the market, you’ll want to dig into the “why” behind the data. Coupling your findings from your STR report with insight from a business intelligence tool or a rate shopper can help you develop more effective strategies to capture even more of your fair share.   STR Shows the "What" and Business Intelligence Shows the "Why" There’s a reason why STR reports are so popular, but it’s important to remember that they don’t always tell the complete story. A revenue manager should have more tools in his or her toolbox to interpret data, such as business intelligence system and rate shoppers, to further explain the information that a STR report provides.  A business intelligence tool that pulls information from your property management system can be the key to understanding your hotel’s performance. When you use a BI tool like HotelIQ alongside your STR report, your STR numbers will make more sense within the context of your hotel’s full performance data. For instance, you can pull up your current promotion performance. Maybe this year’s holiday email campaign didn’t see as strong of results as last year’s, so that could be the reason why your December occupancy was lower than last year in the STR report. A rate shopper can also provide valuable information about your compset hotels - in real-time. There’s no need to wait a week until the new STR report comes out; if you notice that your hotel is losing occupancy to the compset, you might want to see exactly what rates your compset hotels are selling. Maybe one hotel is running an aggressive promotion that’s causing guests who might have stayed at your hotel to stay at the hotel down the street. A good revenue manager knows his or her way around a STR report, but a great revenue manager uncovers insights from multiple sources to paint a holistic picture and uncover trends. By reading a STR report and studying the trends and year-over-year changes, then comparing the data to your own property performance with a BI tool or compset rates with a rate shopper, you can take your revenue management strategy to the next level.   Want to learn more about reading and analyzying STR Reports?

How to Up Your Game With Business Intelligence Software

by
Hotel Tech Report
2 months ago

Data siloes are one of the biggest problems keeping hotel managers up at night and business intelligence software is key to addressing this barrier to growth and profitability. Many properties struggle to share information between revenue, marketing, and sales teams.  Additionally, hotel groups have access to extremely valuable data that they can't unlock when they're independently analyze each business at the property level. As a result, hotels and groups are missing massive opportunities for better strategic decision making and revenue growth. Business intelligence is about synthesizing data from different sources to uncover new opportunities for growth through constant improvement. Some hoteliers use business intelligence tools to measure the true ROI of their marketing campaigns; others dive into lead time analytics to find the best booking window for an Advance Purchase sales drive. Business intelligence tools like Demand360 by TravelClick are designed to provide fast, thorough, and accurate insights through user-friendly dashboards, reports, and analytics. The best business intelligence tools slice, dice, and filter data, so sales can monitor performance, distribution can keep track of channel performance, and marketing can quickly spot opportunities for data-driven campaigns. Know when is the best time to run a discount on rooms, when to order more inventory for an upcoming busy period, and when a dip in bookings is industry-wide – or something more concerning. Here’s what Business Intelligence software can tell you about your hotel, and how your teams can use BI data to take advantage of opportunities that are otherwise hidden by noise.   How Business Intelligence Software Makes You a Better Hotelier Hotels have a large amount of data at their disposal. This data comes from a wide variety of sources such as website analytics, property management systems, central reservations systems, compset data and guest feedback tools. It’s impossible to synthesize and act on that data in real time when it is living in a dozen different systems, so how can your hotel make that data actionable?  Business intelligence tools parse data collected throughout the guest journey from marketing, guest experience teams, and business intelligence to surface ideas for new marketing campaigns, pricing, and e-commerce opportunities. The right business intelligence tool gives your property the ability to forecast for operational efficiency, more targeted marketing, and smarter sales campaigns. Too many hotel revenue managers are still relying on spreadsheets to make calculations and manage reporting. Spreadsheet-based reporting is clunky, time-consuming and error-prone. It’s also not a great way to extract deeper insights from the wealth of data available through your PMS. A tool like Demand360 can leverage your hotel’s PMS data for improved pricing and profitability – all with greater efficiency than a spreadsheet formula. “It is so easy to use and to get the information on time that helps me to take better revenue, parity and strategy decisions. I have no revenue staff so I need simple and complete information just on a glance,” says one reviewer. With dynamic PMS analytics, your manager can crunch the numbers and present unique intelligence and analytical views in seconds. During meetings, business intelligence tools allow you to get granular and give your teams the information they need to succeed. For instance, one manager compares rate codes with customer segmentation to see how different strategy changes impact booking rates. Reporting capabilities within a dedicated hotel BI tool like Revenue Insight makes it easy for Sales, Marketing, E-Commerce, and Revenue Management to share reporting and analysis using a “single version of the truth”. Work within a property, across a portfolio, or between the corporate/property-level divide. The user-friendly modules show your Sales team useful data points on corporate performance and for negotiating new contracts. Your Marketing team can monitor channel performance and create new campaigns anchored in data insight. Management teams are able to access reports that combine key performance indicators such as rate codes, channels, room types and more to provide a clear picture of ways your teams can drive revenue. Overall, business intelligence software offers more comprehensive data for optimizing performance. View analytics for one or multiple properties, for historical and forward-looking dates, from the highest to the most granular level of business. Process, organize and present large amounts of data quickly. BI tools use predictive analytics to make more accurate forecasts free from errors that result from manual reporting. Managers can plan rooms inventory management more strategically with granular yet actionable sales and forecasting data. This ability leads to less wasted resources and higher profit margins.   Business Intelligence Software Trends Business intelligence tools have gotten more advanced in their forecasting, self-service, and user interface. Today’s BI software, includes even better predictive analytics and the ability to compare your performance with competitors. BI tools use historical data and machine learning to predict future performance across a number of metrics – for instance, managers can compare actuals and on-the-book sales with previous time periods, booking windows, historic trends to analyze and predict your revenue KPIs. Or, save on one of your biggest costs: labor. In addition to predictive analytics, BI software add the ability for users to develop and create customized dashboards and reports, depending on their role within the organization. Self-service business intelligence makes your valuable data accessible to more teams. BI dashboards are making it intuitive for the average business user to create their own reports on the fly. Overall, these workspace tools allow for greater collaboration, moving siloed systems into unified digital workspaces. We expect to see predictive analytics get even more accessible moving forward; rather than simply forecasting at a market segment level, hotel teams will be able to plan across multiple dimensions like distribution channels, feeder markets, and room types. 2020 will bring big innovations from Microsoft, whose BI solutions are moving ahead of the competition in terms of their ability and vision. While not specifically designed for the hospitality industry, Microsoft’s Power BI tool is the technology that many hospitality focused BI solutions are built upon. There are many BI offerings in the hospitality market; it’s important to choose one that leverages the best technology for your property and Power BI is the cream of the crop. STR’s Forward STAR reports will change the competitive landscape by providing a 360-degree view of actual business on the books. This report compares your upcoming daily performance with that of the overall market and your competitors. Hoteliers no longer need to analyze their pace and pickup in a vacuum. Compare against your competitors with forward-looking market intelligence.   How to Select the Best BI Software To derive the most value from a business intelligence tool, there are a number of important features to consider. Cloud infrastructure: offers inexpensive, easy and flexible access to business intelligence data across multiple devices. Enterprise-level reporting: view the performance of multiple hotels using unified standards for easier reporting at an area or portfolio level. Depth of information: view statistics and figures; dive deeper into the data to understand what’s impacting those results.  Data management: manage & clean data to maintain data and reporting quality and accuracy. Forecasting and budgeting support: use budgeting data to maintain data and reporting quality and accuracy. Interactive dashboards: crunch huge amounts of data, contextualize, compare, and conditionally format your insights. Conditional alerts: set up the tool to notify you \when critical thresholds are met; respond sooner to take advantage of opportunities while they still exist Predictive analytics: use current and historical data to inform projections of where your business is heading. The right BI software must integrate with other best of breed hotel software like your PMS, guest feedback tool, and market intelligence platform. A property management system fuels your BI with the right data to create reports and predictive analytics. The guest feedback tool provides critical guest review and survey data to existing BI sources, allowing your teams to tap into potential benefits. And, just as importantly, a Market Intelligence integration allows you to view your performance in detail as compared to your competitive set, as well as spot any market opportunities or threats to your business. Make sure as you go through the vetting process you ask potential partners the following questions:  Which PMS and source systems do you connect with? Make sure your business intelligence tool can sync with your existing technology stack.  Can your tool be used across multiple devices? A good BI tool should provide widespread access across multiple devices, with as few limitations as possible.  In what ways can users customize and interact with data? Make sure the BI tool allows users to manipulate data to optimize reporting capabilities.  Do you have different security settings for different user levels? The right BI tool can restrict certain abilities and areas to specific users, so only the right people have access to your proprietary data.  Does your tool have data visualization categories? A good BI tool should make less work for you, not more; find a platform that can aggregate large quantities of data from multiple sources in an easy-to-digest format.   For more information and advice on buying business intelligence software download Hotel Tech Report’s 2020 BI Software Buyer’s Guide.  

How to Boost Your Bottom Line with Duetto's Total Revenue Management Software

by
Hotel Tech Report
1 year ago

With high fixed costs and perishable inventories, hotels of all sizes can enjoy a lucrative upside after deploying revenue management techniques. Yet, according to most data, fewer than 1 in 10 hotels in 2018 are leveraging a revenue management system to price their properties. That leaves a massive opportunity to enhance revenues with world-class technology. Enter Duetto. Its straightforward brand promise of “revenue made simple” underscores how the company strives to reduce the intimidation factor when it comes to navigating revenue management today. Duetto’s Total Revenue Management technology takes a holistic approach across its product suite to help hotels achieve their profitability goals with dynamic pricing, smart segmentation, and targeting. Here’s how to boost your bottom line with Duetto’s three products: GameChanger for data-driven pricing decisions, BlockBuster for groups sales optimization, and ScoreBoard for making better business decisions.   GameChanger saves time so you can focus on revenue management strategy We talk a lot about data here on the HTR blog. The promise of data is that it provides all kinds of indicators on how to best match price to a consumer’s willingness to pay. In effect, hotels are selling to thousands, and even millions, of different needs. Business travelers may be less price-sensitive and more location aware; family vacationers may choose the lowest price but may spend heavily on hotel ancillaries throughout the trip. Hotels are selling to thousands and even millions of different "needs" with different price sensitivities, booking windows, desires and hangups. To paint the brightest revenue picture, hotels need to account for each search’s unique needs. Yet, when it comes to making sense of these indicators, it's a messy problem to tackle without the right revenue management tech stack. Pricing rooms in a spreadsheet is limiting. It takes a data-crunching machine to ingest the data and output recommended pricing, providing constant (and consistently accurate) pricing recommendations. Duetto calls this Total Revenue Management, which sits at the core of its Revenue Strategy Platform.    After parsing the data into patterns, the Duetto GameChanger dashboard reveals revenue opportunities for future dates.   Duetto’s flagship product here is GameChanger; it’s built on a philosophy of Open Pricing, which trades tiered Best Available Rate (BAR) pricing for instant yielding by segment. In other words, rather than basing pricing decisions on discounts from BAR, GameChanger prices independently based on dates, segment, channel, room type, and other factors, all in real-time. This maximizes yield without disrupting consumer expectations. To do this, the software relies on: Lost business data. By tracking visitors who left your website without booking, the software has a greater grasp on your hotels true unconstrained demand.  Price experimentation. To capture the most profitable bookings, the software continually tests new rates and monitors conversion rates in real-time. Total demand forecasting. Proper demand forecasting leads to better pricing decisions. Thanks to machine learning, the pricing algorithm learns over time, and adjusts future recommendations based both on your activity and that of your customers.  Cloud architecture. With seamless integrations across leading PMS and booking engines, GameChanger reacts in real-time to optimize every transaction.   Hoteliers report a large measure of satisfaction, with GameChanger’s 87% recommendation rate landing it in second place on the HotelTechReport Popularity Index. In addition to mentions of GameChanger’s accuracy and speed, time savings is a common refrain. One revenue manager from a boutique hotel says that time spent “managing rates throughout the year has been dramatically reduced.”    Read more reviews of Duetto GameChanger.    BlockBuster aligns revenue with sales and marketing to boost group business The latest addition to the product suite is called BlockBuster and it focuses on optimizing contracted business from groups, events, and meetings. Group sales has long been a friction point between sales/marketing and revenue management. Traditionally, these teams were siloed, meaning that group sales decisions were made without much consideration for the actual impact on revenue. Oftentimes, this meant booking groups that were less profitable than other guests, pushing yields down and preventing hotels from taking advantage of more favorable pricing down the line. "Fixing the communication gap between the sales and revenue departments is crucial not only for driving more profitability through group business, but also for adopting a Revenue Strategy culture. that Duetto has championed from the start.”  -Marco Benvenuti, Duetto Co-Founder This “group displacement analysis” has become an essential pillar of effective revenue management for hotels. When hotels accept groups under the right conditions, at the right price, over the best set of dates, with a clear understanding of the related transient displacement, it drives profitability.     While there is some ramp time for enough data to be collected (some hotels report accuracy improvements after a year), the tool can dramatically improve outcomes in identifying and capturing the most profitable business. With its contracted business optimization module, Duetto improves outcomes by:  Replacing group blocks. BlockBuster uses a dynamic pricing structure for group business, which accounts for demand across segments to optimize prices by room type rather than room blocks. Enhancing collaboration. Instead of infrequent communication, BlockBuster encourages regular collaboration between sales and revenue with a simplified communication tool for sales to request rate approvals from revenue. Using historical patterns. BlockBuster factors in all historical patterns, alongside a hotel’s wider demand forecasts, to recommend group rates that maximize yield across group and transient business.  This last outcome -- recommendations based on historical data -- won top accolades from BlockBuster customers. With an 89% recommend rate, the tool earns a second place spot on the Popularity Index for meeting and events intelligence software.   Read more reviews of Duetto BlockBuster.      ScoreBoard delivers business intelligence and actionable insights To maximize your hotel’s performance (and thus your metrics), it’s important to have the tools necessary to benchmark progress and measure performance over time. ScoreBoard is Duetto’s business intelligence tool that fosters a data-driven strategic mindset across a hotel’s management.  You’ll also want to define metrics for each department to rally behind. That way there’s clarity and transparency, creating the shared accountability of common goals across teams. Two metrics gaining traction in hospitality      To achieve a greater level of transparency, ScoreBoard provides: Real-time data visibility. In the past, so much of a revenue managers stay involved manually extracting data from disparate systems. With connections into a hotel’s critical systems, data access is far simpler than it once was. More time analyzing and less time exporting. Interactive dashboards. Dashboards are revenue manager's best friend, offering rich visualizations with a single click. Customizable dashboards can orient around key metrics and can be shared so others have access to actionable performance trends. Custom reports. For situations in which a dashboard is too much, reports can be customized and set to run at regular intervals. There’s no wasted time building reports or updating spreadsheets. Easy-to-adjust forecasts. Revenue managers can quickly adjust forecasts both at the stay-month and stay-date level. This also makes budgeting a breeze.   ScoreBoard is second on our Popularity Index for business intelligence tools, with 86% of hoteliers recommending it. In customer reviews, the most well-liked aspects of Scoreboard are the ease-of-use and customizable reports. That combination leads to a “clearer picture of business trends” and free up time to “focus more on strategic planning/thinking,” said one hotelier:   Read more reviews of Duetto ScoreBoard.    Duetto: time savings and more efficient yield management Duetto prices its services on a per-product basis, with a hotel’s total room count factored into the overall price. For hotels looking to implement all three solutions, there’s considerable savings. As far as results, reference customers report a range of success, with most seeing at least a 4% increase in RevPAR. Lee Pillsbury, Chairman at Thayer Lodging, says that “Duetto adds 5 to 10 points of RevPAR Index in the hotels where it has been implemented,” and can’t imagine ”any other single thing management could do to bump the Index like that.” As a complete suite, Duetto can mark a watershed moment in any hotel’s revenue management journey. The reality of today’s complex distribution landscape is that most hoteliers can’t punch through without some help from technology that takes the flood of data and turns it into a manageable stream of actionable information, says Duetto's Managing Director EMEA: “Technology can make more decisions more rapidly that any human can. To try and compete with the machines will be an impossible task. To ignore it and stick your head in the sand would be detrimental. Align your thinking and organisation around these lines and you will be ready for the future.”