1. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 SPANISH AND EUROPEAN URBAN HOTEL STRATEGIES AGAINST LOW COST OPTIONS Evolution 2005-2006 Authors: Dr. Mar Vila, Professor, Department of Financial Management and Control, and Director, Centre for Tourism Management, ESADE Dr. Josep-Francesc Valls, Professor, Department of Marketing Management, ESADE, and Director, International Tourism and Recreation Symposium Research Assistant: Marta Molist

2. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Sample  Quantitative research: open-ended survey Sample: 847 urban hotels associated with Keytel Response rate: 11% Error: 9,6% 2 STARS 3 STARS 4 STARS 5 STARS Less than 50 Between 50 and 99 Between 100 and 199 200 or more

3. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Will prices have to be lowered in the future? Yes: 16% No: 44% DK/NA: 40% Source: ESADE-Keytel 2005  In 2005: “The future is somewhere between uncertain and not very optimistic: price reductions are expected (16%: 21% Spain, 11% Rest of Europe)” Spain Europe

4. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Did average prices increase more than inflation between 2000-2004? Source: ESADE-Keytel 2005

5. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Have average prices increased more than inflation from 2001-2005? Source: ESADE-Keytel 2006

6. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Price Variation 2001-2005 Nominal Values Source: ESADE-Keytel 2006

7. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Source: ESADE-Keytel 2006 Have average prices increased more than inflation from 2001-2005? Categories Yes No DK/NA 3 STARS4 STARS5 STARS

8. © CEDIT. Mar Vila, Josep Francesc Valls, 2006  The pessimistic forecasts and doubt registered in 2005 are confirmed with respect to real average price evolution:  In 2006, only present among 25% of the sample  Trend slightly improving, especially in the rest of Europe. Real average price has grown in the last 5-year period: 2005 2006 Total23%25% Europe 20%31% Spain25%21%

9. © CEDIT. Mar Vila, Josep Francesc Valls, 2006  In nominal values,  In Spain, average prices have increased in 40% of cases, with an increase of up to 20% in 32% of cases  In Europe, they have increased for almost 70% of the sample, with an increase of up to 20% in 58% of cases.  By category, 5-star hotels are doing best: real average prices have increased for 35%

10. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 RevPAR Variation between 2001-2005 Source: ESADE-Keytel 2006 Decreased: 38% Same: 10% Increased: 52%

11. © CEDIT. Mar Vila, Josep Francesc Valls, 2006  RevPAR evolution in Spain is similar to that in the previous period among Spanish hotels Source: ESADE-Keytel 2006 Fuente: ESADE-Magma, 2005

12. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Source: ESADE-MAGMA  The previous year’s expectations have been exceeded.

13. © CEDIT. Mar Vila, Josep Francesc Valls, 2006  Hotel occupancy rates managed to improve over real average price evolution, although less in Spain: Source: ESADE-Keytel 2006

14. © CEDIT. Mar Vila, Josep Francesc Valls, 2006  RevPAR decreased for 38% of the sample and increased for 52%.  In Spain, similar levels were maintained compared to the previous year and exceeded growth forecasts, from 16% to 40%.  In general, the occupancy rate compensated average price evolution, though less in Spain.

15. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 GOP Variation in 2001-2005 Source: ESADE-Keytel 2005-06 Decreased: 25% Same: 11,84% Increased: 63,16% Decreased: 17% Same: 38% Increased: 45% Improvement with respect to B.N.E. evolution 2000-2004

16. © CEDIT. Mar Vila, Josep Francesc Valls, 2006  GOP for Spanish hotels exceeds the previous year’s forecast

17. © CEDIT. Mar Vila, Josep Francesc Valls, 2006  Slight improvement in exploitation cost management, especially among Spanish hotels in the sample

18. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Source: ESADE-Keytel 2006 RevPAR and GOP variation in 2001-2005 Categories THREE STARS Decreased Same Increased FOUR STARS FIVE STARS

19. © CEDIT. Mar Vila, Josep Francesc Valls, 2006  GOP decreased for a quarter of the sample and increased for 63%  In Spain, GOP increased for 56% of the sample, exceeding expectations.  It evolved better than the RevPAR, as a result of cost management.  Five-star hotels did best: RevPAR increased by 75% and GOP by 63%  Four-star hotels did worst: RevPAR decreased by 54% and GOP by 52%.

20. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Source: ESADE-Keytel, 2005-06 Will prices have to be lowered in the future?  Future expectations improve. Doubt is confirmed as positive.  Positions between Spain and the rest of Europe nearing each other; in 2005, the situation was more negative for Spanish hotels.

21. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Can RevPAR be maintained in the future? Source: ESADE-Keytel 2006  For 18% of the sample, expectations are that it will drop. Greater pessimism in Spain.

22. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Can GOP be maintained in the future? Source: ESADE-Keytel 2006  More favourable perspective for GOP. Expected decrease in 8% of cases. Not expected in the rest of European cities

23. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Source: ESADE-Keytel 2006 Future RevPAR and GOP Evolution

24. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Source: ESADE-Keytel 2006 Future RevPAR and GOP Evolution Categories

25. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Price Setting Strategies Source: ESADE-Keytel 2006

26. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Price Setting Strategies Source: ESADE-Keytel 2006 2005

27. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Which characteristics to clients value most? Source: ESADE-Keytel 2005

28. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Necessary improvements to increase rates Source: ESADE-Keytel 2006

29. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Current importance of the various commercialisation channels Source: ESADE-Keytel 2005-06 SPAIN EUROPE

30. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 Future importance of the various commercialisation channels SPAIN EUROPE Source: ESADE-Keytel 2005 Own web Third party webpages Spontaneous Direct sales Representative National travel agents GDS Reservation centres International travel agents Tour operators Others Direct sales Own webpage Third party webpages Representative Tour operators National travel agents GDS International travel agents Reservation centres Spontaneous Others

31. © CEDIT. Mar Vila, Josep Francesc Valls, 2006 In summary:  In the last five years, real average prices have only increased in 25% of cases, 21% in Spain, a slight improvement over the previous year. Price restructuring has its consequences.  Occupancy succeeds in improving real average prices, though less in Spain. RevPAR has decreased by 38% in general, 47% in Spain.  GOP has decreased for a quarter of the sample. In Spain, GOP increases for 56% of the sample, exceeding expectations. Its evolution exceeds RevPAR’s, the result of cost management.  By category, five-star hotels are doing best, RevPAR increasing by 75% and GOP by 63%. Four-star hotels are doing worst, RevPAR decreasing by 54% and GOP by 52%.

32. © CEDIT. Mar Vila, Josep Francesc Valls, 2006  For the future, forecasts are better than for the previous year; they are more positive in Europe than in Spain. Nevertheless, 15% of the sample expects prices to decrease, 18% a drop in RevPAR, and 8% a fall in GOP.  In price setting strategies, each specific moment determines the most adequate rate, generally being maintained at the same level.  If clients increasingly value how they are treated as well as the differentiated personality of the hotel, price increases should respond to improvements in facilities, the service offered and the hotel’s commercialisation. Or in the inverse order for the rest of Europe.  Third party webpages or the hotel’s own webpage gain ground as concluded in a previous survey. In the future, the situation will be similar for the hotels in the sample: websites and direct sales moving up. Tour operators lose ground, especially in Spain, though not as much in the rest of Europe.