Lodging companies are investing more into business intelligence and performance improvement. Hotels and hotel brands alike are coming to the realization that if you continue to craft operational strategies based solely on historical data, then you are ignoring upcoming trends and may repeat history—whether you like it or not. Considering the past couple of weeks of group bookings outlook, it may be wise to seek guidance from the future 12-month horizon as an input into their hotel decision-making support.
Committed occupancy for the next four quarters is up 4.1 percent year-over-year while group pace bounced back from a dismal showing last month. At this point in the booking window, Q4 is showing the highest year-over-year gains in committed group occupancy. The positive committed occupancy outlook continues through Q1 2012. After dropping 12.9 percent year-over-year last month, group pace turned positive with an 18.6 percent increase over the same time last year. Group committed room nights are 3.7 percent higher over the prior year during the next four quarters. RevPAR growth, based on second quarter booking activity, is poised to jump 8.1 percent year-over-year.
While RevPAR is widely recognized as the most important hotel performance measure, understanding and acting on channel level opportunities is a key driver of performance. CRS contribution is generally the key performance metric that major hotel brands publicly disclose every year in their Franchise Disclosure Documents. Based on Rubicon’s Channel Insights and MarketVision Demand Position data, there are interesting facts and observations that speak to channel performance—past and future.
For the purposes of this analysis, we defined “Central Channel Delivery” as the percentage of room nights originating from distribution channels in which the brands have either direct control (Brand.com and Voice) or influence (GDS & OTA). The adjacent charts illustrate that central channels delivered approximately two-thirds of industry room night volume at a $17 or 14 percent ADR premium to those walk-in or property-direct booked rooms sold during the first quarter. CRS contribution declined by a full percentage point from the first quarter of 2010 because a 9.3 percent year-over-year increase in GDS demand was not enough to offset declines in voice and OTA channels while Web demand grew more modestly than property-direct (8.4 percent year-over-year).
In these times of lowest Internet rate guarantees and rate parity rules in brand standards, it is also interesting to note that the average OTA rate was $31 or 22 percent lower than the average Brand.com rate. OTA remained the smallest of the five main distribution channels in Q1 2011 with market share of industry room nights down 70 basis points (bps) from 2010 while the industry’s largest channel, Brand.com, grew 20 bps from last year. Rubicon sources its information directly from the brand’s reservations and property management systems, providing a complete view of the source channels as well as the ability to isolate market share of individual online travel agents and GDSs. Among the major players in this space, Priceline retained the largest (30 percent) market share of OTA channel room nights during Q1, despite declining by 108 bps from last year. Expedia was the top market share gainer, up 133 bps from last year to nearly 27 percent.
Another relevant topic when discussing channel delivery is overall system delivery including loyalty programs, particularly in benchmarking loyalty program production against competitors. Hotel chain loyalty programs contributed more than half of the industry branded room nights during the first quarter at a $13 or 10 percent ADR premium to non-loyalty program members. Loyalty program contribution increased for the fourth straight quarter after declining through much of the recession.
The evolution of hotel industry performance benchmarking will lead to real share gains, not shift. Our data allows for a holistic approach to understanding the various distribution channels and interactions between them and how they correlate to your pricing, sales, marketing, and revenue management tactics. Hotels can and now are optimizing channel mix to control distribution costs in the context of intelligent sales blitz or promotional campaign planning, thus shifting the results measurement focus from operating ratios such as RevPAR and RevPAR index to financial statistics such as gross profit margin and return on investment.
Don’t get me wrong; past performance analytics has its place, but insights gleaned from proactive market intelligence can be more advantageous in elevating long-term brand equity. After all, the only room demand and revenue share that you can “steal” are those that have not yet checked-out.
Lloyd Biddle is strategic manager at Rubicon, a Travelclick Company, www.therubicongroup.com.