HOTEL MANAGEMENT HOMEWORK

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Sheet1

STR Data Guidelines

• Supply (__________) – the number of rooms in a hotel multiplied by the days in the month
• Demand (_________) – number of rooms sold by a hotel, does not include comp rooms or “no-shows”
• Revenue – total room revenue generated from the _________, includes __________not resort fees, nothing else such as _______

Key Performance Indicators

From these raw data values, STR calculates the three key performance indicators (KPIs), which are used for reports:

• Occupancy - %
• Average Daily Rate (ADR)- $
• Revenue per Available Room (RevPAR)- $
  important metric, based upon all rooms, some
  feel like it is better measurement of profitability

Occupancy

Definition

The percentage of available rooms that were sold during a specific time period.

Calculation

Occupancy is calculated by dividing the demand (number of rooms sold) by the supply (number of rooms available), this is a percentage

Occupancy = Demand / Supply

Monthly Occupancy - Formula

You could multiply times 100 or format as a percentage

ADR

Definition

A measure of the average rate paid for rooms sold during a specific time period.

Calculation

ADR is calculated by dividing the room revenue by the demand (rooms sold), this is a dollar amount

ADR = Revenue / Demand

Monthly ADR - Formula

You could format as a “$” or as a number with 2 decimals

RevPAR

Definition

A measure of the revenue that is generated by a property in terms of each room available. This differs from ADR because RevPAR is affected by the amount of unoccupied rooms, while ADR only shows the average rate of rooms actually sold.

Calculation

RevPAR is calculated by dividing the dividing the room by the average rate of rooms actually sold.

RevPAR = Revenue / Supply

Monthly RevPAR – Formula

You could format as a “$” or as a number with 2 decimals

Percent Changes

Definition

The comparison of s(TY) numbers vs. Last year(LY) numbers. The percent change illustrates the amount of growth (up, flat, or down) from the same period last year.

Calculation

Percent Change = ((This Year – Last Year) / Last Year) * 100

Demand Percent Change

You could multiply times 100 or format as a percentage

ADR Percent Change

You could multiply times 100 or format as a percentage

Daily vs. Monthly Data

• Formulas for KPIs and Percent Changes are the same
• The date fields are different:

201007 – monthly

20100725 – daily

• Most daily percent changes are based upon ________, in other words _____________________________

Thu 20100715 compared to Thu 20090716

Sat 20100731 compared to Sat 20090801

Multiple Time Periods

• Multiple time periods for monthly data include:

Year-to-Date (YTD)

Running 12-Month (12 Month Moving Avg)

Running 3-Month

• Multiple time periods for daily data include:

Current Week

Month-to-Date (YTD)

Running 28-Day (different than Running 4-wk)

• The metrics for these time periods are based upon the aggregated raw data.

YTD Supply, Demand, & Revenue

Use the SUM function to aggregate the raw values

YTD Occupancy, ADR, & RevPAR

Aggregate raw values, then apply same formulas as before

Other Multiple Time Periods

• The Raw data for other monthly and daily time periods are calculated the same way by aggregating the raw data for every month or day in the entire time period
• The calculated metrics (Occupancy, ADR, and RevPAR) for multiple time periods are always calculated from ___________________
• Numbers for multiple time periods never use averages of monthly values

Percent Changes for Multiple Time Periods

• The percent changes for multiple time periods are based on the aggregated values or the calculated metrics which are derived from the aggregated values for this year compared to the same values for last year
• Percent changes for daily data are based upon groups of comparable days, with the exception of Month-to-Date numbers which are based on a date-to-date comparison

YTD Percent Changes

Aggregate 1st, KPI formulas 2nd, % Change formulas 3rd

Full Availability – Subject Hotel

• Occasionally a subject hotel may report a Supply number that is different than the number of rooms in the property times the days in the period
• If this happens in the case of the subject hotel, their STAR report will always reflect the Supply and the corresponding Occupancy based upon the number _________________.
• STR does not change the Supply number of the subject hotel on their own STAR report

Full Availability Example - Subject

Occupancy for Subject based on reported Supply, not Actual

Weekday/Weekend and Day of Week Data vs. Monthly Data

• Sometimes a hotel will submit daily data that does not add up exactly to the monthly number
• There are good reasons for this; some systems do not accept adjustments to daily data, only to the month numbers
• STR will slightly adjust the daily numbers based upon the monthly data when they are aggregated by day of week and weekday/weekend

Use percentages for each day, ensures WD/WE adds up

Percent Changes and WD/WE or Day of Week Data

• ____________ (WD/WE) Percent Changes compare all the aggregated weekday or weekend data (per month or other time period) this year to the same data last year
• ____________(DOW) Percent Changes compare all the aggregated daily data for a single day (per month or other time period) this year to the same data last year

Running 4 Week Data

• The Weekly Reports compare individual daily data for the Current Week to the Running 4 Week numbers
• The Running 4 Week numbers are the aggregated data __________________, i.e.: _____________
• A hotel can compare their Monday performance metrics to the average of the last 4 Mondays

Competitive Set Data

Key Performance Indicators

for the Competitive Set

• Numbers for the comp set are derived based on aggregated raw data
• Supply, Demand, and Revenue numbers are the combined values of each hotel in the comp set
• Occupancy, ADR, and RevPAR numbers are bases on the aggregated Supply, Demand, and Revenue

Including or Excluding the Subject Hotel in the Competitive Set

• STR allows companies to choose whether to include or exclude the data for the subject hotel in the numbers for the comp set
• Historically companies usually included the data for the subject hotel, but more recently most companies have decide to exclude the subject
• People feel that having the subject data included in the comp set numbers distorts the comp set

Comp Set Supply, Demand, & Revenue

Aggregate raw values for each member of the comp set

Comp Set Occupancy, ADR, & RevPAR

Apply KPI formulas to aggregated comp set data

Percent Change Numbers

for the Competitive Set

• Percent Change numbers for the comp set are calculated similarly to the ones for the subject property
• These numbers show increases or decreases in performance this year versus last year

Comp Set Occupancy, ADR, & RevPAR

Percent Changes

Calculate TY & LY KPIs, then apply % Change formulas

Index Numbers

• The Index numbers compare the performance of the subject property to the comp set

Subject / Comp Set * 100

• A number greater than 100 means the subject property _outperformed___________ the comp set and a number below 100 means the comp set ______________the subject property
• Index numbers are available for Occupancy, ADR, RevPAR and the Percent Changes

Index numbers are percentages, multiple * 100 or format as %

Occupancy, ADR, & RevPAR Indexes

Calc KPIs for Subject & Comp, then apply Index formula

Index Percent Change Numbers

• First you calculate the Index numbers this year for Occupancy, ADR, and RevPAR
• Next you calculate the Index numbers for last year using the same formulas
• Then you can calculate the Percent Changes for the Index numbers, this shows whether the Subject is improving
• Indexes could be below 100 TY, but if Percent Changes are positive, Subject is improving

Occupancy, ADR, & RevPAR Index

Percent Changes

Calc indexes TY & LY, then apply % Change formulas

Ranking Data – What is it?

• STAR Property Reports include Ranking information for Occupancy, ADR, RevPAR and each Percent Change, comparing the subject hotel to the comp set
• The Ranking data would be in the format of “X of Y”, where X is the subject hotel’s position and Y is the number of participating properties in the comp set, for example “2 of 7” would mean the subject hotel had 2nd best value in the comp set of 7

Ranking data gives you more than just the KPIs & Indexes

Occupancy Ranking Data – How?

• The values for each hotel in the comp set including the subject hotel are sorted and then the position of the subject hotel is determined within the group

Subject had the 4th highest occupancy in the comp set of 6

ADR Ranking Data – Ties

• If two or more hotels are tied, i.e.: they have the same value, then each hotel would get the same number

Subject had the 2nd highest ADR (with 2 others) in comp set

Multiple Time Periods and Comp Set Data

• Multiple time periods are handled the same way for a comp set as they are handled for a subject property
• The Raw data for monthly and daily time periods are always aggregated and then calculations are applied to the aggregated data

Sufficiency of Comp Set Data

• If a Comp Set has 3 or more participating hotels (submitting actual data) then that comp set is defined as “Sufficient”
• The numbers for that comp set can then appear on the STAR report
• Multi-year numbers are considered to be sufficient if greater than 50% of the months or day included in the multi-year period are sufficient

Full Availability and Comp Sets

• Occasionally a hotel in the comp set may report a Supply number that is different than the number of rooms in the property times the days in the period
• In those cases, STR uses the Supply number based upon full availability, not the number that the hotel reports

Full Availability Example

Formulas are based upon Actual Supply, not Reported

Non-Reporting Hotels in the Comp Set

• There may be situations where one or more hotels in a comp set does not report data for a month or more
• First, the Supply, Demand, and Revenue for the participating properties is aggregated. This is the “Sample” Supply, Demand, and Revenue.
• Next, an Occupancy and ADR is calculated based on the Sample data

Non-Reporting Hotels in the Comp Set - continued

• Then the Supply is determined for all hotels in the comp set, simply the number of rooms times the days in the month. This is referred to as the “Census” Supply.
• This Supply number is multiplied times the Sample Occupancy to derive the Census Demand
• The Census Demand is multiplied times the Sample ADR to derive the Census Revenue

Non-Reporting Hotel Example

Calc Occ & ADR based on Sample, multiply * Total Supply

Industry Data

Industry Data Basics

• STR uses a variety of segments to analyze performance of the hotel industry
• There are __________(market, tract) and ________ (scale, location) categorizations
• STAR Reports and corporate data files will frequently compare a subject hotel to nearby industry segments
• Publications and Destination Reports will also display the performance of industry segments

The Methodology for Industry Data versus Comp Set Data

• The methodology used for arriving at industry numbers is different than the one for arriving at comp set numbers
• Actual data is used for hotels that participate and “modeled data” is used for hotels that do not participate
• The Actual and Modeled data is aggregated for all hotels in each industry segment

Modeling of Industry Data

• STR estimates the data of non-participating hotels to help increase the accuracy of industry data
• Data for a non-participant is estimated based on participating hotels that are closest to the non-participant based on geography and price level
• No modeled data is ever used in the Comp Set numbers

Possible to explain technical procedure used for modeling

Key Performance Indicators

for Industry Segments

• The Actual and Modeled data is aggregated for all hotels in each industry segment
• Supply, Demand, and Revenue numbers are the combined values of each hotel in the comp set
• Occupancy, ADR, and RevPAR numbers are based on the aggregated Supply, Demand, and Revenue

Industry Supply, Demand, & Revenue

Accumulate Actual & Modeled Supply, Demand, & Revenue

Industry Occupancy, ADR, & RevPAR

Apply KPI formulas to accumulated raw data

Percent Change Numbers

for the Industry Segment

• Percent Change numbers for the industry segment are calculated exactly like the ones for the comp set or the subject property
• These numbers show increases or decreases in performance this year versus last year

Multiple Time Periods and Industry Data

• Multiple time periods are handled exactly the same for an industry as for a comp set or a subject property
• The Raw data for monthly and daily time periods are always aggregated and then calculations are derived based upon the aggregated data

Sufficiency of Industry Data

• If an Industry segment has 4 or more hotels that submit actual data, then that segment is defined as “Sufficient”
• The numbers for that industry segment can then appear on STAR reports and elsewhere
• Multi-year numbers are considered to be sufficient if greater than 50% of the months or day included in the multi-year period are sufficient

Full Availability

• Occasionally a hotel in the industry segment may report a Supply number that is different than the number of rooms in the property times the days in the period
• In those cases, STR uses the Supply number based upon full availability, not the number that the hotel reports

Corporate Data

What do Companies Receive?

• Most corporate headquarters receive reports listing each of their hotels and the various performance metrics, referred to as “Index Reports”. These may be subtotaled.
• Some companies receive “Summary Reports” aggregating data for their hotels based upon various subtotal groups.
• Many companies receive data files containing this same type of data to use internally

Who do Companies Compare Their Hotels to?

• Most commonly, companies compare their hotels to the corresponding comp sets
• Sometimes they compare their hotels to the corresponding industry segment of the subject property, such as a Market or Tract Scale
• They may compare total Brand numbers to the corresponding Scale total, or to a group of other brands, referred to as a “Corporate Comp Set”

Corporate Aggregations

• Hotels can be grouped based upon common fields such as Brand, State, or Operation
• Hotels can also be grouped based upon user-defined variables, such as Sales Regions or Hotel Types
• Raw data can be aggregated using Standard Weighting or Portfolio Weighting

International Issues

Industry Segments

• In the US and in North America, probably the most popular industry segment to compare hotels to are Market Scale or Tract Scale
• The Scale category is totally related to chain hotels
• Outside North America, since there are much less chain hotels, Class is used instead and the poplar segments are Market Class and Tract Class

Currencies and Exchange Rates

• Outside the US, most hotels want to see their STAR reports in their local currency
• STAR obtains daily and monthly exchange rates for all currencies in the world (at least the countries that have hotels) from Oanda
• Daily data utilizes the daily exchange rate
• Monthly data utilizes the daily exchange rate for the last day of the month
• Multi-year data is aggregated in local currency

Additional Data

Additional Issues/Topics

• Segmentation Data (Group, Transient, Contract)
• Additional Revenue Data (F&B, Other, Total)
• Data within a Trend Report
• Data within a Hotel Review or Destination Report