HENDERSONVILLE, Tennessee—During a downturn, a natural strategy is to modify pricing by day of the week, focusing on where you believe you have the best opportunity to maximize revenue. Typically, this will be the days where your demand, and therefore occupancy, are the strongest.
STR has been examining the weekday performance compared to the weekend for the total U.S. and chain scale segments. The weekdays are considered Monday through Thursday, and the weekend is Friday and Saturday. Sunday isn’t included in the calculations for two reasons. First, depending on your orientation, Sunday could be included in either time period, and second, the notoriously low occupancy on that day tends to distort the analysis. To help ensure consistency in the number of days in each period, the data used in this analysis is year to date (beginning on 3 January) through 25 April 2009.
Generally, most of the chain scale segments report better weekday performance, in occupancy and average daily rate, because they tend to cater to the transient and group business traveler. But the magnitude of a daily premium, regardless of whether it’s a weekday or weekend, is dramatic for most chain scale segments. The one exception is luxury chains, in which the weekday ADR premium is only 2 percent. Because there’s such a small variation in the rate, it’s clear the luxury segment places the same value on its product regardless of the day of the week, despite falling occupancies. When demand begins to rebound in this segment, this strategy will prove useful because it should allow for a quicker recovery from revenue per available room declines.
In the upscale segment, the ADR premium for the weekday is 14.7 percent. It appears this segment is dropping its rates on the weekend to drive demand, with the ADR difference in the weekday over weekend ADR at about $15. As you can see in the charts, the RevPAR premium for the weekday in this segment is 27.3 percent. It appears that by dropping the rate by $15 on the weekend, this segment isn’t driving occupancy, and the RevPAR suffers substantially compared to the weekday numbers.
In the economy segment, the weekday ADR premium is -7 percent, meaning this segment is raising its rates on the weekend compared to the weekday. This shows the economy segment is aware of its customer base because this segment usually attracts more leisure travelers than business travelers and reports considerably higher occupancies during the weekend despite higher room rates.
STR will continue to monitor the weekday premium for these segments as the industry continues to struggle through this economic downturn.