Global Hospitality Consulting 1 Brisbane Hotel Performance We can't solve problems by using the same kind of thinking we used when we created them (Albert Einstein) If we keep doing what we're doing, we're going to keep getting what we're getting (Stephen R. Covey) Opportunity is missed by most people because it is dressed in overalls and looks like work (Thomas Edison) Rutger Smits Director, HVS International Sydney 9 September 2004
Objectives of the Presentation 2 Provide an understanding of market dynamics Assist in decision making processes (budgets, contracting) Generic only, you have to do your own homework! Performance review and cycle analysis Review historic performance in key cities ( Inner ) Review historic performance in Brisbane ( TR and Inner ) Analyse the impact of supply and demand on occ% and rate 3-year performance outlook Mathematics class Review weekday occupancy profiles Analyse the impact of rate on gross profit Discussion of Yield Strategies
3 Room Occupancy Trend Key Cities (Mar 1987 Mar 2004) 90.0% 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% 55.0% 50.0% 45.0% Mar-87 Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Sydney Melbourne Brisbane Perth Adelaide
4 Average Room Rate Trend Key Cities (Mar 1987 Mar 2004) $250.00 $225.00 $200.00 $175.00 $150.00 $125.00 $100.00 $75.00 $50.00 Mar-87 Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Sydney Melbourne Brisbane Perth Adelaide
Adjusted Average Rate Trend Key Cities (Mar 1987 Mar 2004) 5 $300.00 $275.00 $250.00 $225.00 $200.00 $175.00 $150.00 $125.00 $100.00 $75.00 Mar-87 Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Sydney Melbourne Brisbane Perth Adelaide
6 RevPAR Trend Key Cities (Mar 1987 Mar 2004) $175.00 $150.00 $125.00 $100.00 $75.00 $50.00 $25.00 Mar-87 Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Sydney Melbourne Brisbane Perth Adelaide
7 Adjusted RevPAR Trend Key Cities (Mar 1987 Mar 2004) $250.00 $225.00 $200.00 $175.00 $150.00 $125.00 $100.00 $75.00 $50.00 $25.00 Mar-87 Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Sydney Melbourne Brisbane Perth Adelaide
8 Room Occupancy Key Cities (March 2000 March 2004) 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% 55.0% 50.0% Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Sydney Melbourne Brisbane Perth Adelaide
Rolling Room Occupancy Trend Key Cities (March 2000 March 2004) 9 80.0% 78.0% 76.0% 74.0% 72.0% 70.0% 68.0% 66.0% 64.0% 62.0% 60.0% Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Sydney Melbourne Brisbane Perth Adelaide
Average Room Rate Key Cities (March 2000 March 2004) 10 240.00 220.00 200.00 180.00 160.00 140.00 120.00 100.00 80.00 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Sydney Melbourne Brisbane Perth Adelaide
Rolling Average Room Rate Trend Key Cities (March 2000 March 2004) 11 200.00 180.00 160.00 140.00 120.00 100.00 80.00 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Sydney Melbourne Brisbane Perth Adelaide
RevPAR Key Cities (March 2000 March 2004) 12 170.00 150.00 130.00 110.00 90.00 70.00 50.00 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Sydney Melbourne Brisbane Perth Adelaide
Rolling RevPAR Trend Key Cities (March 2000 March 2004) 13 150.00 130.00 110.00 90.00 70.00 50.00 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 Mar-04 Sydney Melbourne Brisbane Perth Adelaide
Hotel Rooms Ratio by Classification Brisbane TR (1999 2003) 14 3,000 2,500 2,000 1,500 No of Rooms 1,000 500 0 Mar-99 Jun-99 Sep-99 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 5 Star 4 Star 3 Star Serv'd Apts
Room Occupancy by Grade Brisbane TR (1999 2003) 15 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 90.0% 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% 55.0% 50.0% 45.0% 40.0% 5 Star 4 Star 3 Star Serv'd Apts Mar-99 Jun-99 Sep-99 Dec-99
Room Occupancy Trend by Grade Brisbane TR (1999 2003) 16 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% 55.0% 50.0% 45.0% Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 5 Star 4 Star Serv.Apt. 3 Star
Average Room Rate by Grade Brisbane TR (1999 2003) 17 Adjusted for GST and Inflation Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 $175 $150 $125 $100 $75 $50 5 Star 4 Star Serv.Apt. 3 Star Mar-99 Jun-99 Sep-99 Dec-99
Average Room Rate Trend by Grade Brisbane TR (1999 2003) 18 $175 Adjusted for GST and Inflation $150 $125 $100 $75 $50 Dec-99 Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 5 Star 4 Star Serv.Apt. 3 Star
RevPAR by Grade Brisbane TR (1999 2003) 19 Adjusted for GSt and Inflation Mar-00 Jun-00 Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 $130 $105 $80 $55 $30 5 Star 4 Star Serv.Apt. 3 Star Mar-99 Jun-99 Sep-99 Dec-99
$150 $125 $100 $75 $50 $25 RevPAR Trend by Grade Brisbane TR (1999 2003) 20 Adjusted for GST and Inflation Sep-00 Dec-00 Mar-01 Jun-01 Sep-01 Dec-01 Mar-02 Jun-02 Sep-02 Dec-02 Mar-03 Jun-03 Sep-03 Dec-03 5 Star 4 Star Serv.Apt. 3 Star Dec-99 Mar-00 Jun-00
Supply & Demand Trends by Quarter (March 1984 March 2004) 21 85.0% 700,000 Supply CAG 84-04 = 4.4% 80.0% 600,000 75.0% 500,000 Occupancy 70.0% 65.0% Demand CAG 84-04 = 5.7% 400,000 300,000 No of Rooms 60.0% 55.0% 50.0% Mar-84 Mar-85 Mar-86 Mar-87 Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Supply Demand Supply Trend Demand Trend 200,000 100,000 0
90.0% 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% 55.0% 50.0% Occupancy Trend by Quarter (March 1984 March 2004) 22 700,000 600,000 500,000 400,000 300,000 200,000 100,000 0 Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Occupancy No of Rooms Supply Demand Occ % Mar-84 Mar-85 Mar-86 Mar-87
Adjusted Rate Trend by Quarter (March 1984 March 2004) 23 90.0% $200.00 85.0% $180.00 80.0% $160.00 75.0% $140.00 70.0% $120.00 Occupancy Rate 65.0% $100.00 60.0% $80.00 55.0% $60.00 50.0% $40.00 Mar-84 Mar-85 Mar-86 Mar-87 Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Rate Adj Rate Occ% Trend
Occupancy & Rate Trend Correlation (March 1984 March 2004) 24 90.0% $200.00 85.0% 1984-89 Supply growth 1995-2000 Supply growth $180.00 80.0% $160.00 75.0% 3 years $140.00 Occupancy 70.0% 65.0% $120.00 $100.00 Rate 60.0% $80.00 55.0% 50.0% Mar-84 Mar-85 Mar-86 Mar-87 Mar-88 Occ% Trend 5 years Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Adj. Rate Trend 3 years $60.00 $40.00
The RevPAR Cycle (March 1984 March 2004) 25 90.0% $200.00 85.0% $180.00 80.0% $160.00 Occupancy 75.0% 70.0% $140.00 Downturn, supply stop Rate Recovery, new development $120.00 Impact of new supply Rate 65.0% 60.0% 55.0% 50.0% Occupancy recovery RevPAR Recovery Market collapses Mar-84 Mar-85 Mar-86 Mar-87 Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Occ% Trend Rate Trend RevPAR Trend $100.00 $80.00 $60.00 $40.00
100.0% 95.0% 90.0% 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% 55.0% 50.0% Brisbane - Seasonality Analysis (March 1984 March 2004) 26 $260.00 $240.00 $220.00 $200.00 $180.00 $160.00 $140.00 $120.00 Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Occ % Occupancy Mar-84 Mar-85 Mar-86 Mar-87
100.0% 95.0% 90.0% 85.0% 80.0% 75.0% 70.0% 65.0% 60.0% 55.0% 50.0% Brisbane - Seasonality Analysis (March 1984 March 2004) 27 $180.00 $160.00 $140.00 $120.00 $100.00 $80.00 $60.00 $40.00 Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Occupancy Rate Occ % Adj. Rate Mar-84 Mar-85 Mar-86 Mar-87
Brisbane - Seasonality Analysis (March 1984 March 2004) 28 100.0% $180.00 95.0% $160.00 90.0% 85.0% $140.00 80.0% 75.0% 70.0% Occupancy Rate $ $ $120.00 $100.00 65.0% $80.00 60.0% 55.0% $60.00 50.0% $40.00 Mar-84 Mar-85 Mar-86 Mar-87 Mar-88 Mar-89 Mar-90 Mar-91 Mar-92 Mar-93 Mar-94 Mar-95 Mar-96 Mar-97 Mar-98 Mar-99 Mar-00 Mar-01 Mar-02 Mar-03 Mar-04 Occ % Adj. Rate Adj RevPAR
Brisbane (TR) - Demand Analysis Visitors Nights 29 Domestic visitor nights in 2003: 16.6 million 2001: 15.9 million 2002: 16.1 million 21% stay in hotels 3.45 million hotel room nights in 2003 International visitor nights in 2003: 8.4 million 2001: 8.1 million 2002: 8.2 million 13.6% stay in hotels 1.14 million hotel room nights in 2003 Total of 4.59 million hotel room nights in 2003 18% of total visitor nights 75% domestic 25% international
Brisbane - Domestic Visitor Nights (1989 2003) 30 20,000 18,000 16,000 89-03 = 0.8% 89-93 = -7.8% 94-99 = 8.3% 00-03 = 1.8% 14,000 Nights (000s) 12,000 10,000 8,000 6,000 4,000 2,000-1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Nights Elsewhere Nights in Hotels
Brisbane (TR) - Demand Analysis International Visitors 31 International visitors in 2003: 750,000 International visitors nights in 2003: 8.4 million Average length of stay about 11 days Only about 13.7% staying in a hotel Top producers: UK most room nights (18%), but only 11% stay in hotels NZ most hotel room nights, 16% of total room nights USA 3 rd largest producer of hotel room nights, Other Europe 4 th, Japan 5th China only 2.6% of total nights, but 5.7% of hotel nights, because 83% uses hotels USA stay longest (4.5 days) Chinese only stay 2.2 days
Brisbane - International Visitor Nights (1989 2003) 32 10,000 9,000 8,000 89-03 = 4.0% 89-93 = 3.8% 94-99 = 7.9% 00-03 = 6.3% 7,000 Nights (000s) 6,000 5,000 4,000 3,000 2,000 1,000-1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Nights Elsewhere Nights in Hotels
Looking Forward.. 33 New Supply Demand Growth Occupancy Projections Rate Predictions
Additions to Hotel Supply (2004 2007) 34 Saville 250 rooms & apartments Q3 2005 Pac. Int. 190 rooms & suites? Q1 2007 Brisbane Airport Hotel? Cruise Ship Terminal? Planning will take two years Construction will take 2 years Supply growth is predictable Supply growth is limited
Brisbane - Supply Forecast (1983 2007) 35 2,700,000 2,400,000 2,100,000 1,800,000 CAG 83-03 = 4.4% CAG 04-07 = 1.5% CAG 83-07 = 3.8% Roomnights 1,500,000 1,200,000 900,000 600,000 300,000 0 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Demand Supply Supply Trend Demand Trend
Brisbane - Domestic Visitor Nights (1989 2007) 36 20,000 18,000 16,000 89-03 = 0.8% 04-07 = 2.5% 89-93 = -7.8% 94-99 = 8.3% 00-03=1.8% 14,000 Nights (000s) 12,000 10,000 8,000 6,000 Hotel room nights increasing at constant ratio of 24% of total 4,000 2,000-1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Nights Elsewhere Nights in Hotels
Brisbane - International Visitor Nights (1989 2007) 37 10,000 9,000 89-03 = 4.0% 04-07 = 4.5% 89-93 = 3.8% 94-99 = 7.9% 00-03=6.3% 8,000 7,000 Nights (000s) 6,000 5,000 4,000 3,000 Hotel room nights increasing at constant ratio of 14% of total 2,000 1,000-1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Nights Elsewhere Nights in Hotels
Brisbane - Demand Forecast (1983 2007) 38 2,700,000 2,400,000 2,100,000 1,800,000 CAG 83-03 = 5.7% CAG 04-07 = 3.5% CAG 83-07 = 5.4% Roomnights 1,500,000 1,200,000 900,000 600,000 300,000 0 1983 1984 1985 1986 1987 1988 1989 1990 1991 Demand 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Supply 2005 2006 2007
Brisbane - Occupancy Forecast (1983 2007) 39 2,700,000 85.0% 2,400,000 80.0% 2,100,000 75.0% 1,800,000 70.0% Roomnights 1,500,000 1,200,000 900,000 600,000 300,000 0 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Demand Supply Occ% Trend 65.0% 60.0% 55.0% 50.0% 45.0% 40.0% Occupancy
Brisbane - Average Rate Projection (1983 2007) 40 85.0% $200.00 80.0% $175.00 75.0% 70.0% $150.00 65.0% $125.00 60.0% Roomnights Rate 55.0% $100.00 50.0% $75.00 45.0% 40.0% $50.00 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Rate Adj. Rate Occ%
A Few Calculations 41 Occupancy patterns Weekday (Tuesday Thursday) Extended Weekend (Friday Monday) From gross rate to gross profit The importance of rate growth
Occupancy Profiles 42 Weekday A B C D Monday 70.0% 75.0% 80.0% 85.0% Tuesday 74.2% 80.8% 87.5% 94.2% Wednesday 74.2% 80.8% 87.5% 94.2% Thursday 74.2% 80.8% 87.5% 94.2% Friday 65.0% 70.0% 75.0% 80.0% Saturday 72.5% 75.0% 77.5% 80.0% Sunday 60.0% 62.5% 65.0% 67.5% Average 70.0% 75.0% 80.0% 85.0%
From Rate to Profit Typical Average Rate 43 Gross Rate $160 GST 10% $ 145 S&BC 6.5% $ 135 Comm. 10% $ 119 Freq Fl. 5.5% $ 110 Cr.card 2.5% $ 106 Amenities $ 15 $ 91 Wages 15% $ 24 Other cost $ 10 $ 10 A&G 4.5% $ 7 S&M 5.5% $ 9 Maint. 3% $ 5 Energy 2.5% $ 4 MGFE 2% $ 3 NET RATE $ 91 Expenses $ 62 Gross Profit $ 29 (20%)
The Impact of Rate Growth Typical Rate 44 10% Rate Increase Gross Rate $ 160 GST 10% $ 145 Direct costs $ 54 NET RATE $ 91 Expenses $ 62 Gross Profit $ 29 Gross Rate $ 176 GST 10% $ 160 Direct costs $ 58 NET RATE $ 102 Expenses $ 62 Gross Profit $ 40 Profit Margin 20% Profit Margin 25% A 10% rate increase results in a 38% profit increase
From Rate to Profit Group Rate 45 Gross Rate $ 160 GST 10% $ 145 Res. Fee 3% $ 140 Comm. 10% $ 124 Freq Fl. n/a $ 124 Cr.card n/a $ 124 Amenities $ 15 $ 109 Wages 15% $ 24 Other cost $ 10 $ 10 A&G 4.5% $ 7 S&M 5.5% $ 9 Maint. 3% $ 5 Energy 2.5% $ 4 MGFE 2% $ 3 NET RATE $ 109 Expenses $ 62 Gross Profit$ 47 (32%)
The Impact of Rate Growth Group Rate 46 Gross Rate $ 160 GST 10% $ 145 Direct costs $ 36 NET RATE $ 109 Expenses $ 62 Gross Profit $ 47 10% Rate Increase Gross Rate $ 176 GST 10% $ 160 Direct costs $ 38 NET RATE $ 122 Expenses $ 62 Gross Profit $ 60 Profit Margin 37% A 10% rate increase results in a 28% profit increase
Conclusions Rate and Profitability 47 The rate cycle and occupancy cycle are not synchronised Anticipated occupancy constraints create opportunities for rate growth Seasonal and weekday patterns can provide further yield opportunities A 10% rate rise may result in a 35% profit improvement, across all segments Long term yield management requires a pro-active approach!
Yield Strategies 48 Long term yield strategy: should be based on your marketing and business plan Market supply and demand projections Property positioning strategy Demand penetration analysis Short term strategy: aimed at maximising RevPAR by making short term decisions Yield management software Ad-hoc discounts and packages Lose-it rates for short term bookings Short term strategy should not undermine long term objectives!!!
Long Term Yield Management 49 Yield Management = Revenue Management Invented by airline industry Principles: Perishable product Supply is known Demand is predictable Loading factor (= occupancy) can be predicted Consumer behaviour can be anticipated Price elasticity can be calculated Inventory can be actively managed Long term pricing strategy = pro-active Daily yield management = re-active
Airlines vs. Hotel Industry 50 Airline: Uniform product in three classes (economy, business, first) Large variety of fares for each class (red-e, super saver etc) Limited availability of cheap fares Long term booking = lower fare Active inventory management Hotel: Uniform product in different room types Large variety of rates for each room type Low rates always available Long term booking = higher rate Passive inventory management
Current Long-Term Strategies 51 Contracted rates are offered on run of house free upgrades during high demand periods High volume contracts get lower rates is actual production in line with rate offered? Next year s rate based on past performance Looking backwards, not forwards! Long term contracts made on today s rates Is that rate appropriate for the contract period? Focus on quantity not quality (more is better) High rate business is more profitable!
What can we improve? 52 Think ahead and be more pro-active Long term planning vs. short term yield management Diversify pricing strategy based on lead time Give long-term bookings lower rates, but limit availability Demand higher rates for short-term bookings, unless the expected occupancy is low and discounts are appropriate Redefine contracted business Rate structure by room type, not run of the house Enforce this structure where possible Award volume discount based on actual production, not on predictions or last year s production Reward commitment but charge for flexibility
Potential problem areas 53 Perceived fairness is important Provide arguments to support rate increases Be transparent in rate policies and explain the structure When offering discounts, attach booking restrictions When asking high rates, be more flexible Do not abuse yield opportunity Do not insist on high rates when not appropriate Be mindful of the need for repeat business Good yielding is an art, not a science Do not leave to inexperienced staff
Summary 54 Market cycles are driven by supply, not demand! Supply is predictable, as new developments take time Long-term demand can be forecast with reasonable accuracy The rate cycle is lagging the occupancy cycle, due to lack of planning and anticipation The long-term market cycle is predictable! Use long-term yield management strategies A 10% or $20 rate rise may result in a 30% profit improvement If you fail to plan, you are planning to fail!
Global Hospitality Consulting 55 HVS International 02 9233 1125 Tel Level 1, 5 Elizabeth Street 02 9233 1147 Fax Sydney NSW 2000 hvssydney@hvsinternational.com www.hvsinternational.com