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People today expect to be connected always and everywhere; sometimes it’s hard to believe that there was a world before smartphones and Wi-Fi. In the time since Wi-Fi became ubiquitous in hotels, apartments, and public spaces, it has fueled the evolution of connectivity in a lot of ways. Just like Maslow’s hierarchy of needs, the most basic needs start at the bottom, and you can’t get to the next level without a strong foundation. 

By now, everyone is aware that hotel giant Marriott International announced on Friday a massive data breach that goes back more than four years and may have affected up to 500 million customers worldwide. 

After two years of preparation, the FlyZoo Hotel — a futuristic property that uses interactive technologies to do everything from greet guests to deliver room service — is ready for business. 

Mobile technology is fast becoming central to the entire travel experience. Consumers are increasingly using their smartphones to research trips, book accommodation, check in at the airport, and access their hotel room. But one of the next big roles mobile has to play in the travel process is mobile payment. The idea of an entirely cashless society might still seem some way off, but mobile payment is gaining popularity. As it becomes more widely used, its fast and frictionless nature will bring benefits before, during and after a trip. 

Digital marketing, also known as internet marketing, plays a significant role to boost hotel website traffic and online bookings. Recently, many big announcements were made in the digital industry, for example when Facebook introduced a new video format for marketers, or when Google announced a board core algorithm. If you are a new hotelier and want to stay ahead in the industry, then you should know what’s going on in the hotel digital marketing industry. 
 



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Adapting to the Changing Landscape of Group Demand Measurement; Part 1 of 3

09/19/2014

The hotel industry had a record setting year in 2013: It was the year of most rooms sold, highest rooms revenue, highest ADR, and highest RevPAR.  2014 is shaping up to be even better: Occupancy is projected to grow between 2.1 percent to 2.6 percent, and ADR is forecasted to grow between 4.2 percent and 4.5 percent.  In fact, in the United States, May 2014 RevPAR growth was a new record breaking 10 percent.
 
It has been well-documented that the stellar U.S. performance has been driven by the increase in the transient segment, but we are also finally seeing growth in group demand.  For example, the number of group rooms sold in June 2014 was 1.5 million more rooms than what was sold last June of 2013.  Exemplified in the table below, group occupancy growth is finally outpacing the growth of transient occupancy.  However, group ADR growth is only at 1.5 percent compared to the 4.2 percent growth of transient ADR. 

 

YTD 2014: Top 25 North American Markets

   

 

YOY Growth

Segment

Occupancy

ADR

Group

3.70%

1.50%

Transient

3.10%

4.20%

Source: Travelclick
 
With all of these positive indicators (record breaking performance, consistent demand increases, moderate supply growth and four years of positive RevPAR lift), why aren’t we seeing better growth in group ADR? Certainly some of this lack of growth can be attributed to group business booked between 2008 and 2010, the Great Recession.  However, the Recession cannot explain it all.  Let’s examine a bit more closely some contributing factors.

The most obvious reason for the lack of growth is the change in group dynamics: Meetings are getting smaller and shorter.  Back in 2005, group business represented about 39 percent of occupancy, and currently in 2014, it represents only 33 percent of the occupancy.  Another issue is the 12-month moving average of group demand change was in negative territory during the second half of 2013 through early 2014. This may have led some hotels to reduce group prices to be lower than what the market could probably have held.  These factors, and more, have made the group landscape more competitive. 
 
While there are various reasons for group ADR underperformance, let’s focus on how individual properties currently measure their group demand, the changes to group distribution, and then ultimately, the downstream impact on how they price group.

As noted earlier, until recently, group occupancy and group pace have been lackluster in the United States.  I can certainly empathize with the revenue management team during the group rate quotation process when the group pace has not been as strong as needed. At the same time, we have to recognize that most markets have already reached or surpassed previous peak occupancies.  Many markets have likely already hit their functional capacity with little to no space for additional occupancy growth.  For RevPAR growth to remain positive in the future, growth has to come in the form of ADR lift.  The prognosticators in our industry are all projecting 2015 RevPAR increases between 5.2 percent and 6.7 percent, with occupancy only contributing about 1 percent growth. 

Assuming that the transient ADR lift continues at the current pace of about 4.2 percent, transient rate growth will have to be even higher in 2015. More importantly, group ADR has to rise dramatically compared to the current growth rate of 1.5 percent to hit the overall RevPAR projections.
So how do we make this ADR lift happen?  In my next blog post, we are going to examine what is going on with measuring group demand and how you might be looking at it incorrectly. All of which could be leading to pricing decisions resulting in money left on the table.
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.

 

 
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