GLOBAL REPORT—With leisure demand growing at a much stronger pace than this time last year and most areas of the world forecasted for continued improvement, hoteliers would benefit by placing an increased focus on pricing and distribution strategies, TravelClick officials said during the company’s first-quarter update.
During the first three months of 2012, demand appeared to rise steadily across most areas of the industry. What stands out, however, is how the mix of demand has shifted, said Rao Avasarala, VP of business intelligence, on the first-quarter update webinar. Hoteliers, he said, can capitalize by getting the right product in the right places.
“Whether it’s a brand’s own channel or an (online travel agency) or the (global distribution system), all of them represent critical demand that needs to be understood well and utilized,” Avasarala said.
TravelClick offered a snapshot of demand trends for each of the word regions:
Americas: Hotels in the Americas—particularly the United States—are “performing very well,” said Caryl Helsel, VP of demand and distribution. Helsel said occupancy in Sao Paulo and Buenos Aires has dipped slightly but that average daily rates remained strong. She said this could be an example of successful revenue management because hotels aren’t reacting too quickly to demand drops. On the other hand, future data must be monitored to ensure the rate increases aren’t contributing to the decreases in demand.
In New York, Helsel said, year-over-year occupancy is up 5.8% while rate is only up 1.6%. “There could be an opportunity to raise rates there,” she said.
Europe: Helsel said Europe’s performance, along with poor conversion rates, are dragging down the global recovery.
London stands out among Europe’s uneasy economies. Hotels in London reported a slight drop in year-over-year occupancy but continue to hold strong on rate, which was up 3.4%. “All eyes are on London,” Avasarala said. “We’re going to see much higher (revenues per available room). Expect London to have a strong year overall.”
Middle East: Abu Dhabi’s poor performance stood out among a mostly positive first quarter in the Middle East. The capital of the United Arab Emirates reported a 16% RevPAR decrease during the first quarter, but with high-profile events in the second half of the year, the region’s performance is expected to pick up.
“The Middle East is showing strong performance even with all the unrest,” Helsel said. “The occupancy is there, now it’s up to them to drive a bit more ADR.”
Asia/Pacific: In the Asia/Pacific region, New Delhi and Mumbai showed major decreases when data was presented in dollars. However, Helsel said a poor conversion rate makes decreases look greater than they actually were.
“Asia/Pacific has been an accelerator,” Helsel said. “It’s great that they’re holding onto ADRs, which is driving the RevPAR number.”
Channel mix snapshot
While most channels drove more overall demand during the first quarter of 2012 than they did in Q1 2011, TravelClick noted a shift in revenue from OTAs to brand sites and the GDSs.
In the first quarter of 2012, OTAs drove only 8% of all hotel industry revenue while brand websites contributed 22.5%; GDSs drove 17.8%; central reservations offices contributed 15.6%; and 36% of revenue was driven from the “direct” channel, which includes walk-in and most group business.
TravelClick broke down demand trends for the different channels:
OTA: “One channel we’re seeing a minor decrease in is the OTA channel,” Avasarala said. “This means hoteliers are doing a great job of driving demand to their proprietary websites. And the GDSs are doing a great job working with their customers.”
One factor for the decrease in revenue contributed by OTAs is that hoteliers are offering less discounted rooms as demand picks up. This data does not suggest, however, that hoteliers pull inventory from third-party partners.
“We believe hotels should have a very strong presence on each of these channels,” said John Hach, senior VP of global product management.
“While we see that the OTA channel has dropped over a point (since Q1 2011), it remains an important channel that needs to be managed accordingly,” Avasarala added.
Breaking down the OTA channel even further, TravelClick noted which sites were driving the most traffic. Expedia during the first quarter of 2012 by far drove the most reservations, but Hotels.com and Priceline.com showed significant increases year over year.
“There are a number of OTAs and many more joining the fray,” Avasarala said. “It’s important to pay attention to the bigger sources of demand, but pay attention to the new up-and-comers as well. It’s important to understand them.”
GDS: The number of reservations driven during the first quarter from the GDSs was up 3 million over the same time period in 2011, according to TravelClick. Hach predicted this data will shock some hoteliers.
“Many people wrongly predicted the demise of the GDS. It’s actually growing,” he said. “I think this channel is going to do at least 55 million (reservations) in 2012 … that’s back to 2007 levels.”
Hach said the GDSs provide an interesting opportunity for hoteliers to connect to travel agents at the point of sale. Travel agents, Hach said, are an advocate of upselling guests on additional amenities because they make, on average, 10% commissions.
In fact, the GDS channel booked reservations at the highest ADR in Q1 2012, followed by central reservation offices, brand websites, direct bookings and, finally, OTAs.
“It has surprised a lot of people,” Avasarala said. “It’s a channel that continues to be very important.”