Pricing Psychology in Challenging Times
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Get a midyear strategy boost in this uncertain environment.We’ll address the issues through the lens of what they mean in periods of low and/or no demand, demand uncertainty, and recovery:• Navigating the Economic & Geopolitical Risks and
Opportunities Ahead• Optimizing the Ecosystem for Multi-Property RMs• Revenue Management Everywhere: Cross-industry RM
Learnings for Hoteliers• Driving Incremental Revenue from Premium Rooms• The Magic is in the Mix: A practical discussion on leveraging
transient demand, group forecasting, and group price optimization in order to maximize overall profitability
• Telling the Story Behind the Numbers• Manufacturing Consent: How to Get Your Owner to Say Yes• Leading and Developing RM Teams for Maximum Performance• Demystifying Artificial Intelligence: Readying the Industry for the
Rise of the Machine• And more!
Thank you to our ROC Preferred and Platinum Partners:
Source: 2020 STR, LLC / STR Global, Ltd. trading as "STR". © CoStar Realty Information, Inc. Any reprint, use or republication of all or a part of this presentation without the prior written approval of STR is strictly prohibited. Any such reproduction shall specifically credit STR as the source. This presentation is based on data collected by STR. The information in the presentation should not be construed as investment, tax, accounting or legal advice.
Pricing Psychology in Challenging Times
Carter Wilson | SVP, Consulting & Analytics
© 2020 STR. @CoStar Realty Information, Inc.
How Do Hotels Behave Under
Extreme Duress?
© 2020 STR. @CoStar Realty Information, Inc.
What We Know
U.S. ADR plummeted in 2009
Demand declines preceded ADR declines
No major markets were immune
© 2020 STR. @CoStar Realty Information, Inc.
What We’ve Heard
One hotel in the comp set lowered rates first…
…forcing the others in the comp set to follow
© 2020 STR. @CoStar Realty Information, Inc.
Evidence of “rogue” hotels
(initial rate‐slashing by a single property in a comp set)
IF TRUE, THEN:
Did other hotels follow?
What was the timing gap?
Did any hotels NOT drop rate?
What We Are Solving For
© 2020 STR. @CoStar Realty Information, Inc.
Disclaimer:There Are No Winners Here
© 2020 STR. @CoStar Realty Information, Inc.
Chicago, IL Market, All Hotels
Daily Data Analysis, 2008 ‐ 2010
Threshold ADR Drop of 10% = “Slashed”
Downturn Began September 2008
Methodology
© 2020 STR. @CoStar Realty Information, Inc.
What We Found
© 2020 STR. @CoStar Realty Information, Inc.
‐20%
‐18%
‐16%
‐14%
‐12%
‐10%
‐8%
‐6%
‐4%
‐2%
0%‐30
‐18 ‐6 6 18 30 42 54 66 78 90 102
114
126
138
150
162
174
186
198
210
222
234
246
258
270
282
294
306
318
330
ADR % Declin
e
Days After Rogue Dropped 10%
Sample Chicago Comp Set
1 2 3 4
Source: STR
© 2020 STR. @CoStar Realty Information, Inc.
26 days
57 days
© 2020 STR. @CoStar Realty Information, Inc.
‐25%
‐20%
‐15%
‐10%
‐5%
0%
5%‐30
‐18 ‐6 6 18 30 42 54 66 78 90 102
114
126
138
150
162
174
186
198
210
222
234
246
258
270
282
294
306
318
330
ADR % Declin
e
Days After Rogue Dropped 10%
All Chicago Comp Sets
1 2 3 4
Rogue hotels and second movers suffered ~20% Total ADR Drop
Source: STR
© 2020 STR. @CoStar Realty Information, Inc.
27 days
130 days
Source: STR
© 2020 STR. @CoStar Realty Information, Inc.
3rd and 4th Hotels Were Willing to Sustain Double the Occupancy Loss
‐7.2% ‐7.8%‐12.1% ‐15.0%
‐21.1% ‐21.5%‐17.9%
‐15.8%
1st 2nd 3rd 4th
Occ % Change At Peak RevPAR Drop ADR % Change at Peak RevPAR Drop
Source: STR
© 2020 STR. @CoStar Realty Information, Inc.
By Class
© 2020 STR. @CoStar Realty Information, Inc.
‐25%
‐20%
‐15%
‐10%
‐5%
0%
5%‐30
‐18 ‐6 6 18 30 42 54 66 78 90 102
114
126
138
150
162
174
186
198
210
222
234
246
258
270
282
294
306
318
330
ADR % Declin
e
Days After Rogue Dropped 10%
Economy & Midscale Comp Sets
1 2 3 4
93 days
224 days
Source: STR
© 2020 STR. @CoStar Realty Information, Inc.
‐20%
‐15%
‐10%
‐5%
0%
5%‐30
‐18 ‐6 6 18 30 42 54 66 78 90 102
114
126
138
150
162
174
186
198
210
222
234
246
258
270
282
294
306
318
330
ADR % Declin
e
Days After Rogue Dropped 10%
Upper Midscale & Upscale Comp Sets
1 2 3 4
43 days
150 days
Source: STR
© 2020 STR. @CoStar Realty Information, Inc.
‐25%
‐20%
‐15%
‐10%
‐5%
0%‐30
‐18 ‐6 6 18 30 42 54 66 78 90 102
114
126
138
150
162
174
186
198
210
222
234
246
258
270
282
294
306
318
330
ADR % Declin
e
Days After Rogue Dropped 10%
Upper Upscale & Luxury Comp Sets
1 2 3 4
24 days
100 days
Source: STR
© 2020 STR. @CoStar Realty Information, Inc.
The Higher the Chain Scale, the Shorter the Timing Gap
© 2020 STR. @CoStar Realty Information, Inc.
The Closer to Downtown, The Shorter the Timing Gap
© 2020 STR. @CoStar Realty Information, Inc.
Did Any Hotels NOT Drop ADR?
© 2020 STR. @CoStar Realty Information, Inc.
Hotels That Didn’t Slash ADR Lost More Demand…
‐20%
‐15%
‐10%
‐5%
0%
5%
10%
15%
Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10
Hotels With ADR Drop >10%
Hotels With ADR Drop <10%
Dem
and % Cha
nge
Source: STR
© 2020 STR. @CoStar Realty Information, Inc.
…But Experienced Less Extreme RevPAR Declines
‐30%
‐25%
‐20%
‐15%
‐10%
‐5%
0%
5%
10%
Sep 08 Dec 08 Mar 09 Jun 09 Sep 09 Dec 09 Mar 10 Jun 10 Sep 10 Dec 10
Hotels With ADR Drop >10%
Hotels With ADR Drop <10%
RevPAR
% Cha
nge
Source: STR
© 2020 STR. @CoStar Realty Information, Inc.
Chicago Market Summary• It took an average 239 days of demand decline for first hotel to
lose 10% ADR.• The second property to drop ADR lowered about a month later,
and the final property about four months later.• Properties with the lowest ADR heading into the downturn
tended to cut ADR first.• Upper Upscale/Luxury sets dropped ADR faster than other chain
scales.
© 2020 STR. @CoStar Realty Information, Inc.
Downturn Profitability Analysis
© 2020 STR. @CoStar Realty Information, Inc.
Results
• Nearly every hotel lost significant RevPAR in 2009• Full‐service hotels that sacrificed occupancy and held
rate had profit declines of 24%• Full‐service hotels that sacrificed rate in favor of
occupancy had profit declines of 31%• Comparable results for limited‐service hotels
Source: STR. 2020 © CoStar Realty Information, Inc.
-3.9%
-9.9%-10%
-8%
-6%
-4%
-2%
0%
0 6 12 18 24 30 36 42 48 54
09/01 ‐ 09/04 (9/11) 09/08 ‐ 05/13 (Lehman Bros)
ADR Rebound After External Shock Takes Time Total U.S., 12MMA , Monthly ADR % Change, Indexed to Event
© 2020 STR. @CoStar Realty Information, Inc.
Overall Key Findings• Chicago overall patterns consistent with other markets we
studied (Upper Up/Lux)• Most hotels are unable to hold rate steady when competitors
drop. • Properties sacrificing rate for occupancy in 2009 had more severe
profit declines• There are no winners – all hotels had significant losses. Operators
need to analyze impact of both ADR and occupancy on their properties. Create stress test to prepare for next downtown.
Source: 2020 STR, LLC / STR Global, Ltd. trading as "STR". © CoStar Realty Information, Inc. Any reprint, use or republication of all or a part of this presentation without the prior written approval of STR is strictly prohibited. Any such reproduction shall specifically credit STR as the source. This presentation is based on data collected by STR. The information in the presentation should not be construed as investment, tax, accounting or legal advice.
QuestionsCarter WilsonSVP, Consulting & Analytics
ss
Get a midyear strategy boost in this uncertain environment.We’ll address the issues through the lens of what they mean in periods of low and/or no demand, demand uncertainty, and recovery:• Navigating the Economic & Geopolitical Risks and
Opportunities Ahead• Optimizing the Ecosystem for Multi-Property RMs• Revenue Management Everywhere: Cross-industry RM
Learnings for Hoteliers• Driving Incremental Revenue from Premium Rooms• The Magic is in the Mix: A practical discussion on leveraging
transient demand, group forecasting, and group price optimization in order to maximize overall profitability
• Telling the Story Behind the Numbers• Manufacturing Consent: How to Get Your Owner to Say Yes• Leading and Developing RM Teams for Maximum Performance• Demystifying Artificial Intelligence: Readying the Industry for the
Rise of the Machine• And more!
Thank you to our ROC Preferred and Platinum Partners: