Tech Talk

Recent posts

Before I get into this week’s topic, a quick reminder that I really need to hear about what YOU have seen that is new or innovative in hospitality tech. Readers often ping me AFTER I write about a topic to tell me about some product or company I should also have looked at. It’s much more useful if you tell me BEFORE I write about it! And indeed, cool new companies I hear about from readers are often my inspiration for a topic. My contact info is at the end of this section, so please reach out … I’m always happy to spend time learning about new companies or products.

The ubiquity of mobile devices for both guests and staff, together with continual improvements in location technologies, has created new possibilities for serving guests and upselling. Nowhere is this more evident than in food and beverage. For many hotels, F&B is a low-profit or loss-leader product that could be moved to profit if just a few more sales opportunities can be found.

Hotels always talk about how focused they are on guest satisfaction. But studies such as the ACSI Travel Report consistently show hotels coming in way below even banks and limited-service restaurants in guest satisfaction, and just barely above airlines and gas stations. And it’s getting worse: 2019 showed a 1.3% drop over 2018. Net promoter scores for most major hotel brands are lowest for millennials and Generation X, which does not bode well for the future. A 2016 study by Revenue Strategy Summit showed that poor service delivery accounted for 56% of negative trip reviews.

Could QR codes revolutionize the hospitality industry? While far from being mainstream in Australia, the use of QR codes is on the rise thanks to improved technology and innovations in consumer engagement.

From the company’s simple beginnings in a Beijing apartment to the global expansion and recent major technology acquisitions, over a short period of time Shiji Group has experienced fantastic growth to serve a fully worldwide customer base. Looking back over the previous decade, Kevin King, COO of Shiji Group, shares the company’s background and pathway moving forward mixed with a desire to push the boundaries of technology for the hospitality industry. Below are some key takeaways from Mr. King’s article:

want to read more articles like this?

want to read more articles like this?

Sign up to receive our twice-a-month Watercooler and Siegel Sez Newsletters and never miss another article or news story.


Adapting to the Changing Landscape of Group Demand Measurement; Part 3 of 3

by Erik Browning

In part 1 of this three-part series, I discussed the health of the overall US hotel market specifically focusing on the group segment and the less than stellar ADR growth. In part 2, I discussed the need for and related challenges of estimating group demand in today’s current environment and the impact on pricing. If you haven’t already, you can read part 1 and part 2 now. In this third (and last) post, I will talk about how your measurement of group demand may be causing you to price group business incorrectly.

With the increasing prevalence of third-party meeting planners and online RFP sources, hotels are getting more leads than ever. In Image 1 above from Cvent, you will see that RFP volume has increased by 33 percent each year since 2010. Granted, this information is from the middle of 2012, but in their June 30, 2014 quarterly report, Cvent reports that their revenues have increased by 28 percent this year. I think it’s safe to say that lead volume isn’t diminishing.  ConferenceDirect and others have reported similar growth! 
Imagine for a moment that you are operating a hotel that only gets leads from Cvent. You have no other lead sources available to you. Assuming that all leads are input into the sales system, you could add up all the definites, tentatives, prospects and lost business to get to estimate group demand. Alternatively, you could just take the leads received and call that group demand. Using this information, we can calculate the conversion ratio [Conversion Ratio = (Definite Group) / (Group Demand)] for the property as illustrated in the hotel example above (Image 2). This hypothetical hotel starts in 2010 with 4,000 group bookings and group demand of 7,500. Group demand increases each year at 33 percent which is the same growth reported by Cvent. The group rooms sold increase each year is calculated based on U.S. overall demand change as reported by PWC and works out to a three year average of 3.2 percent. Using those assumptions, we come up with the table (Image 2) above.

In the table above, conversion started at 53.33 percent in 2010. Conversion drops all the way down to 24.91 percent by the time we get to 2013. Group bookings started at 4,000 in 2010 and increased to 4,396 by 2013 due to the hotel capturing group business at the same pace as overall demand increased. Put another way, had this hotel started 2010 with an occupancy index of 100, this hotel would have maintained that same index through 2013. Clearly the reported conversion decreased, but that doesn’t mean the hotel did a worse job. In fact, at the Hotel Data Conference this year, Chris Crenshaw referenced the STR Global Voice of the Meeting Planner survey that is conducted every two years. Based on the results of that survey, in 2011, hotels received 1.5 RFPs per lead. In 2013, that number has increased to 1.7 RFP’s per lead. In other words, for every 100 RFP’s your hotel receives, only 59 of them are true leads.

Obviously a hotel has many more lead sources than just Cvent. And to be very clear here, I am only using Cvent as an example as they are publicly traded and have information not readily available elsewhere. Each lead source at a hotel has a different conversion ratio. Most likely leads that come directly to the property (i.e., as a result of a sales manager talking to a prospect customer) have a higher conversion ratio compared to business that comes from any other lead source. What is changing is the proportion of leads which comes directly from the direct sales effort as compared to those which come from other channels. Generally speaking, on a percentage basis, leads generated from online meeting planning software far outpace growth from any other source.

Thus, if you don’t factor these changes in distribution and lead quantity into your group demand calculation, you will then overestimate the amount of group demand there is in your hotel. This will likely have a direct downstream impact on your pricing, assuming that you price based on demand! If we take the hotel example above, and if one of the components used to price group was conversion, the natural thing to do would be to decrease price until conversion was increased back to historical levels. Obviously, this isn’t the right answer, but I suspect this is happening more often than we think.

In the case of our hypothetical hotel above, it is very obvious that conversion is dropping due to lead volume growth. In that case, there are actually more unqualified RFP’s coming to the hotel which is not reflective of a true increase in demand. It may be that the meeting planner is now asking for 10 different alternate hotels instead of three or four like they did in the past.  Your hotel may/may not be a real consideration, but the meeting planner is curious for whatever reason.

Going back to the ADR performance of group in 2014, I would like to remind you that we are at a 1.5 percent YOY lift. And, while group demand has been struggling, overall demand has not with many markets at peak occupancy levels. Frankly, I think that we as an industry can do much better than a 1.5 percent lift. Actually, you have to do better than this if you have any hope of achieving budget next year. 

Be careful about how you measure demand and conversion. At a bare minimum, you should look at the YOY change in group occupancy in your competitive set/market as a better gauge of group demand change. More than that, though, I think it’s high time to remove the emotion out of group pricing. Start using data and factor in willingness to pay, expected booking probability, and maximize expected revenue on each book. Many of you have invested in a transient revenue management system that does this. Why is your group business less important?

About The Author
Erik Browning
Vice President of Business Consulting
The Rainmaker Group

Erik Browning is the vice president of business consulting with THE RAINMAKER GROUP. With 15 years of revenue management experience across a wide range of hotels in multiple destinations, including 10 years with Hilton Worldwide, Erik understands the hotelier perspective to help meet business objectives.


Blog post currently doesn't have any comments.
Leave comment

 Security code