Kriya RevGEN Case Study – Manhattan Boutique Hotel

Kriya RevGEN Case Study
New York City Boutique Hotel

For this case study, we’re looking at a great little boutique hotel that we started working with in July of 2018. Since beginning with this hotel we’ve been able to make some big improvements in key indices mainly by optimizing market mix. Keep reading to see what sets our RM service and data apart from the rest!

Background

This boutique hotel is a fantastic 4.5 star property in Manhattan; it is smaller than it’s STR competitors and on average can charge a nice rate premium due to its excellent location, good amenities, various premium room-type offerings, and strong reputation. When we first started with the property, there was no question that demand and occupancy were high, but we noticed that there were definite opportunities, especially when it came to their business mix. In 2018 the hotel gained a strong piece of corporate business which gave them 10-12 room nights per night for the entire year which compressed the hotel and gave us some opportunities to push rates often. They did not have this piece of business in the prior year (2017)

Issues we found:

A few of the largest issues we found when taking over the hotel were: dropping rate last minute to fill rooms, relying too heavily on opaque channels to fill rooms, and weak relationships with OTA partners.

How we approached the issues:

By implementing Spider’s by Kriya RevGEN’s unconstrained demand forecast we quickly implemented a process where, on nights where we forecasted safely above supply, we would yield out our opaque business. We did have to control for the fact that the prior year’s occupancy (and therefore current year’s forecast) was heavily influenced by last year’s opaque production, so the unconstrained demand forecast needed to be substantially over supply by an amount that roughly equaled supply + last year’s opaque production.


Notice that upon taking over the property in July of 2018, we were able to immediately grow OTA retail room nights to slightly outperform our opaque production for the first time in at least 18 months. Through the end of the year we were able to keep OTA Retail room nights above opaque room night production for 5/6 months, which signals that is a sustainable trend for future high-occupancy months. The decision to take more OTA retail and less opaque business was a no brainer, especially when you look at the obvious ADR premium that the OTA Retail market segment can command (shown below). Since Jan. 2017, OTA Retail rooms have an average ADR premium of $94.23 over opaque rooms!


We also activated several CRS integrations with several OTA providers to reduce the reliance on manual extranets which created overall efficiencies for both RM and Ops teams.

Another area where we made improvements was regarding rate-evolution, or simply how we priced the hotel in the days leading up to arrival. When I examined the average rate evolution for December of 2017 (when we weren’t in charge of RM) versus December 2018 (when we were handling RM) there were stark contrasts that help illustrate how we handle RM differently than other providers.


Looking at the pricing trends in 2017 vs. 2018, you can immediately see the difference in how the prior revenue manager approached pricing vs how Kriya RevGEN handled pricing strategy. In the 30-day window leading up to arrival, the previous RM dropped rate on average $169, whereas we dropped rate about $53. Ideally, the trendlines above would have a positive slope, but the 2018 is an obvious improvement in the 30-day pricing window.

For comparison, our compset’s pricing strategy for December is shown below. Note that in 2018 we were able to drop much less than the compset over the 30 day rate evolution window.

This overly-optimistic style of pricing led to a volatile booking-pace pattern, which forced rate to be drastically dropped over time, and I believe correlates very closely with the reliance on opaque rooms in 2017.

Next, examine the distribution of room nights by booking lead time:

Slicing it a different way, the above chart which shows in which booking windows guests were booking rooms in December of 2018 vs December 2017. Only 14% of total room nights in 2017 were booked in the 15-30 day window, which is a 2 week span where, in 2017, the hotel was priced an average of $88.14 higher than in 2018. In 2017, the 15-30 day window up 267 fewer rooms than our 2018 strategy.

Also of interest is the final 7 days leading up to arrival for stay dates in December. In 2018, we pushed rate higher than the previous year on 5/7 of those days. This was due to our pricing strategy being more proactive than reactive, and building base occupancy first rather than dropping rate too late to make a difference.

Lastly, we made an effort to run promotions only where necessary- in 2017 there was a large reliance on discounted rate plans, which we felt was cannibalizing existing BAR rate business. In 2017 we now know that we were pricing rooms too high, too far in advance, meaning that guests would’ve been more apt to book discounted rate plans rather than the unrealistically high BAR rate. In 2018, with a more realistic pricing structure, we were able to maintain a healthier blend of discounted and BAR rate rooms. Notice in the graph below that when it comes to BAR + Brand Direct Discounts, if treated like a market segment, we were able to grow overall ADR in 4/6 months. We also grew BAR Room Night production in 4/6 months as well. Notice that in July and August there was a disproportionate amount of discounted rooms vs BAR. December of 2018 was a slight exception to the rule, however as we did run a very aggressive Black Friday sale which saw a bulk of its production in the second half of December, which explains the uptick in discounted business for that month.


Results

Here’s a look at how RGI performance trended in 2018 versus 2017. We did underperform last year’s RGI performance on July and August but beginning in September made big improvements through the end of the year.


To recap our approach:

• Priced more reasonably in the 30-day window, which helped optimize market mix further out. This allowed us to drive rate more often in 2018 than 2017 in the final 7-day window leading up to arrival.
• Strengthened relationships with OTA’s while reducing our reliance on opaque channels to increase property ADR and grow RGI.
• Ran more tailored promotion strategy to help boost soft occupancy days rather than cannibalize existing BAR rated guests

By using just these simple approaches we were to see great results! Some achievements we’ve had with this property since taking over include:

• Highest room revenue month EVER achieved in October of 2018
• RGI Growth in 4/6 Months
• Ran 92% occupancy for second half of the year, with above fair-share MPI indices in 4/6 months
• Achieved above fair-share ARI in 5/6 months

 

To see if our approach to Revenue Management can help your hotel, request a demo!

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