Current Market Overview - Sustaining
Occupancy Growth
As we progress deeper into this recovery, occupancy growth
continues to build. Committed business on the books for the current quarter
through the second quarter of 2011 is ahead of this time last year by 5.4%,
improving since last month, when it was ahead by 4.7%. The favorable occupancy
outlook is led by the group segment, which is currently 6.7% ahead of last
year. New group sales over the past month were very strong, up 35% over the
comparable period last year. Growth in the transient segment has leveled off,
with transient room nights ahead of last year by 3.8% for the past two months.
The business segment, consisting of weekday guests booking negotiated or retail
rates, remains very strong, up 10.3%. Leisure demand, on the other hand, is
down 2.7%. The leisure segment is a concern in an otherwise positive occupancy
outlook.
ADR growth has been painfully slow. Overall ADR, based on
reservations on the books for the current and three future quarters, is only
0.9% ahead of last year, basically unchanged from last month. Group ADR is and
will continue to be a drag on overall ADR, as low rates negotiated during the
downturn work their way through the cycle. Group ADR is down 3.9%. Transient
ADR is growing, now up by 3.1%, but the growth is far slower than desired,
given the depths to which ADR fell. Demand growth drives ADR growth. If the
current level of occupancy growth is sustained, we look for pricing conditions
to strengthen, leading to a more rapid recovery in ADR.
Loyalty = Fidelity, Or Not
Members of hotel loyalty programs are an extremely important
customer segment to most hotels. Rubicon's demand data indicates that these
guests represent around 50% of transient room nights for major global chains.
Recent articles in the media have reported that hotels are more than ever
focused on the loyalty customer segment. In an effort to fill rooms this fall
and secure repeat customers, they are ramping up promotional offers targeted at
their loyal guests. The offers range from free nights to triple bonus points.
Even luxury brand Ritz-Carlton introduced a new loyalty program last week in an
effort to attract more business and leisure travelers.
Loyalty customers are an appealing segment for many reasons,
some obvious, some less so. First, they of course stay frequently. Also,
loyalty guests tend to book through a hotel company's direct channels. In the
second quarter of 2010, 75% booked through hotel company channels: 35% through
the brand.com channel, 22% through voice reservations, and 18%
direct to property. Finally, loyalty guests are clearly identifiable and
reachable with marketing messages and promotional offers.
However, an inconvenient truth is that a guest's loyalty is not
as exclusive as a hotel company would wish. Many frequent travelers have a
wallet filled with membership cards from several different loyalty programs.
Winning loyalty members is less than half of the battle. Winning more share of
loyalty stays is the true battleground.
As mentioned above, loyalty guests are the most reachable
customer segment. The challenge for hotel companies is to reach the right
customers with the right message and the right offer, at the right time, in
order to steer more loyal customers in their direction.
Performance Summary
The chart below shows the year-over-year position by market of
committed occupancy, reserved occupancy, ADR and RevPAR, based on business on
the books for the future 12 months. Committed occupancy is group blocks plus
transient reservations. Reserved occupancy, ADR and RevPAR are based only on
reservations (group pickup and transient reservations). Shades of green
indicate performance better than the market average. Shades of orange/red
indicate performance worse than the market average.
About
Rubicon
Rubicon (www.RubiconGroup.com)
offers the broadest and deepest collection of market insight in the travel
industry today. A leading provider of competitive market intelligence, market
analysis and revenue management products for the global travel industry,
Rubicon integrates competitive market information into the business planning
and revenue management practices of its customers. Its premier solution,
MarketVision, offers a comprehensive suite of services that addresses market
positioning in terms of price, demand and channel. Rubicon's publishing arm,
IndustryIntel™, provides insights from the world's largest repository of future
demand and cross-channel pricing data.
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