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Is the Price Right? Demand & Competitive Rates Presented by: Tammy Rajaniemi, Manager HMG Extended Stay Revenue Management Paul Malje, Revenue Manager.

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Presentation on theme: "Is the Price Right? Demand & Competitive Rates Presented by: Tammy Rajaniemi, Manager HMG Extended Stay Revenue Management Paul Malje, Revenue Manager."— Presentation transcript:

1 Is the Price Right? Demand & Competitive Rates Presented by: Tammy Rajaniemi, Manager HMG Extended Stay Revenue Management Paul Malje, Revenue Manager – Candlewood Suites – Value Partners

2 First Things First… Clear your mind!

3 See & Say RedYellowBlue

4 Blue Red Yellow Black Red Yellow Purple Red Black Blue Green Orange GreenPurple OrangeGreen BlueBlack Green Orange YellowPurple RedBlue

5 Overview What should the Rate be? Forecasting Factors to Consider Demand Competitor Rates

6 Revenue Management Products Revenue Management Distribution Channel Direct Web GDS Customers/ Segments Hotel Rooms

7 Factors Rate Decisions are Governed by Two Factors CONSUMER DEMAND COMPETITIVE RATES

8 Consumer Demand Forecasting Demand Implicit Explicit CONSUMER DEMAND

9 Consumer Demand Forecasting Example: Forecast: 50% Occupancy Action: Open Allocations on All Channels Response: More Booking Result: 62% Occupancy Was the Forecast Wrong? CONSUMER DEMAND

10 Consumer Demand Forecasting Mistakes Goal Setting vs. Forecasting Define a Good Forecast The Gamblers Fallacy Focus on Recent Trends Not Taking Action CONSUMER DEMAND

11 Consumer Demand When Demand is High CONSUMER DEMAND COMPETITIVE RATES

12 Consumer Demand When Demand is Low COMPETITIVE RATES CONSUMER DEMAND

13 Consumer Demand Usually Demand is In-between CONSUMER DEMAND COMPETITIVE RATES

14 Impact of Demand Every days demand is different; often requiring different rates Demand varies by booking channel; requiring distribution strategies DIRECTION Demand dictates the DIRECTION that rates should move

15 Impact of Competitive Rates DEGREE Competitive Rates limit the DEGREE – not direction of rate changes Competitive rates may differ by channel Trends are as important as individual rates

16 Impact of Competitive Rates Dont be the Greater Fool

17 Taking Action Shop Competitive Rates Multiple Channels Average Length of Stay Call Arounds

18 Taking Action Be aware of your booking window Bookings Days Left 42 35 2821 14 70

19 Taking Action Cornell University Study "Price Discounting - Is It a Wise Strategy to Raise Revenues?" Examined demand for rooms at 480 hotels in 22 metropolitan areas in the U.S.

20 Taking Action "The prevailing wisdom is that reducing room rates entices new consumers to enter the market and buy more rooms… never Instead, existing consumers simply get more for less, and hotel revenues fall …This has never worked for the hotel industry, and it won't work in this era of proliferating hotel room discounts and Web-based travel deals, because new consumers do not enter the market in response to hotel discounting. Instead, existing consumers simply get more for less, and hotel revenues fall."

21 Good News ~ Bad News Bad News First: Your long-lost Uncle in Atlanta just passed away. The Good News: He left you his restaurant in Buckhead!

22 Café Ptomaine Celebrating its 3 rd year Located in the heart of Buckhead on Peachtree Road Casual American Fare in a Relaxed Atmosphere Serving Lunch and Dinner 7 days a week

23 Café Ptomaine The Stipulation In 3 years, the Restaurant has not made a cent in profit. You have 5 weeks to turn a profit or you will lose the Restaurant to your evil cousin Cheryl.

24 Week One You visit The Buck Stops Here Restaurant next door to the Café Ptomaine. Atmosphere is trendier Was very busy at 4pm on Wednesday The menu has a few similar items Meal was $15 more than a meal at Café Ptomaine

25 Week One A. Immediately raise all menu prices 10% B. Change prices to be the same as TBSH C. Review all restaurants in the area and determine your prime competitors D. Report that you got food poisoning to the local press A. $25 B. $50 C. $100 D. $ 0

26 Week Two You review the Reports from Week One Highest lunch sales: Tue, Wed, Thur, Fri Highest dinner sales: Wed, Fri, Sat Sunday and Monday are the two slowest days overall

27 Week Two A. Offer 25% off discount for anyone eating on Sunday or Monday B. Check sales volume at competitors before taking action C. Focus advertising on Sunday and Monday D. Close the Café on Sunday and Monday A. $ 50 B. $100 C. $ 75 D. $ 25

28 Week Three You review the Reports from Week Two and compare to Week One. There is no change in pattern – strong lunch days are the same as is the case for dinner Overall sales are up 30% week over week

29 Week Three A. Forecast the same increase for next week B. Forecast a greater increase for next week C. Monitor next weeks sales to see if increase is constant or one time D. Place a Help Wanted add for more staff ! A. $ 75 B. $50 C. $100 D. $ 0

30 Week Four You review the Reports from the first three weeks Overall sales are back to Week One level Comment Cards indicate a gap in attracting a mature crowd The 20 & 30-Somethings like to hang out at the Café

31 Week Four A. Create specific and unique menu items that will attract a wider audience B. Offer a 20% Senior Discount C. Add an Early Bird Special to the menu D. Tell the youngsters that they have to leave after an hour A. $100 B. $ 50 C. $ 50 D. $ 0

32 Week Five You review the Reports from the first four weeks Sales are only marginally higher since you took over Labor costs remain high due to low volume Your Competitors and the overall Market are very strong

33 Week Five A. Lower the menu prices in order to attract more business B. Offer a bounce back coupon to all guests C. Review position in the Market and make specific and targeted changes D. Organize a sales blitz to better communicate your unique dining experience A. $ 0 B. $ 50 C. $100 D. $ 50

34 The Results $500 - $400 $399 - $200 Under $199 Move over Emeril Maybe a job at McDonalds is right for you Give the keys to Cheryl and call Dominos

35 Thank you!


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