demystifying corporate pricing

7/30/2019 Demystifying Corporate Pricing

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Demystifying Corporate Pricing


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Reality is merely an illusion, although a very persistent oneReality is merely an illusion, although a very persistent oneReality is merely an illusion, although a very persistent oneReality is merely an illusion, although a very persistent one


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Reality What happened Last Winter?

Even if we just manage to get the 20Cr lost revenue back, it will already

- Contracted Transient Segment contributes to 47% of total room revenue.

- The segment witnessed 11% drop in RPD i.e 116 RPD less than LY.

- The segment registered no growth in ARRs.

- The Result = 11% drop in rev, i.e approx 20Cr less than SPLY.

mean a 13% growth in revenue.


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ALL OF US need to be aligned to the same REALITY, in order

to meet our common GOAL!


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Back to the Basics How do we increase

productivity from this segment?

Work on our zero mat clients to produce.

Increase productivity from existing users.

Acquire New Customers


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Work on our zero mat clients to produce.

[Q] Why doesnt a customer use us?

Inconvenient Location

No Potential

Sales Relationship

Loyalty Programs

Pricing (Expensive)

Habit

Have potential,Rate and

Location OK.


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[Q] How can we increase productivity from existing users?

GOAL Variables

Increase Revenue

Thru ahealthy

balance

of

ARR Volume


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[Q] How can we increase productivity from existing users?

Variables

ARR Volume

Premium Room

Cat Sales.

Premium Over

Competition.

Category closures.


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Before we Begin

Approx 70% of our revenue in Winter, comes from accounts that have LNR.

Only 30% of our revenue, comes from accounts that are contracted on Lanyon.

This underlines the impact of our current pricing change since it will

impact 70% of our segment revenues.


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Our Objective!

Selling the Right Room to theRight Client at the Right Moment

on e g s r u on anneat the Right Price

(Q) What is Right Price?


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(Q) What is Right Price?

Let look at an example

Consider a 100 room Hotel

With 2 room categories EC and TWR

In a an Utopian Market,

The Hotel Should sell ALL its rooms at Rack

Rates to reach maximum revenue Potential.


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The Hotel Should sell ALL its rooms at Rack

Rates to reach maximum revenue Potential.

In this Utopian Scenario the hotel can do a

maximum ofRs.23lac everyday.


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This Utopian Scenario is highly

unlikely, because

egmen s ac segmen pays a erence pr ce.

[2] Market Reality What is the customer ready to pay for?

[3] Competition How are they pricing?

[4] Demand / Supply How does this balance pan out?

[5] Misc economic conditions, industry trends, loyalty, etc.

So


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SoLets break it down

Selling ALL the rooms, at rack rate every day in the the Winter

is NOT possible!

Hence Step 1 Make a realistic Winter

Forecast.


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Step 1 Make a realistic Winter Forecast.

Where do see growth opportunity Volume or Yields?

- While preparing a forecast, do keep sight of the Budgets.

- Also consider all other factors like

- Market conditions demand /supply balance, customer expectations.

- Forthcoming city events- Last year performance, growth opportunities vis--vis the same (If we did

poorly last winter, forecasted gorwths over LY will be higher)

- Relative performance both learning from LY and targets for TY.


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Step 2 Align segment mix to meet winter targets.

- Break the forecast into individual months, evaluate each month separately with a

special focus on November and February. Have a strategy for each month.

- What is the crew occupancy going to be in winters? At what ARR? This is pre

booked, incorporate the impact of the same in your forecast.

- What does the conference calendar look like? What can we derive from past pick-uphistory?

- Forecast realistic volume and yield to evaluate growths in each segment. (Each

segment will have its own strategy)

- Have a plan to meet expected hotel RevPAR incase any one segment needs to makeup for the loss in another. (Ex- loss of crew / low conferences viz-a-vis SPLY)


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Step 3 Narrow down to Corporate Segment

Corporate Segment contributes to more than 50% ofoverall room revenue.

A pricing error made now, will be difficult to correct

until end of this pricing season.

Hence a pricing error now will impact 50% of our

overall room revenue, in the coming winter.


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With our targets in place, we must look at the

Past market trends historic data

Business in pipeline

Relative performance (m-o-m SPLY)

targeted relative positioning

current market conditions

new supply expected

past booking history

Inventory mixaverage LOS city events

booking window

Sounds complex, Doesnt it?


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Now.. lets attempt to

emyst y orporatePricing


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Step 3.1 Understand Past Trends

Pull out Data from STR for last 3-4 winters for Compset and Complete Market (Luxury

and Upper Upscale Hotels)..


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Step 3.1 Understand Past Market Trends

Pull out Data from STR for last 3-4 winters for Compset and Complete Market (Luxury

and Upper Upscale Hotels).

Simple xls

GraphsBase Data

Inferences

What are the inferences we can draw, Lets look at an example


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What are the inferences we can draw, Lets look at an example

- The ARR over last 3 winters for the compset is between 10-14 thousand.

- ARRs peak in November and February significantly. (how does this compare to our forecast)- Average occupancy for winters is approx. between 75 80 percent.

- Both our Occ% and ARR has always been slightly lower than compset /market throughout

winters. where is the opportunity?

- Do take into account addition of any new supply, and its impact on the market numbers.

- Do include Market (Luxuruy and Upperscale Hotels) data to analyse trend vis-a-vis market.- How does this reading compare with our Forecasted Targets?


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Step 3.2 Understand Past Hotel Perf. Trends

Look at each months VI report for Last Winter

- Spot opportunities in volume and yield growth in each month vis--vis competition.

- Take cognizance of those months where we CANNOT push Occ% or ARR any further.

- See how our approach in every month (Occ% and ARR), helped us / did not help us in

relative positing. Spot opportunities at a month level.- Each months strategy needs to be clearly defined.

- Focus specially on November and February - These two months drive maximum

revenues (Approx more than 41% of H2 revenues come from there 2 months)

- What do you expect in the coming Nov and Feb how does that compare with theforecast?


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Look at each months Segment reports for Last Winter

- Corelate monthly segment performance with the relative performance for that

month to help appreciate which segment needs to be pushed at a monthly level.

- Spot volume and yield increasing oppurtunites at a segment level Vs. SPLY.

- Which segments do we anticipate a degrowth in (Crew / Conferences)? Is there an

action plan to enhance transient delivery in those months.- Spot opportunities in volume and yield growth at a monthly level.

- Take cognizance of segments where we CANNOT push Occ% or ARR any further.

Does this increase dependence on Corporate segment?

- Focus specially on November and February - These two months drive max revenues- Plan for valleys as well as city pressure dates.


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Look at each months Room Category reports for Last Winter


- Look at numbers for SPLY, to spot volume and yield increasing opportunities at a

room cat level.

- Corelate monthly room cat performance with the relative performance for thatmonth to help appreciate which segment needs to be pushed at a monthly level.

- Devise strategies to drive optimum yields.

- Take cognizance of room cats where we CANNOT push Occ% or ARR any further


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Look at each months Rate Plan Productivity


- Check if Last winter data helped in overall strategy.- Where are the gaps?

- Did our contracted rates sell? If not, why?

- Did we overprice ourselves? If yes, how do we correct it?


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Step 4 Devise strategy to meet overall Corporate

Segment Forecast.

Corporate Segment contributes to approx 50% of overall room revenue

in winter.

Increasing CVGR Rates alone will NOT lead to higher ARRs.

The highest room nights generating contracted rate, does not mean it

is the most popular rate point. (Could be because only 1 or 2 customers

have produced big numbers at this rate)

Dropping rates alone, will NOT lead to higher volumes


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Our Relaionship customers, buy the following

rates

CV1 CV2Customized

ETVP

Generic


Segment Forecast.

CV3

,

CS2)

ETVPCust.

[Q] Which range of rates give us

the most business ???


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Segment Forecast.

Use Starwiz to generate LY Winter data (from the Dashboard Report).

Use the data to tabulate productivity in this format.


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Segment Forecast.

Use this Table to- Identify highest selling price points,

and then further drilldown into

understanding these customers

w o are t ey en o t ey

produce? What are their contractedrates? Until when have rates been

contracted with them? Are the

seasonal or static for the year? What

do we expect from these customersin the coming winter.


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Identify the key

customers, basis

.

And then


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Ok we have identified and

analysed our HIGH IMPACTCustomers What Next?

What about the other Customers?

How do we optimize our CV Band

Productivity???

What different can we do?

ll


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Segment Forecast.

New Approach - 10 CV BANDS

1Post Analysis of historic data and expected market conditions identify the

lowest Corporate Rate applicable for the coming Winter.

Divide the difference between the Highest value and the lowest value by 9,

round it off to the higher multiple of 100 to arrive at intervals for the 10 CV

bands.

2

3

4

Define the HIGHEST REALISTIC / SELLABLE CV Rate that you would like to go

with for the coming Winter. (Look at Nov and Feb separately)

Arrive at the Range of Contracted Rates (Ex. If the lowest rate is Rs.6000 and

the highest sellable rate is Rs.10,000 ; the range is Rs.6000 to Rs.10,000)

S 4 D i ll C


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Segment Forecast.

In the previous example

Lowest Rate identified = Rs.6000

= .

Therefore difference = Rs.4000

Intervals for 10 CV bands = 4000 / 9 = Rs.444

Round offRs.444 to nearest multiple of50 = Rs. 450

Hence 10 CV Bands will read as follows

Hotels will have the freedom to round off / lower / increase the intervals as required.


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Lets take some questions now

[ ] f


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Lanyon rates which are alreadycontracted, and DO NOT fall

[Q.1] What about Lanyon rates that do not fit the CV Band

value?

Slabs (due to rate value orseasonality or rate inclusions),

will remain as customized rate

plans.


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Hotels will have the ability to add breakfast

and/or internet to any of the fixed slabs &customize it for any customer, such rate

plans will be loaded as CV1B (CV1 with b/f)

or CV1BI (CV1 with b/f & internet)

[Q.2] How we handle Value Add ons (Bf / Internet) ?

The differential for these value ad on to be

as per the Hotels brand.

The hotel should than contract with all

customers with any one of the 30 slabsonly. (10 X 3)


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It is recommended that the adjacent CV

table, be created with rates applicable untilDecember 2013.

This means we will currently load Seasonal

[Q.3] Until when do we intend to prepare a rate guideline?

Rates against these BANDS, applicable

until December 2013.

This will enable us contract with our

customers (Local and Lanyon) until Dec

2013.


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[Q.4] How will we structure the Rate Code reporting on

Opera?The reporting to market segments would be as follows:

CV1 -2 rate plans, (even the B/f & internet plans) to the CV1 market code

Similarly

This segmented structurewill enable us identify exactly what price point sells

the most for the hotel & take appropriate action accordingly.

- o e mar e co e

CV5 - 6 to the CV3 market code CV7 - 8 to the CS1 market code (also including any customized plans that fall

under this price range)

CV9 -10 to the CS2 market code (also including any customized plans that fall

under this price range)


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Something NEW

Next Slide


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NO more manual conversions from F1 to CV1 !!

[Q.5] How do we approach customers on BAR?

1 Introduce a new market code called CBAR

A CBAR rate plan will be attached to ALL customers. (both contracted on a

This will enable clean market segment data without manual intervention.

3

5

BAR, as well as customer with a locked rate plan at the hotel)

Hence for example if IBM has a locked plan attached (CV or customized), it will

also be attached with the CBAR Rate plan hence 2 rate plans. This (CBAR)

rate plan will be tagged back to market code CBAR for reporting purposes.

4Any customer now on CBAR will automatically get tagged under market code

CBAR.

[Q 5] H d h t BAR?


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IBM Booker calls Reservation

Res Agent will see 2 rates on the screen attached to IBM Profile

[Q.5] How do we approach customers on BAR?

Lets look at an example

IBM Contracted Rate

(Say Rs.7000)

CBAR = BAR of

the day.

The Res. Agent will have the freedom to sell any rate i.e whichever is lower

amongst the two.

When the CBAR is sold, the PMS will

automatically pick up CBAR market

code.

When the IBM contracted rate is

sold, the PMS will automatically pick

up the appropriate contracted market

code.

[Q 6] C d thi diff t ith K A t ?


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[Q.6] Can we do something different with Key Accounts?

Learning from Starwoods model of SP and GP accounts, where they get a % discount

off the bar, we recommend the following

1

Introduce one more new market code called CBAR5

To enable us (current only regional sales offices) to offer Key Accounts a 5% of

the BAR, at hotels wherein the customers volume does not qualify a CV rate.This is extended as a benefit on the basis of large volumes at other hotel(s).

RMs to ensure that customers attached with CBAR5 plan ARE NOT attached to

any other rate plan.

3

5

CBAR5 will be a floating rate plan at 5% off the prevailing BAR rate.

4Any customer now on CBAR5 automatically get tagged under market code

CBAR5. (Both CBAR5 and CBAR will be grouped under a new market group i.eCBAR)

[Q 5] How do we price different categories?


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The following inclusions in the service design for respective categories need to be

considered: Cost of laundry

Cost of luxury hours

Cost of breakfast

Along with the best possible realistic pricing for this winter to enhance yields it isalso important to have a optimum category differential.

[Q.5] How do we price different categories?

Cost of meeting room if used.

Cost of in room amenities & special services

Cost of internet

It is recommended that the differential to be kept at Rs 1500 - 2000

Note: if a minimum category differential (which covers such costs) is not maintained

than selling Towers may lead to lesser contribution to the bottom line than selling anEC


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demystifying corporate pricing

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