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Exploring Competitive Measures of Hotels

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Sydney Garcia

on 26 July 2013

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Transcript of Exploring Competitive Measures of Hotels

Objectives
Market Penetration Index
Competitive Bandwidth Analysis
GOPPAR
Capturing loyal guests
Market Penetration Index
Competitive Bandwidth Analysis
GOPPAR=
Value of Capturing Loyal Guests
The purpose:
Hotels cannot use just one competitive measure in order to compare themselves with other hotels. It is the job of the sales team to continually measure the hotel's success by using a variety of competitive measures. The purpose today is to explore these different measures and understand what each of them mean.
Understand & Analyze...
helps understand daily performance
shows complete picture of occupancy, ADR, and REVPAR performance
displays the property's daily performance against the full range highs and lows of the competitive set
What does Competitive Bandwidth Analysis do?
gross operating profit per available room
A Glimpse of GOPPAR
A measure that looks beyond the top line and sees how the bottom line is effected by decisions made
Gives a valuable look at how the property is truly performing
A look at what you are making, how you are driving it, and how it affects the outcomes of the property
A Deeper Look
at GOPPAR

Reflects the profitability, management's efficiency, and underlying value of the hotel's property as a whole. (Investors are able to evaluate hotel performance not on rooms revenue, but on total revenues and operating efficiency on a per unit basis)


Does not indicate the revenue mix of a hotel property and does not allow accurate evaluation of the rooms revenue department.


Provides a clear indication of the overall performance or cash flow potentials of a hotel property.

GOPPAR Formula:
Gross Operating Profit
Available Rooms

In this example:
3,738,000
73,000

=$51.21/available room
Take Aways from GOPPAR:
As far as RevPar is concerned, it indicates the performance of a hotel in terms of rooms inventory management and provides some general market trends.
Provides no cost indication of a hotel property and how much money it could be making.
GOPPAR provides a deeper indication of a hotel's profitability by taking into consideration management control & efficiency.
An overall performance measure, especially when comparing the financial performance of other hotels with different sizes or in different markets.

Exploring the Competitive
Measures of Hotels

A presentation by:

Sydney Garcia
Grace Hall
Kaitlyn Hilton
Kavin Martin
KEY POINTS:
Questions to ask yourself...
What in the world is market
penetration?
How are hotels using competitive
bandwidth analysis to compare themselves
with other hotels?
How is GOPPAR different than RevPar?
Why is it important to know what your competition is doing?
How can you (the sales team) help your hotel drive to be the most competitive hotel and be the hotel of choice?
The Loyalty Traveler
Even though owners and investors are primarily concerned with the performance of the hotel in relation to the macro market standards, there still must be focus on the interactions of occupancy, average daily rate, and RevPar. These interactions must be compared to the competition each night.
Bandwidth Analysis allows management to have a better understanding of the market and gauge the timing of a particular pricing strategy, group booking, and market positioning by comparing performance to individual competitors.
Enables the operator to quantify what the true potential revenue gain (or loss) that a hotel can realistically achieve by understanding the market performance within which they compete.
Take Aways from
Competitive Bandwidth Analysis
Why are travelers loyal to a certain hotel?
All hotels offer something similar.
Location is often key and price, yes, matters for most.
But what is something that hotels can do to be different from the rest and how can they stand out and stand up to their competition without spending any additional money?


What can we, the hotel, do to keep these guests coming back trip after trip? How can we make them remember us?
It's all about:

Relationship Management and guest services because the traveler always remembers
how you, the hotel team,
made them feel!

The best way to get business is to maintain the the business you already have and build relationship with that business!
There's a guest at your hotel who is staying at your hotel for the first time.
We call this new guest a stranger.
They don't know anything about our hotel. They don't know anything about the area. They are lost and need help! Forget stranger danger and talk to them. Talk their ear off! Do something to catch their attention. Make them something. Remember their name. Do whatever you can to make them feel welcome... make them feel at home.
Now that this guest is a little more comfortable and gets the feeling like they are important.
This guest now is an acquaintance to the hotel and all of the staff.
Now the challenge becomes what can we, the staff, do to make our guest feel so welcome and so special that it would only be silly not to come back to the hotel that knows them by name and would take a bullet for them just because of a one time stay at their hotel?
Weeks later, our acquaintance is back in town and guess what? Our hotel is the hotel of choice.
This guest is now a friend to the hotel and will continue being a friend of the hotel for many more stays.
Our friend has found a home away from home. Perhaps he's working 20 minutes away and there are hundreds of hotels between ours and where he's working but he picked us because he feels comfortable here. He enjoys talking to Sarah at the front desk and always stops by the bistro for breakfast for his usual coffee and BLT Sandwich. The hotel team did everything to make this guest a priority and wait until what happens next..
After a few stays and the same consistent service is given to our great friend! We find out that he told his business about us and they are so impressed with his experience that everyone he's told wants to stay here when they come into town!
We did it! We made a lifelong friend with not only one person, but with a company! Partners for life!
When our hotel team strives to make the difference in one person's day, look what happens! What if our team did this for every guest? It makes all the difference to smile, be friendly, and build a relationship with these guests! Who cares if they are only staying with us for one night, it's that one night that we have to let them realize this is the best hotel on planet Earth!
Take Aways from the Value of Capturing Loyal Guests
It's all about the relationship management cycle!
stranger
acquaintance
friend
partner
The key in the value of capturing loyal guests is developing your associates and making them aware that, they themselves, are valuable and can create even more value by grabbing the attention of every individual that walks through the door!
There are many competitive measures, but this measure is, by far, the measure that we can control the most! If we hire the hungry, train to be the best, and treat every guest as if they were family, the value in capturing these loyal guests becomes second nature and a stay at our hotel feels
invaluable.
Words of sadness?
Words of confusion?
Words worse than
death?
RIGHT THERE!
LET'S GO OVER THIS TOGETHER!
LET'S START WITH SOME BASIC
DEFINITIONS:
Market Share- the number of rooms in the hotel as a percentage of rooms in the hotel's competitive market.
We have 200 rooms in our hotel. Say we compete with 4 other hotels within our area with the same number of rooms. This means that the total rooms in our market set is 1,000 rooms!
Figuring out our market share, just divide 200/100 and our Market Share is 20%.
Market Penetration- the percentage of demand for rooms actually accruing to our hotel. This is calculated as the ratio between the total rooms occupied in our hotel against the total rooms occupied collectively in our hotel's market set.
Receiving the research of the market occupancy percentage, we find this percentage to be 80% (given).
We have our market set of 1,000 rooms.
market occupancy of 80%
We are calculating our MPI for the whole year, so 365 days.
Total rooms occupied in the market set for the year, 255,500 (given number)
Remembering that our market share is 20%, our goal of rooms occupied is 51,000. (255,500 x .20)
However, our hotel's occupancy for the year is 60%. This converts to 43,800 rooms occupied.
To calculate market penetration, divide actual number of rooms occupied (43,800) by the goal of 51,000.
The Market Penetration is 85%
With Market Penetration, we want
to be equal or better than our competitors. MPI must be at least 100%, and to be the leader in the market, we must be well over 100%!
CALCULATING MARKET PENETRATION INDEX (MPI)
However, as a sales team,
we have to realize that being under 100%
does not mean that our hotel is failing!

This is just one measure we can use to compare ourselves to our competitors. We need to take this measure into account, but there are also other measures to take notice of in order to see how our hotel is doing as a whole.
FOR EXAMPLE:
MPI ONLY CALCULATES THE REVENUE ANALYTICS. (OCCUPANCY PERCENTAGE, ADR, AND REVPAR). IT DOES NOT FACTOR IN ANY EXPENSES OF EVENTUAL PROFIT.
SO, WE HAVE AN MPI OF 85% AND THE HOTEL DOWN THE STREET HAS AN MPI OF 120%. JUST LOOKING AT MPI, IT LOOKS AS IF THE OTHER HOTEL IS DOING BETTER THAN US.
HOWEVER, EVEN THOUGH THEY ARE LEADING THE MARKET, THEY COULD HAVE A PROFIT MARGIN OF 26% AND WE HAVE A PROFIT MARGIN OF 50%.
THIS MEANS THAT WE ARE ACTUALLY SPENDING MORE EFFICIENTLY AND MAKING MORE MONEY.
TAKE AWAYS FROM MARKET PENETRATION
Market Penetration is not as scary as it may sound!
A good measure to see how your hotel is doing in the market compared to others.
But, it's not the only measure!
Looking at this measure can tell you a lot, but looking at the following measures can you give you an even better understanding of your hotel's success.
If we take the time to understand these measures, we will have a better idea as to how our hotel is doing everyday with the competitive bandwidth analysis, in the market with MPI, and as far as expenses are concerned with GOPPAR. We also learned that if we motivate & encourage our employees, they will find value in capturing those loyal guests, allowing us to compete with the best!!
Research provided by:
"How to use the Bandwidth report"
www.str.com/tutorials/TrainingGuides
"Your hotel might be leaving millions on the table"
www.hotelnewsnow.com
"What is Your Hotel's Market Share and Market Penetration"
www.hotel-online.com/Trends/IHC/MarketPenetration.html
"GOPPAR, a Derivative of RevPar!"
www.hotel-online.com/News/PR2003_1st/Mar03_Goppar.html
"GOPPAR- Best Measurement of Success"
hotelexecutive.com
Final Project
for
HRAD 3543
Full transcript