Dynamic Pricing Friend, Foe or the Future?

Presented bySean McCurdyGlobal Director of Worldwide SalesInterstate Hotels & Resorts

Agenda

Hotel Trivia

Dynamic Pricing

What is it?

How to evaluate it?

Is it right for you?

Amenities Travelers Prefer

What is Negotiable?

Hotel Trivia 1930 The standard travel agent commission

was? A. 5% B. $1 C. 10% Average Room Rate? A. $1.34 B. $5.60 C. $15.80

Hotel Trivia 1950 JW Marriott opens his first hotel in? A. Arlington VA B. Atlanta GA C. New York NY

1951 First hotel company to install televisions in all the guest rooms?

A. Wingate B. La Quinta C. Hilton

Hotel Trivia 1950

Kemmons Wilson opens his first Holiday Inn, where?

A. Atlanta

B. Memphis

C. Irvine

He named his hotel after?

A. His first Vacation

B. A National Holiday

C. A Bing Crosby movie

Economic Factors Driving Dynamic Pricing

Inflation

Demand grew 4.5% vs. Supply of 1.3%

Consolidation of ownership-greater control on pricing

Dramatic increase in control over rate integrity and inventory

Aftermath of Hurricanes

Industry Factors Driving Dynamic Pricing

Allied Members

Desire to simplify the RFP Process

Negotiate Rates based upon Demand

Major Brand Support

Direct Members

Increase Hotel Compliance

Opportunity to expand preferred partnership in secondary cities

Eliminate 3rd Party Costs

What is Dynamic Pricing?

Fixed % off a floating benchmark rate. Consortia

Corporate

Best Available

Benchmark rate will float up or down based upon market conditions.

What should you consider?

How often do your travelers receive the negotiated rate at your preferred hotels?

Will the discount apply to other room types? Will it cover all properties (chain-wide) or selected

properties? Will the % discounts vary by city & volume? Or will

one fixed % that applies to all properties? Will you be able to negotiate value added

amenities? What is your benchmark? Will the rate fluctuate by

night for a multiple stay?

Key Areas of Consideration

Financial Can your suppliers provide a data-driven model

that quantifies the economic benefits. Are all of your suppliers providing a similar pricing

model, how will this affect non-dynamic preferred agreements.

How do your current negotiated rates compare to other benchmark rates?

Dynamic Pricing may add additional hotels that could not offer you a negotiated rate, resulting in incremental savings.

Measure the effectiveness on an on-going basis.

Key Areas of Consideration

Traveler Experience How will you communicate the new model to your

travelers? Will they understand the value of the discount?

How will travelers forecast or budget their hotel costs?

If your travelers are performing client-billable services, how will the changes be communicated to their clients?

Are you travelers required to use per diem or city caps?

Key Areas of Consideration

Change Management How will the forecast and budgeting process be

changed? How will you manage cities where you have a

hybrid situation? How will online booking tools and travel agencies

manage and sell rates? How will the discounts be validated and audited? How will pre-trip approval and post-trip expense

audits need to be changed? Will you be able to quantify the value of the new

program to management?

Dynamic Pricing

Is it right for you?

What is negotiable?

Hotel Trivia 1960

1962 Curt Carslon buys shares of this Minneapolis hotel?

Typical hotel had? 120 rooms, 39 rooms, or 78 rooms.

Average occupancy? 45%, 67% or 85%.

First cable movie station offered in hotel rooms? HBO & Cinemax or Showtime & The Movie Channel.

Questions & Answers

Available Resources

NBTA Hotel Committee:Rate loading white paper-glossary of industry terms. 2006 NBTA Modular Hotel RFP: includes copies of theModules, Specifications, Instructions, Templates, Vendors, French, German and Spanish Translations - Best Practices: Hotel RFP Package

- Best Practices: Company Overview Sample - Best Practices: Rate Accept Sample - Best Practices: Rate Reject Sample - Best Practices: Cover Letter Samples - How to Develop a Hotel Program - Recommendations on Hotel Reverse Auctions - Reverse Auction Resource List - RFP Vendor Resource List

Historical Perspective of Occupancy and ADR