Tips for communicating with your owner or asset manager

According to Jennifer Hill, VP of Client Engagement at Kalibri Labs, Revenue Strategists should always have a seat at the table with owners and asset managers when there are other disciplines represented. When at the table, Revenue Strategists should provide simple, clear and effective messaging as to what is happening in the market, why it's happening and what they are doing to accomplish a particular strategy.

It's really important to be able define a challenge or upcoming obstacle, understand how they are going to implement their strategies, and then deliver that message very clearly so that the owners and asset managers understand it’s a known problem but the team is aware of it and taking a proactive approach to resolve it. If the team is celebrating success, it's really important to showcase how that success was accomplished and the obstacles the team overcame.

For more information on a Hotel Revenue Strategy Platform built with that framework in mind, please schedule a demo.

What are some leading indicators of another economic recession?

Is another recession looming? It’s the question on the minds of analysts and leaders across the hotel industry. When asked if the hotel industry is more or less prepared for another recession, Mark Lomanno, partner and senior advisor at Kalibri Labs, couldn’t help but laugh. He said, by every measure hotels should be more prepared, having seen a few of these over the last 15 or 20 years, but being prepared and behaving accordingly are two entirely separate issues.

Access to advanced metrics at the market or U.S. level can aid in tracking the cycle strength and can help project whether we’re at the start or end of a particular cycle. Mark mentions how one new leading indicator from these advanced metrics would be a contracting Length of Stay and Booking Lead Time which may signal that tides are starting to change and budgets are tightening.

In the case below, a 6-month look at the YOY% change of Booking Lead Time and Length of Stay appears to show both metrics growing, or at least holding steady, versus same month in the previous year, indicating the health of the industry remains in tact.

Booking Lead Time continued to expand versus the same time in 2017 but trended downward last fall, prior to ticking back up in December.  

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Hotel distribution and the booking trends of consumers are light years different than even 10 years ago at the start of the great recession. Ensure you’re using next-generation metrics, powered by the Kalibri Labs database, to better understand the conditions in your market.

 
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U.S. Hotel Industry Performance Overview (US HIPO)

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Market Level Hotel Industry Performance Overview (Geo HIPO)

 

Are you evaluating the correct hotels in your comp set? How to know and what to do about it…

Mark Lomanno explains how hotel benchmarking is quickly changing. Historically, the way the industry has evaluated success is viewing a subject hotel or sub-market against an aggregate, whether that be a comp set, or a chain scale catagory in a certain market. There has been a movement from average to optimal, where hotels are less focused on the average of a localized grouping of hotels and more tuned into the best they can acheive, based on real market data.

Hotels don't compete with each hotel in their comp set for 100% of their business. Kalibri Labs has introduced the Optimal Business Mix algorithm that enables hotels to see what hotels they compete with for each segment of their business and rate categories there is captureable opportunity for the subject hotel to go after. This paradigm shift moves hotels from striving for average, to optimal.

Hotel operators, asset managers and revenue managers, learn more about Hummingbird PXM, our hotel revenue strategy platform or contact us.

Brokers, underwriters, and those in the hotel investment community, learn how Optimal Business Mix can be applied to hotel real estate reports.

Read the featured article on HotelMarketing.com.

Metrics Made for the Digital Age - Going Beyond RevPAR

Mark Lomanno, Kalibri Labs’ partner and senior advisor and former STR president, talks about the power of big data. When hotel data is sourced at the transaction level with rate code, channel, arrival/departure dates as well as price and acquisition cost information, the granularity and level of detail allows brokers, underwriters and developers to go significantly deeper in terms of analysis.

Mark also shares a brief history of hotel performance benchmarking, from the accounting consulting firms who produced the first industry standard metrics, to the late 1980s when Smith Travel Research pioneered the benchmarking field, to where we are today with Kalibri Labs creating a new set of benchmarks and metrics for the digital age.

Learn more about our subscription based Industry Performance Reports.

Reports for Brokers, Underwriters and the Hotel Investment & Real Estate Community.

Or learn more about options for Destination Marketing Organization & CVB’s.

What impact has Airbnb had on hotel development supply?

Mark Lomanno, Partner and Senior Advisor at Kalibri Labs, analyzes the impact Airbnb has had on hotel development supply. When looking to develop a new hotel, he says, developers at least need to take pause and consider how alternate accommodations may affect the market and how they might operate differently in peak periods or during a down cycle.

According to Lomanno, the presence of Airbnb is definitely something people are, or should be, evaluating but perhaps haven't completely adjusted their models to account for the influx of supply in accommodations and this newfound demand for alternate accommodations.

He goes on to describe that the effects of Airbnb go beyond just additional supply in the market and that some hotel companies have evolved their brands and developed new hotel concepts.

More information on hotel comparable short-term rental supply in your market is available - click here to learn more.

Kalibri Labs' 2019 Hotel Industry Performance Forecast

Text originally published on HotelsMag.com - “How changing booking habits will impact 2019 profits

By: Mark Lomanno

Heading into 2019, when looking at the traditionally tracked metrics of Hotel Collected RevPAR, ADR, and Occupancy, we expect US the lodging industry to perform generally in line with the last several years. Supply growth looks to remain steady at the long-term average, and demand should continue to outpace the level on new room growth by a small amount resulting in rising occupancy. In fact, national occupancy numbers will again reach all time high levels since performance data began being accurately tracked in the 1980’s. Therefore, that supply/demand relationship will remain strong, which is the primary driver of ADR and RevPAR growth, however at levels well-below what the underlying fundamentals would suggest. See figure 1 for Kalibri Labs’ 2019 traditional metrics forecast.

While there are many factors at the root of the sluggish room rate growth over the past several years, one of the more compelling drivers has been the rapid shift in the way customers book hotel rooms. In 2019, at a national level, more than half of all hotel bookings will be made online versus only 35% just 4 years ago. This has a perceived effect on pricing power at the property level and the associated cost of the bookings is greatly impacted. Specifically, in the same four-year time frame, more than 201,400 rooms booked per day have shifted to another channel away from Property Direct, the most direct means of booking a reservation via walk-ins or phone calls handled directly by the front desk staff. That level of change in such a short time period is staggering and will continue to have a profound effect on ADRs and hotel profitability.

Generally, that shift in booking behavior has resulted in increased reservations through either brand.com or the OTAs. On a per room night basis, in the same time frame, the average daily rooms booked through brand.com has risen by approximately 203,000 rooms booked per night compared to an increase of about 186,000 rooms booked per night through the OTAs. Further analysis of these results displays an increase of about 270,000 incremental rooms booked per night, in absolute room night demand over the same 4 year period. Chart 2 shows the change in room night booking demand by channel between 2015 and our forecast for 2019. It’s clear that the majority of the change in consumer behavior is happening in 3 main channels. It must also be pointed out that while an examination of this dynamic by market or property type would reveal considerably different magnitudes of change, the underlying pattern would be the same.

In addition to the industry standard metrics shown in figures 1 and 2, Kalibri Labs has projected many other advanced metrics displayed on Chart 3. As shown, booking costs per room (measured as the costs directly associated with the booking, like wholesale commissions, retail commissions, loyalty investment and channel costs), will continue to rise in 2019. While these costs, aggregated at the national level, are a blended result of all the booking channels, the costs associated with certain channels are increasing at a faster rate than others, both from an absolute cost perspective as well as a booking volume perspective.

In 2019, the industry will continue to see increases in loyalty contribution, or the percentage of bookings made by loyalty program members, which we expect will rise about 2% to just under 50% of all room night bookings. Again, this is a meteoric rise from just 5 years ago when industry wide loyalty contribution was about 40%. Also shown in figure 3, we project the change in booking lead time, up slightly over 2018 and average length of stay, which should remain mostly flat over the prior year.

With modest changes in most metrics year-over-year, it’s important further analyze more advanced metrics that can give context and nuance to the standard industry metrics, and when actioned correctly, can potentially drive more Net RevPAR.

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For more information on using the Kalibri Labs database for your hotel revenue strategy and benchmarking needs, please visit or contact us.

How will Revenue Strategy improve the health of the hotel industry?

As Cindy notes, many hotel owners and operators are not as readily aware of the impact of customer acquisition costs on the overall asset value of the hotel.

 

Where do you see the discipline of Revenue Strategy going over the next 5 years?

Cindy Estis Green explains that an organization built around revenue strategy absolutely needs to be in place going forward. Today, the industry is dealing with a certain set of costs, channels and segments of business but they will inevitably change and processes need to be in place to manage and measure the opportunities and costs that arise from the constantly shifting distribution landscape.

 

Why is Revenue Strategy the answer to today’s challenges?

Kalibri Labs’ CEO & Co-founder, Cindy Estis Green, explains why the industry has reached a point where it needs to manage costs of acquisition in a similar way as it manages labor costs. Operating in the digital world calls for a move to Revenue Strategy which is very different than the traditional approach taken in the analog world because it integrates all of the revenue generation disciplines and has a focus on profit contribution.

 

HSMAI DC 2018 State of the Industry Recap

By Ken Barna

Jennifer Hill, our VP of Business Development, joined an esteemed panel of presenters headlining the HSMAI DC chapter's 2018 State of the Industry held at the MGM National Harbor last week. The event coincides with many hotels’ budget planning seasons so, presumably, attendees were looking for DC and U.S. national trends, key performance indicators and insights around which they can base their budget projections for 2019.

Elliott Ferguson II, President and CEO of Destination DC, Mark Woodworth, Senior Managing Director of CBRE Hotels Americas Research, and John Hach, Senior Hotel Industry Analyst & Advisor at TravelClick all shared their different viewpoints on how the industry has performed over the last 1-2 years as well as forward looking analysis as to where the hotel industry could be headed as we move into 2019 and beyond. While the data was primarily focused on the Washington DC region there are elements that would apply to many first-tier cities across the country, despite the unique makeup of a DC hotel’s business mix with its proximity to the federal government

Mark Woodworth presented a conundrum. While occupancy across the industry has maintained a more-than-healthy percentage since 2010, ADR has not been growing in tandem since Q2 2015.

Modeled ADR - CBRE HOtels' Amercias Research, STR Q2 2018.

Historically, and rationally, as the law of supply and demand would dictate, occupancy and ADR have remained tethered in their growth and decline. This recent anomaly, or at minimum abnormality, coupled with John Hach’s analysis showing softness in on-the-books reservations for 2019 gives pause for concern, or at least potentially re-considering a less aggressive RevPAR growth projection for the 2019 budgets currently being planned.

Woodworth mentioned that CBRE has come up with 15 different hypotheses as to what could be causing this so-called conundrum, and I’m sure you may be thinking of a few yourself right now, but one thing is clear, if ADR isn’t rising in lock-step with occupancy, you will need to squeeze every dollar out of your Net RevPAR with an intelligent revenue strategy. Jennifer Hill spoke at length about the different ‘types’ of revenue that can help revenue managers and strategists compare each channel or source of business apples-to-apples by removing the costs of acquisition they incur. Having this depth of data is often the hard part, but Kalibri Labs has spent the last six years building a best-in-class database of over 31,000 hotels across the U.S. that not only tabulates ADR, Occupancy and RevPAR, but tracks the cost of acquisition so you can see beyond what might appear on a hotel’s P&L, the Hotel-Collected Revenue.

Hill explained that understanding the Guest-Paid Revenue, or the rate the guest actually transacts when they book, is very important and is often, depending on the booking channel, far different than what would be remitted back to the hotel by a third party. It is also critical that those costs of acquisition are considered and tracked when formulating your 2019 budget or any time you’re thinking of making a shift in your hotel’s revenue strategy. COPE Revenue, she joked, is your way of ‘coping with third-party acquisition costs,’ but it is a very real and important acronym in the revenue strategy vocabulary she presented, meaning Contribution to Operating Profit and Expense (COPE). COPE Revenue is, simply, Guest-Paid Revenue with all direct transaction-related costs removed. Going one step further, by also removing sales and marketing expenses, a hotel can view their Net Revenue.

So how do you get your hands on this level of data?

Our ETL (extract, transform and load) process normalizes guest folio datasets from brands across the industry, including the channel and rate category through which the guest booked, when they booked, whether they are a loyalty member, and the acquisition costs associated with that transaction, such as commissions (retail or wholesale), loyalty investment, and channel costs.  This data is used to derive Guest-Paid and COPE Revenue from the Hotel-Collected Revenue total that a hotel is accustomed to seeing. With this information, revenue strategists can draw much more valuable insights understanding where lies the most profitable business and then develop an action plan to go after it.

So how could you use these insights?

If you are a DORM or asset manager, for starters, you would want to utilize Hummingbird PXM, our hotel revenue strategy digital platform, that shows your business mix using the detailed revenue types outlined and defined above, but also allows comparison and benchmarking to a customized benchmark group or selected comp set. Hummingbird PXM refreshes data every month, so it most definitely should be part of your ongoing revenue strategy discussions and decision-making process. For all the reasons highlighted at the HSMAI State of the Industry event, this budgeting season is the ideal time to understand all the intricacies of your market, and benchmark against your hotel’s revenue performance in order to better prepare your hotel for what could be an uncertain 2019 in Washington, DC.

Schedule your personalized demo with Jennifer Hill

Better understand guest behavior using length of stay metrics

In the first four segments of this series we’ve explored the value in upgrading your KPIs to track revenue and profit contribution through a series of next-generation hotel industry benchmarking metrics. We discussed how Guest Paid ADR, COPE %, Loyalty Contribution and Booking Lead Time remain interconnected and how trends from each metric can affect both a hotel's bottom line, as well as that of the broader industry.

As we observe the growth and evolution of brand loyalty programs, Length of Stay becomes an important variable in the equation. Length of Stay, or the number of actualized room nights per booking, is impacted by a variety of factors, as well as economic and societal trends.  For instance, a recent Forbes.com article said "78% of millennials intentionally carved out personal time on their business trips."

Weekdays still represent a higher loyalty contribution than weekend stays, but trends like ‘bleisure’ will begin to be woven into the fabric of loyalty programs to encourage and incentivize extending a business trip for personal purposes, generating a longer length of stay.

Transparency and granularity in data at scale across the industry can only help all operators stay in tune with the emerging trends the industry is facing as the digital marketplace continues to rapidly evolve.

One thought as to the cause of the decline is an expanding volume of total bookings in combination with group business declining, or remaining relatively flat, producing a drop in Length of Stay when compared to the same month of the previous year. 

For the complete report and to purchase an annual subscription to the Hotel Industry Performance Overview (HIPO) report, please visit the link below. With HIPO report you will receive monthly updates on the U.S. Hotel Industry or the Metro Areas (MSAs) that are important to you. 

Increase Booking Lead Time to manage costs

With a higher loyalty contribution, one would expect Profit Contribution (COPE)% to be higher, due to the current correlation between Loyalty Contribution representing an increase in direct bookings and thus lower acquisition costs. Booking Lead Time and COPE % are related but perhaps more indirectly, as a shorter booking lead time can force a hotel to begin to use more costly sources of business as inventory becomes distressed, and can act as a leading-edge symptom of declining cycle strength.

A longer Booking Lead Time should result in higher Guest Paid ADR. With an emphasis on driving Loyalty Contribution, the direct and repeat bookings would generate a higher Profit Contribution (COPE) % and thereby more NET revenue flowing through to the bottom line. Historically, the industry has evaluated performance based on top-line revenue and on occupancy statistics. However, it is evident that the five critical hotel KPIs for the digital age are highly intertwined and essential in anticipating movement that can affect your hotel, markets and establish the trends that drive the overall health of the industry.

For the complete report and to purchase an annual subscription to receive monthly updates on the U.S. Hotel Industry or the Metro Areas (MSAs) that are important to you, please visit the link below.

In our next segment we will review Length of Stay, its trends and importance in tracking across the industry.

Drive repeat stays and direct bookings using Loyalty Contribution %

The Profit Contribution % or COPE % tracks the proportion of room revenue after commissions, transaction and channel costs are removed. The lower the COPE percentage, the costlier the business is for the hotel and the less room revenue remains, after costs are factored out. To move the needle back to a healthier balance, following Loyalty Contribution % is a key component to fulfilling the hotel’s optimal business mix. Loyalty Contribution % is the proportion of room night demand associated with a loyalty membership, and vital to continually filling the hotel through direct channels and with repeat business. When reported by Kalibri Labs, this Loyalty Contribution % only includes the brands that have a formal loyalty program.

Over the past 18 months the Book Direct campaigns from the major hotel brands have made growing loyalty programs and brand.com bookings a top priority. Within the HIPO report you can track the growth in Loyalty Contribution across the U.S. as well as in top markets, by property size, weekday vs weekend and by rate bands that are important to you. This emphasis on loyalty program growth is only going to intensify, as Loyalty Contribution is becoming the new system contribution across the industry.

For the complete report and to purchase an annual subscription to receive monthly updates on the U.S. Hotel Industry or the Metro Areas (MSAs) that are important to you, please visit the link below.

In our next segment we will review Booking Lead Time, its trends and importance in tracking across the industry.

Maximize Profit Contribution using COPE %

Having established the importance of tracking Guest Paid ADR in our last post, next in our informational series is getting to the bottom (line), pun intended, of COPE %. Contribution to Operating Profit and Expense percentage (COPE %), also known as profit contribution, is quite simply, a bottom line key performance indicator that displays the proportion of room revenue after commissions, transaction and channel costs are removed. While COPE % an easy concept to understand, the data has not always been easy to obtain.

Only Kalibri Labs has been able to aggregate the cost of acquisition data from our hotel partners across the industry at this scale. Therefore, COPE % is new terminology to many and needs its own introduction.

COPE ADR is the room revenue the hotel keeps after individual costs of acquisition per transaction are removed and COPE % is the proportion of COPE ADR to Guest Paid ADR.  

Most hotels are good at tracking ADR by channel, and they understand that certain channels drive higher rates. But what happens to those ADRs when you begin to factor in the commissions and transaction fees associated with each reservation. Identifying your COPE percentage in each channel is the first step in improving your channel mix.

Tech titans and third-party intermediaries have invested millions of dollars to simplify the online booking process and aggregate demand through their own channels in an attempt to attract users with a smooth and convenient user experience. While this can provide options to users and extend distribution, it can also lead to a spike in costs, if not tracked continually. Track COPE % at the U.S. level or in your specific geographic markets of interest in the Hotel Industry Performance Overview (HIPO) report.

For the complete report and to purchase an annual subscription to receive monthly updates on the U.S. Hotel Industry or the Metro Areas (MSAs) that are important to you, please visit the link below.

In our next segment we will review Loyalty Contribution, its growth and importance in tracking across the industry.

Five Critical Hotel Metrics for the Digital Age

Over the next several weeks, we will serve up 5 key data points we are tracking at the industry level and why they are so important in the digital age.

  1. Guest Paid ADR

  2. Contribution to Operating Profit and Expense % (COPE %)

  3. Loyalty Contribution

  4. Booking Lead Time

  5. Length of Stay

As technology has become a powerful tool for the industry to reach its customers, it can also increase the acquisition costs and lead to an expensive marketplace, challenging a hotel’s bottom line.

The first key metric is Guest Paid ADR. Historically, those following the hotel industry have become accustomed to tracking Hotel Collected ADR, which is the traditional ADR measured by hotels. Guest Paid ADR, as the name indicates, is the amount the guest is actually paying for their room night including mark-ups, commissions and channel fees that would not be reported or accounted for in the Hotel Collected ADR figure typically reported throughout the industry. Tracking Guest Paid ADR is important for pricing purposes as well as understanding the full revenue opportunity that exists for each booking, before the commissions and transaction fees that would be charged by distribution partners. 

It's important to note that new standards have been developed by the Financial Account Standards Board, and the factors that previously determined “gross” or “net” revenue recognition have been changed. The new standard requires the party who is the principal in the sales transaction to record the revenue on a “gross” basis.  These new standards go into effect on Jan ‘18 and they will improve the industry's understanding of acquisition costs.

These new standards further solidify the importance of routinely tracking acquisition costs as it will improve the industry’s ability to manage these costs and to understand more accurately what guests are paying for their rooms. 

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GDS is the source of business with the HIGHEST Guest Paid ADR $156.58 up 0.8% YOY.

For the complete report and to purchase an annual subscription to receive monthly updates on the U.S. Hotel Industry or the Metro Areas (MSAs) that are important to you, please visit the link below. 

In our next segment we will review the importance of profit contribution, a net revenue metric we call COPE %. For the latest updates please subscribe to our blog, and follow Kalibri Labs on Linkedin and Twitter.

7 Key Takeaways from the 5th Annual RSS

By: Ken Barna, Director of Marketing

For those of you who were unable to attend RSS 2017, or perhaps you joined us at the Renaissance Marriott on July 26th but just need a quick refresher, our CEO and co-host of the event, Cindy Estis Green has provided her 7 key takeaways from the 5th annual Revenue Strategy Summit. These themes were covered in-depth and reviewed from multiple angles by members of the various expert panels. Below is an executive summary of the highlights to take back to your organizations.

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1. The Tech Titans (Google, Amazon, Uber, AirBnb) are coming – ready or not.  In fact, they are already here and making their presence felt throughout the hotel industry. Their entry may prove to be both an opportunity as well as a threat. Industry decision makers need to stay informed to take advantage of the disruption.

2. Chinese travelers are coming en masse. And the retailers are coming too. Alibaba dwarves Amazon – all eyes are on their entry to North America and beyond.

3. Two new major areas to drive profitability for hotels need to be in focus:

  • Managing acquisition cost across the business mix

  • Generating ancillary revenue outside of solely room revenue

    • This may include revenue share with outside vendors like UberEats for select service hotels

4. The application of data will continue to grow in importance to influence profit contribution – in three main ways:

  • Personalization – recommendation engine type usage

  • Revenue performance evaluation – refining how efficiently hotels acquire their revenue

  • Digital Marketing – both through Brand.com, apps and mix of third party sites and apps.

5. Emerging technology will evolve and adopt quickly

  • Augmented Reality & Virtual Reality will impact guest experience on property as well as marketing to enhance the user in the shopping process.

  • Artificial intelligence (AI) in algorithms to refine the match between products offered and customers, as well as predicting hotel performance.

6. Value of guest experience will be a key point of differentiation going forward. Guest preferences will more prominently weave their way into Loyalty programs executed through digital tools and aid in the seamless nature of good hospitality, enhancing the guest experience. This applies across the spectrum of individual guests, meeting planners and travel agents.

7. Hotels will be evolving organizational structures to bring about a more holistic view of revenue strategy – integrating direct sales, revenue management, digital marketing, customer engagement, and promotional activity. In order to approach revenue generation in a more optimal way, the silos will gradually be replaced by interdisciplinary teams.

How to minimize choice in the world of big data

By: Kathleen Ayers, Data Integration Engineer Manager

In the world of data, bigger is better. Bigger data produces more insights and more robust analyses. A big database is a competitive advantage and data companies are continually looking for ways to expand and enhance their data sets to get an edge on their competition. 

Large databases can provide an infinite number of ways to solve a problem or answer a question. Theoretically, the endless possibilities seem great. However, as Barry Schwartz explains in his TED Talk on the paradox of choice, while some choice is better than no choice, too much choice can produce paralysis rather than liberation.

Let’s say as a hotel revenue manager you notice a year-over-year decline in mid-week transient RevPAR over the past month, and you want to figure out the cause of the decline. You could approach your data from several different angles, but how can you find the best-suited, most accurate solution to your problem without feeling overwhelmed?

Here are three simple steps that will help you maximize your efficiency, minimize your choice paralysis and guide you to the best solution.

1. Formulate a research question

Determine the exact research question you need to answer before diving into your data. If you wander into the forest of data without a set destination, you may get lost (hopefully you left a trail of breadcrumbs). Dive into your data with a clear intention and purpose in mind so that you can avoid distraction and tangents.

In our example, you state your research question as, “Why did transient RevPAR suffer a 10% year-over-year loss in April 2017?”

2. Write a hypothesis

Take an informed guess at the answer to your research question. Quickly brainstorm the potential paths and data points you could use to reach a conclusion and choose a path that seems promising. If your path leads to a dead end, back up and try again.

Given your knowledge of the hotel, you hypothesize “Transient RevPAR decreased in April due to the loss of two large corporate contracts.” When you test this hypothesis, you find that corporate business actually appears relatively stable; therefore, you try again with “Transient RevPAR decreased because of a decline in package offers.”

3. Restrict your sample size

Think about whether you really need to use ALL of the data available to draw a conclusion. In statistics, you learn that you only need a representative sample of a population to draw meaningful conclusions. Sometimes, focusing on a small set of confirmation numbers or a small group of hotels will prove your point.

To test hypothesis 1, you can look specifically at transient corporate RevPAR in April 2016 versus April 2017. To test hypothesis 2, you can look at transient package rates that were offered each year, which leads you to find that several package rates were discontinued since last year. In both cases, your hypothesis is specific enough to allow you to look at a limited set of data to find answers.

Whether you are reading a paper report, or querying your company database, specifying a research question, writing a hypothesis, and restricting your data set will help you navigate the sea of big data efficiently. By limiting your choices, you will find a clear and direct route to your solution.

The Rise of the Digital Traveler

By: Kalibri Labs Marketing team

Several key themes emerged from Part 2 of the landmark study, Demystifying the Digital Marketplace: Spotlight on the Hospitality Industry. We outline these takeaways in the infographic and descriptions below. For the full scoop, click here to request access to the full study.

Key Themes

Shifting Demand: Bookings are shifting from traditional Property Direct channels such as walk-ins or voice calls to digital channels, whether that is Brand.com, OTA, or GDS. Property Direct bookings have dropped from 40% of all bookings in 2014 to 34% in 2016. As bookings that transact directly at the property generally bring the highest profit margin, along with the lowest cost of customer acquisition, these room nights that have shifted to other digital channels now carry higher costs of acquisition.

Hoteliers will need to ask themselves several questions going forward to get an idea of the impact of these shifts on their individual properties. For the guests who used to call directly or drive in, how are these guests now booking? Are they going to Brand.com or booking through a third-party? What actions can be taken to drive consumers who may previously have booked directly at the property to book on Brand.com or other direct channels which have a higher profit margin compared to third-party bookings?

Cost of Booking Increases as Revenue Capture Declines: Revenue Capture - or, the percentage of Guest-Paid Revenue that hotels retain after customer acquisition costs are paid – is declining as hotels spend more on commissions and fees to acquire guests through third parties and on sales & marketing expenses.

Overall Revenue Capture for the industry declined from 84.4% in 2015 to 83.9% in 2016.  In terms of incremental revenue that would drop to the bottom line, this decline represents $729 million that U.S. hotels could have retained had their collective Revenue Capture percentage remained the same as it was during the prior year.  This decline is predicated on increased acquisition costs.

Consumers Actively Influence Supply & Demand: The effect of consumer behavior and the sharing economy on hotels is growing. Consumer to consumer accommodation platforms like Airbnb are increasingly impacting supply, while travel inspiration & planning apps influence guest decisions, and guest reviews sway booking behavior. These all add up to external forces that the industry has never seen before and needs to adjust to.

To dive deeper into the take aways and research, request your code to download Part 2 of Demystifying the Digital Marketplace: Spotlight on the Hospitality Industry here.

ALIS Revisited

By: Mark Lomanno, Partner & Senior Advisor

Leaving an ALIS conference there is always much to reflect on. It takes time to sift through all the information -  what was said and what was implied. There were three major topics which I have contemplated a great deal after the conference.

First, prior to ALIS this year, the last few major US hotel industry conferences had a slightly pessimistic view on where the industry was headed.  Reasons for this included the long term nature of the current recovery and the sluggish ADR growth that was a significant deviation from the robust increase seen in past economic cycles.  However, now the mood has shifted to one of cautious optimism - perhaps because of the absence of any real signs that point to an economic downturn. While hotel collected RevPAR growth is forecast to be on the low end of acceptable, it seems that is ok with most folks.

The second topic was on the US presidential election and what effect the election of Donald Trump was going to have on the hotel industry.  There are lots of conflicting data points here including a rising stock market, travel bans, immigration reforms, loosening of banking regulations and a severely bi-partisan culture to name just a few.   Each point taken on its own merit would have a significant impact on the hospitality industry, some positive and some negative.   Taken as a whole, it’s harder to say and will be interesting to see how it all plays out, but the optimistic nature of the conference seemed to infer that most in our industry see benefits in the short term.

Finally, the need to develop net revenue metrics is strong.  While the industry has enjoyed a sustained recovery, the increased cost of doing business has not resulted in the revenue growth or profit that was expected based on historical cycles.   Increased expenses, especially relating to acquiring the guest, have skyrocketed in the past several years necessitating a closer look at costs.   This is true both at the industry and property levels.  One of the best ways to evaluate costs is to examine Revenue Capture, which is the percentage of room revenue available for operations and profit after subtracting the cost of customer acquisition.    This new metric gives needed insights into both the true cost of customer acquisition and the opportunity to improve profit.

The conference certainly provided food for thought and we will see what the future holds.

Demystifying the Digital Marketplace: Implications for the European Marketplace

By: Cindy Estis Green, CEO & Co-founder

Featured in Hotel Yearbook 2017.

It's a new world order, writes Kalibri Labs' Cindy Estis Green: one that is dominated by the digital marketplace and in which all parties are struggling to migrate from the analog days of the past. The next 2-3 years will be fascinating to observe, she says - and takes us on a tour d'horizon of the current political and regulatory landscape. 

Demystifying the Digital Marketplace-- Part 1, is the first installment in a three part series recently released by Kalibri Labs. It is written from the hotelier's perspective and introduces three key themes. Firstly there is an urgency to alter current revenue management approaches as we move from an analog to a digital market, including the need to more closely manage customer acquisition costs. Secondly, the realty of the new digital market includes the emergence of meta search and mobile apps that will challenge both hotels and legacy OTA players and lastly there are segments of the market (for example corporate and meetings) that are ripe for disruption and to which hoteliers should pay close attention as these changes unfold. 

While all issues discussed in the new study are meaningful globally, there are variations in the way they play out in different regions. The rising costs and the predicted changes in the commercial relationship between hotels and OTAs described are particularly being examined carefully at the EU level. Most regions of the world have taken an ad-hoc approach to regulation of the digital market. In contrast, the European Union is in the middle of a massive review of all digital platforms which will have serious implications for the hotel industry; this includes travel providers as well as retailers such as Amazon, services such as video, television, telecom across the EU as well as general search engines such as Google. Questions arise around the way these platforms interact with consumers and the nature of the relationship between suppliers and distributors. Issues around transparency of pricing and bias in search listings are examples of the topics being explored by the European Commission, along with concern for the power of aggregated content and fairness in the relationships between hotels and distributors regarding commercial use of this content. The outcome of the EU's Single Digital Market review may have far reaching repercussions for the way hotels acquire and interact with guests for many decades to come. 

Foremost in the hotel arena is the activity in many EU member states around rate parity. Since France passed the Macron Law in August 2015, many EU member states are trying to determine if the removal of contract-driven room rate controls imposed on hotels and third party intermediaries will benefit consumers with lower rate offers. Even with the so-called "narrow parity," hotels can offer lower rates to smaller OTAs, but must remain at parity with Booking.com/Expedia Inc. and as long as there are only one or two major players in each market, the language in the contracts may not change reality on the ground. The hotel industry may be too fragmented and the OTAs too consolidated to expect the hotels to gain any leverage in their dealings with a powerful duopoly.

The fallout from the gradual dissolution of rate parity, followed on by the Book Direct campaigns launched by most of the major chains, has yielded some notable reactions from the largest OTAs, implying that they are concerned enough to believe the campaigns will impinge on their growing market share. Early data from Kalibri Labs in the U.S. market is showing that consumers do shift to brand.com when given a compelling offer to book. While the rapid shift of consumers to the worldwide digital marketplace has remained uncharted waters, the European Commissions's Single Digital Market initiative recognizes that it may be time to put appropriate controls in place. Consumer deception in the online shopping and buying platforms has been a fact of life, and being in the early stages of understanding the depth and breadth of it, they are deciding how much regulation may be required. For example, strike-through pricing used by OTAs looks more like fake discounts when the discount is based on a rate that is actually not available for the dates in question.

Looking more closely at the antitrust case being brought against Google by the European Commission raises a question about the latter's role in the hotel market. When search results are primarily based on a pay-for-placement model, the days of organic search are behind us and the vexing question of consumer deception pops up again. Are consumers informed enough to realize that a Google search listing may not be driven by the results most relevant to the query but rather based on the commercial relationship with a supplier? The same kind of questions are raised in the OTA listings with respect to a consumer's awareness of how this market operates. If they don't realize the strike-through prices are not real, would that fly in the face of the EU Directorate General for Competition's Unfair Commercial Practices Directive? If so, a question arises about what can be done to improve both consumer education around the digital marketplace and the enforcement of guidelines that may already exist to govern digital commerce?

There are many issues that are likely to surface as the European Commission evaluates the feedback from hundreds of hoteliers, technology, airline and other travel executives who responded to surveys designed to inform the Digital Single Market initiative. It's a new world order dominated by the digital marketplace and all parties are struggling to migrate from the analog days of the past. The next 2-3 years will be fascinating to observe. Hoteliers should participate through their national hotel associations and other hotel-oriented groups to be sure their voices are heard. For more on this, look at the HAMA and European Hotel Forum white paper, Digital Marketplace in Europe, explaining the issues in more detail.