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Dynamic Pricing Friend, Foe or the Future? Presented by Sean McCurdy Global Director of Worldwide Sales Interstate Hotels & Resorts.

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Presentation on theme: "Dynamic Pricing Friend, Foe or the Future? Presented by Sean McCurdy Global Director of Worldwide Sales Interstate Hotels & Resorts."— Presentation transcript:

1 Dynamic Pricing Friend, Foe or the Future? Presented by Sean McCurdy Global Director of Worldwide Sales Interstate Hotels & Resorts

2 Agenda l Hotel Trivia l Dynamic Pricing l What is it? l How to evaluate it? l Is it right for you? l Amenities Travelers Prefer l What is Negotiable?

3 Hotel Trivia 1930 l The standard travel agent commission was? l A. 5% l B. $1 l C. 10% l Average Room Rate? l A. $1.34 l B. $5.60 l C. $15.80

4 Hotel Trivia 1950 JW Marriott opens his first hotel in? l A. Arlington VA l B. Atlanta GA l C. New York NY 1951 First hotel company to install televisions in all the guest rooms? l A. Wingate l B. La Quinta l C. Hilton

5 Hotel Trivia 1950 l Kemmons Wilson opens his first Holiday Inn, where? l A. Atlanta l B. Memphis l C. Irvine l He named his hotel after? l A. His first Vacation l B. A National Holiday l C. A Bing Crosby movie

6 Economic Factors Driving Dynamic Pricing l Inflation l Demand grew 4.5% vs. Supply of 1.3% l Consolidation of ownership-greater control on pricing l Dramatic increase in control over rate integrity and inventory l Aftermath of Hurricanes

7 Industry Factors Driving Dynamic Pricing Allied Members l Desire to simplify the RFP Process l Negotiate Rates based upon Demand l Major Brand Support Direct Members l Increase Hotel Compliance l Opportunity to expand preferred partnership in secondary cities l Eliminate 3 rd Party Costs

8 What is Dynamic Pricing? l Fixed % off a floating benchmark rate. n Consortia n Corporate n Best Available l Benchmark rate will float up or down based upon market conditions.

9 What should you consider? l How often do your travelers receive the negotiated rate at your preferred hotels? l Will the discount apply to other room types? l Will it cover all properties (chain-wide) or selected properties? l Will the % discounts vary by city & volume? Or will one fixed % that applies to all properties? l Will you be able to negotiate value added amenities? l What is your benchmark? Will the rate fluctuate by night for a multiple stay?

10 Key Areas of Consideration l Financial n Can your suppliers provide a data-driven model that quantifies the economic benefits. n Are all of your suppliers providing a similar pricing model, how will this affect non-dynamic preferred agreements. n How do your current negotiated rates compare to other benchmark rates? n Dynamic Pricing may add additional hotels that could not offer you a negotiated rate, resulting in incremental savings. l Measure the effectiveness on an on-going basis.

11 Key Areas of Consideration l Traveler Experience n How will you communicate the new model to your travelers? Will they understand the value of the discount? n How will travelers forecast or budget their hotel costs? n If your travelers are performing client-billable services, how will the changes be communicated to their clients? n Are you travelers required to use per diem or city caps?

12 Key Areas of Consideration l Change Management n How will the forecast and budgeting process be changed? n How will you manage cities where you have a hybrid situation? n How will online booking tools and travel agencies manage and sell rates? n How will the discounts be validated and audited? n How will pre-trip approval and post-trip expense audits need to be changed? n Will you be able to quantify the value of the new program to management?

13 Dynamic Pricing l Is it right for you?

14 What is negotiable?

15 Hotel Trivia 1960 l 1962 Curt Carslon buys shares of this Minneapolis hotel? l Typical hotel had? 120 rooms, 39 rooms, or 78 rooms. l Average occupancy? 45%, 67% or 85%. l First cable movie station offered in hotel rooms? HBO & Cinemax or Showtime & The Movie Channel.

16 Questions & Answers

17 Available Resources NBTA Hotel Committee: Rate loading white paper-glossary of industry terms. 2006 NBTA Modular Hotel RFP: includes copies of the Modules, 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

18 Historical Perspective of Occupancy and ADR

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