The TravelClick Perspective – August 2013
Current Outlook
The hotel industry outlook for the top 25 North American Markets is showing an increase of 2.2% in committed occupancy for August 2013 - July 2014, based on group commitments and individual reservations on the books as of July 28, 2013 compared to the same time last year. The group segment is up 1.0% in room nights committed (contracted). New group business added over the last month (pace) has declined over the last month, down -14.4% over the comparable period last year. Transient room nights booked are up 5.3% compared to the same time last year. Average daily rate (ADR) is growing slightly more than occupancy, up 3.7% based on reservations currently on the books for 2013.
For the third quarter of 2013 (July - September), overall committed occupancy is up 1.0% in the top 25 markets. Committed occupancy for the group segments is down -2.5% and the transient segment is up 3.4% compared to a year ago. Average daily rate for the third quarter is up 3.3% over the same time last year. Business segment ADR, which includes weekday transient negotiated and retail segments, is up 3.2%. Leisure segment ADR, which includes transient discount, qualified and wholesale segments, is up 4.5%
Revenue Planning for 2014
The 2014 budget season is upon us. Effective revenue planning requires you to anticipate future market conditions and to forecast your own performance within those market conditions, based on the revenue strategies you will put in place.
A good starting point for this planning is gaining a proper understanding of current and evolving market conditions and of your own performance so far in 2013. The industry convention is to focus on overall occupancy, average daily rate and RevPAR performance as the general benchmark for performance. However, overall market and hotel performance is in fact a function of the performance of each individual customer segment, including not only group and transient guests, but also each of the transient business and leisure customer segments that comprise overall transient demand.
The chart below shows the year to date occupancy and ADR growth through July across the top 25 North American markets, by segment. It also shows the contribution in room nights and ADR for each segment.
The transient customer segments are defined as:
- Retail = rack, best available, non-discounted, non-affiliated, non-contracted customer demand
- Negotiated = corporate contracted rates
- Discount = packages, promotional rates, advanced purchase, non-refundable rates
- Qualified = affiliation discounts, such as AAA, senior discounts, frequent guest program, etc.
- Wholesale = wholesalers / consolidators / tour operators
While RevPAR growth has been positive, performance across each of the segments has varied substantially. Group occupancy and ADR growth has been weaker than transient. Transient growth, both occupancy and ADR, has been stronger in the discretionary retail and discount segments. And every market is different. For example, look at the segment mix and the performance by segment for the Washington DC market year to date through July:
The effects of lower government spending in the face of 'sequestration' are evident in the performance of particularly the group, the transient negotiated (i.e., corporate) and the transient qualified segments.Transient qualified is where we classify guests booking under government rates.
As you look forward, it is important to deliberately assess and plan:
- what your market will be offering in terms of room night and revenue growth, segment by segment
- what your performance expectations are in each segment
- what actions are required to drive that performance in each respective segment
This bottom up segment level approach will lead toward a plan that better reflects true market dynamics across the various customer segments you serve.
Performance Summary
The chart below shows the year-over-year position by market of committed occupancy, reserved occupancy, ADR, and revenue per available room (RevPAR), based on business on the books for the future 12 months. Committed occupancy is group blocks plus transient reservations. Reserved occupancy, ADR, and RevPAR are based only on reservations (group pickup and transient reservations). Shades of green indicate highest performance of the markets, while shades of orange indicate average performance, and shades of red indicate lowest performance.
About TravelClick, an Amadeus Company
TravelClick offers innovative, cloud-based and data-driven solutions for hotels around the globe to maximize revenue. TravelClick enables over 38,000 hoteliers to drive better business decisions and know, acquire, convert and retain guests. The Company's interconnected suite of solutions includes Business Intelligence, Reservations & Booking Engine, Media, Web & Video and Guest Management. As a trusted hotel partner with more than 30 years of industry experience, TravelClick operates in 176 countries, with local experts in 39 countries and 14 offices in New York, Atlanta, Bucharest, Chicago, Barcelona, Dubai, Hong Kong, Melbourne, Myrtle Beach, Orlando, Ottawa, Paris, Shanghai and Singapore. Additionally, the Company fosters more than 600 travel-focused partnerships for hotels to leverage. Follow TravelClick on Facebook, Twitter and LinkedIn.
