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TravelClick: Value creation drives rates
February 28 2013

The outlook for the global hotel industry remains relatively positive, as long as hoteliers maintain rate, capitalize on changing channel mixes and create value creation offerings, sources report.

Highlights
  • The shift from a merchant model to a retail model is helping OTAs take their share of the market, John Hach of TravelClick said.
  • “Brazil is experiencing an economic boom,” Yoly Gawler of TravelClick said.
  • TravelClick forecasts in 2013 the top 25 U.S. markets will see an increase of 3.7% in ADR, a 1.9% increase in occupancy and a 5.9% increase in RevPAR.

GLOBAL REPORT—As the hotel industry embarks on the new year, the outlook remains relatively positive for the global regions, as long as hoteliers maintain rate, capitalize on changing channel mixes and create value creation offerings, experts said during a webinar Wednesday.

“There’s not a whole lot of surprises” across the key metrics in the different regions, Yoly Gawler, director of reservations product development at TravelClick, said during the company’s “Global Hotel Trends Webinar: Top Insights and Best Practices for 2013 and Beyond.”

The U.S., including the Americas, are seeing strong growth in all three key performance metrics, the European and Middle East markets are performing better than expected, and the Asia/Pacific region is relatively flat, she said.


Click image to enlarge.
Source: TravelClick

Looking at key markets
Brazil is a market that stands out with Rio de Janeiro and São Paulo reporting losses in occupancy (-6.9% and -3.8%, respectively) but increases in revenue per available room (+2.9% and +2.4%) and average daily rate (+10.5% and +6.4%), according to fourth quarter metrics from STR Global, sister company of HotelNewsNow.com.

“The market is holding on to rate,” Gawler said. “They are getting RevPAR, which is an indicator of how well the market is doing.

“Brazil is experiencing an economic boom,” she added.

John Hach, senior VP of global product management at TravelClick, said San Francisco is an ideal market because it’s growing in occupancy (2.6%), ADR  (6.3%) and RevPAR (9.1%), according to STR, parent company of HotelNewsNow.com. “The market is able to absorb capacity,” he said.

John Hach
TravelClick

 

In Europe, Dublin is “doing extremely well,” said Gawler, with RevPAR growing by 18%. The city held onto solid ADR (9.2%) in euros through the value they offer to customers, according to numbers by STR Global. Additionally, special events held last year drove more than 1 million people to the country.

Asia/Pacific, once the shining star globally, is seeing things balance out. The region is up against strong prior year results and it needs to absorb its abundance of capacity without RevPAR taking a strong hit, Hach said.

Ultimately, with any market, Hach advised hoteliers to stay competitive and “hold rate as long as you can. Don’t panic and lower rate.”

“When (hoteliers) lower rate and don’t promote, no one knows about it, and it really hits ADR and RevPAR,” he said. “You don’t get the value of lower pricing unless you advertise that across multiple channels.”

Revenue by channel
Overall, Gawler said, there wasn’t a noticeable shift in channel distribution compared with the same time last year. However, with 9.6% of the revenue, online travel agencies showed the most interesting shift.


Click image to enlarge.
Source: TravelClick

Hach said the switch from a merchant model to a retail model is helping OTAs take their share. “What we’re seeing with OTAs, it’s almost a rebirth of OTA activity in a new business model.”

Expedia’s Traveler Preference Program, which allows customers to pay upon booking or pay when they check out, has leveled the playing field, allowing OTAs to compete with direct websites for sales, Hach said. Expedia took in $257 million in fourth quarter 2012, up from $186 million in 2011.

“Merchant is an expensive channel. Retail, you have an opportunity for profit,” he said. “When an OTA gets in a retail environment, it’s huge. It’s a mover in the industry because it aggregates so many customers.”

Value creation
It’s not rate alone that converts heads to beds, Hach said. An important element in generating loyalty and profit is value creation. Midscale segments are chipping away at the upper-upscale and luxury segments because they’re offering free continental breakfasts and Wi-Fi.

“The point is, travelers are looking for value beyond ADR,” he said.

The hotels getting the best return on investment understand unique value and competitive differentiations, he added.

The top two value creations in any hotel are free broadband Wi-Fi for multiple devices and free meal inclusion. They create strong ROIs, Hach said.

“It’s not rate alone. There needs to be another way to get guests in a hotel,” he said.

No need for silos
When marketing a hotel, hoteliers need to think of the convergence from online and offline channels and why it matters.

“As hotels invest in digital marketing, we can’t forget the call center channel needs to keep up and adapt that traffic coming through in a way the user demands,” Gawler said.

“If I think of a call center as a silo, I’m making a big mistake,” Hach added.

The industry is engaging in social, location and mobile, or SoLoMo. For example, Wyndham relaunched its mobile platform expecting to see conversions through mobile but the company found people were searching on their smartphones and making phone calls to a hotel, which increased call volume by 70% to 80% booking for same-day booking.

Because of this, the call center cannot be made into a silo. “It’s a convergent channel, and it’s highly important on what we’re doing online,” Gawler said.

2013 outlook
Based on bookings already registered, TravelClick forecasts in 2013 the top 25 U.S. markets will see an increase of 3.7% in ADR, a 1.9% increase in occupancy and a 5.9% increase in RevPAR.

Global markets including Dubai, United Arab Emirates, London, Mexico City, Paris and Shanghai, are not performing as well as the U.S. Part of the reason for low RevPAR numbers in Paris and London is because group business hasn’t booked but is committed, Gawler said.

It’s easy to look at the world and be negative, but things aren’t all bad, Hach said. “They’re not great, but we don’t see a precipitous decline. We see in most markets, the markets are relatively stable. The top 300 markets are showing stability and growth.”

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