Is the Price Right?Is the Price Right?

Demand & Competitive Rates

Presented by:

Tammy Rajaniemi, Manager HMG Extended Stay Revenue Management

Paul Malje, Revenue Manager – Candlewood Suites – Value Partners

First Things First…

Clear your mind!

See & Say

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See & Say

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YellowYellow BlackBlack

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PurplePurple RedRed

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GreenGreen OrangeOrange

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Overview

What should the Rate be? Forecasting Factors to Consider

Demand Competitor Rates

Revenue Management

Products RevenueManagement

DistributionChannel

Direct

Web

GDS

Customers/Segments

Hotel Rooms

Factors

Rate Decisions are Governed by Two Factors

CONSUMER DEMAND

COMPETITIVE RATES

Consumer Demand

Forecasting Demand Implicit Explicit

CONSUMER DEMAND

Consumer Demand

Forecasting Example: Forecast: 50% Occupancy Action: Open Allocations on All Channels Response: More Booking Result: 62% Occupancy

Was the Forecast Wrong? CONSUMER DEMAND

Consumer Demand

Forecasting Mistakes Goal Setting vs. Forecasting Define a ‘Good’ Forecast The Gambler’s Fallacy Focus on Recent Trends Not Taking Action

CONSUMER DEMAND

Consumer Demand

When Demand is High

CONSUMER DEMAND

COMPETITIVE RATES

Consumer Demand

When Demand is Low

COMPETITIVE RATES

CONSUMER DEMAND

Consumer Demand

Usually Demand is In-between

CONSUMER DEMAND

COMPETITIVE RATES

Impact of Demand

Every day’s demand is different; often requiring different rates

Demand varies by booking channel; requiring distribution strategies

Demand dictates the DIRECTIONDIRECTION that rates should move

Impact of Competitive Rates

Competitive Rates limit the DEGREEDEGREE – not direction of rate changes

Competitive rates may differ by channel Trends are as important as individual rates

Impact of Competitive Rates

Don’t be the ‘Greater Fool’

Taking Action

Shop Competitive Rates Multiple Channels Average Length of Stay Call Arounds

Taking Action

Be aware of your booking window

Book

ings

Days Left

42 35 28 21 14 7 0

Taking Action

Cornell University Study "Price Discounting - Is It a Wise Strategy to

Raise Revenues?" Examined demand for rooms at 480 hotels in 22

metropolitan areas in the U.S.

Taking Action

"The prevailing wisdom is that reducing room rates entices new consumers to enter the market and buy more rooms…”

“…This has nevernever worked for the hotel industry, and it won't work in this era of proliferating hotel room discounts and Web-based travel deals, because new consumers do not enter the market in response to hotel discounting. Instead, existing Instead, existing consumers simply get more for less, and hotel consumers simply get more for less, and hotel revenues fallrevenues fall."

Good News ~ Bad News

Bad News First:Your long-lost Uncle in Atlanta just passed away.

The Good News:He left you his restaurant in Buckhead!

Café Ptomaine

Celebrating its 3rd year Located in the heart of Buckhead on

Peachtree Road Casual American Fare in a Relaxed

Atmosphere Serving Lunch and Dinner 7 days a week

Café Ptomaine

The Stipulation In 3 years, the Restaurant has not made a cent

in profit. You have 5 weeks to turn a profit or you will lose

the Restaurant to your evil cousin Cheryl.

Week One

You visit ‘The Buck Stops Here’ Restaurant next door to the Café Ptomaine. Atmosphere is trendier Was very busy at 4pm on Wednesday The menu has a few similar items Meal was $15 more than a meal at Café

Ptomaine

Week One

A. Immediately raise all menu prices 10%

B. Change prices to be the same as TBSH

C. Review all restaurants in the area and determine your prime competitors

D. Report that you got food poisoning to the local press

A. $25

B. $50

C. $100C. $100

D. $ 0

Week Two

You review the Reports from Week One Highest lunch sales: Tue, Wed, Thur, Fri Highest dinner sales: Wed, Fri, Sat Sunday and Monday are the two slowest days

overall

Week Two

A. Offer 25% off discount for anyone eating on Sunday or Monday

B. Check sales volume at competitors before taking action

C. Focus advertising on Sunday and Monday

D. Close the Café on Sunday and Monday

A. $ 50

B. $100B. $100

C. $ 75

D. $ 25

Week Three

You review the Reports from Week Two and compare to Week One. There is no change in pattern – strong lunch

days are the same as is the case for dinner Overall sales are up 30% week over week

Week Three

A. Forecast the same increase for next week

B. Forecast a greater increase for next week

C. Monitor next week’s sales to see if increase is constant or one time

D. Place a ‘Help Wanted’ add for more staff !

A. $ 75

B. $50

C. $100C. $100

D. $ 0

Week Four

You review the Reports from the first three weeks Overall sales are back to Week One level Comment Cards indicate a gap in attracting a

mature crowd The “20 & 30-Somethings” like to hang out at the

Café

Week Four

A. Create specific and unique menu items that will attract a wider audience

B. Offer a 20% Senior Discount

C. Add an Early Bird Special to the menu

D. Tell the ‘youngsters’ that they have to leave after an hour

A. $100A. $100

B. $ 50

C. $ 50

D. $ 0

Week Five

You review the Reports from the first four weeks Sales are only marginally higher since you took

over Labor costs remain high due to low volume Your Competitors and the overall Market are

very strong

Week Five

A. Lower the menu prices in order to attract more business

B. Offer a ‘bounce back’ coupon to all guests

C. Review position in the Market and make specific and targeted changes

D. Organize a sales blitz to better communicate your unique dining experience

A. $ 0

B. $ 50

C. $100C. $100

D. $ 50

The Results

$500 - $400

$399 - $200

Under $199

Move over Emeril

Maybe a job at McDonald’s is right for you

Give the keys to Cheryl and call Domino’s

Thank you!Thank you!