expense
Transcending Optimization 3-Part Series 1.Big Box Integrated Resort insights (Jack Easdale, Venetian|Palazzo)
2.High-End Boutique insights (Nicole Young, SBE) 3.Demographic/Psychographic insights (Angie Dobney, Rainmaker)
2
Integrated Resorts Insights • Venetian and Palazzo Las Vegas
7,100 Rooms 2.3 million sq.ft. of meeting space 38 Restaurants LOTS to 250,000 sq.ft. Casino Optimize! 3 Theatres 2 Night clubs, 1 Day club 3
Integrated Resorts Insights This is my 10th HSMAI ROC Conference, and the feedback in the survey is the same every year….
Minneapolis Orlando Austin Anaheim Orlando Austin
2006 2007 2008 2009 2010 2011
Baltimore Minneapolis Los Angeles Austin
2012 2013 2014 2015
4
“Give me something I can take back to my hotel AND USE”
Integrated Resorts Insights Revenue Management in 1997 defined as “Selling the right PRODUCT to the right CUSTOMER at the right TIME for the right PRICE” ________________ In 2015 is there more to this definition?
5
Integrated Resorts Insights • I’ll argue there IS more to the definition • Selling the right PRODUCT to the right CUSTOMER at the right TIME for the right PRICE…at
the right COST! 6
Integrated Resorts Insights • Vegas hotels routinely run 90-95% months selling out most nights • Vegas hotels have numerous nights with $500-$1,000 standard room rates market-wide (NYE, CES, Fight Weekends, Memorial Day, Electric Daisy Carnival, AAPEX, etc.)
• When demand exceeds supply, raise rates right? • When demand exceeds supply, optimize market mix to favor higher margin segments right? • But do you REALLY know what’s optimal? 7
Integrated Resorts Insights • To truly optimize the PROFIT for your owners and shareholders, you need to unequivocally understand two sides of the equation: 1. The Marginal REVENUE associated with selling the next room, per segment 2. The Marginal EXPENSE associated with selling the next room, per segment
8
Integrated Resorts Insights • Nobody in your property or company understands Room Revenue like you do. Nobody. • If you’ve completed an in-depth distribution channel analysis for your property or company, nobody understands directly attributable Distribution Costs like you do.
9
Integrated Resorts Insights Two fantastic resources on Distribution. GET THEM!
10
Integrates Resorts Insights • Revenues Per Room – – – – – –
Room Revenue ($237) F&B Revenue ($40) Meeting Room Rental ($17) Casino Theo ($25) Retail Revenue ($10) Resort Fee Revenue ($21)
• Total Revenue Per Guest is $350
11
Integrates Resorts Insights • Expenses Per Room – – – – – –
Rooms Expense ($55)* Includes Sales, Mktg, & Distro costs F&B Expense ($30) Meeting Room Expense ($6) Casino Expenses ($10) Retail Expenses ($8) Resort Fee Expenses ($6)
• Total Expense Per Guest is $115
12
Integrated Resorts Insights • In this simple generic example… Revenues per Room Expenses per Room EBITDA per Room
$350 $115 $235
13
P and L by Market Segment • Now here where it becomes interesting
• Now here’s where it becomes cumbersome • Now here’s where you buy your Controller a beer, because he/she’s going to be your new best friend • Now here’s where you provide REAL value to your organization by making optimal decisions
14
Data is already available – Go get it Methodology • Acquisition • Allocation • Assumption
15
Data Acquisition – Required data • Room Data – Revenues AND Expenses – Room nights and revenue by market segment – Include any resort fees, forfeit deposits, upgrades, etc.
• Ancillary Data – Revenues AND Expenses – Entertainment, meeting space rental, F&B including room service and restaurants, entertainment, retail, etc.
• Cost per Occupied Room – Expense – This should already be defined by the Controller
Historical P&Ls are vital for this process – This data should be available via the Controller Revenue (at a minimum) must be captured by group code to allow market segment association Expenses can later be allocated with some base assumptions
16
Allocation Clearly define the segments: Sales, Wholesale, BAR, OTA, etc. – Allocation is the tricky part and will demand some one on one time with department leaders • i.e. Sales Directors will be your best friend….
Two primary items must be defined for each expense per segment: % of expenses to segment AND distribution of said expenses within each segment Expense TOTAL PAYROLL EXPENSES
Expense Category Electronic Channel Sum m ary Portion Departmental Expense 15%
80150 - COMMISSIONS
Z Do Not Use Commission
80180 - CONTRACT LABOR
Departmental Expense
80185 - COMP-ON PROPERTY
Departmental Expense
80210 - DUES,MEM, & SUBS
Departmental Expense
50% 30% 40% 50%
GDS%
OTA%
33% 12% 100%
33% 88%
IHG%
100% 33%
Sales
30% 50% 50% 40% 50%
Corporate
100% 60% 33% 50%
Tradeshow
Wholesale
30% 33% 12% 50%
10% 33% 88%
Some specific expenses will be impossible to break into % allocations, assumptions will be used to fill the gaps (Next Slide)
17
Expense Line items to Allocate…
Expense 80515 - RENT EXPENSE
Expense Category Detail Operating Expense
TOTAL PAYROLL EXPENSES
Payroll
60001X - COMPLIMENTARY ROOMS
Complimentary
70205 - BONUS-OTHER
Payroll
60010X - COMPLIMENTARY OTHER
Complimentary
80185 - COMP-ON PROPERTY
Operating Expense
60002X - COMPLIMENTARY FOOD
Complimentary
80415-500 - OUTSIDE SERV-OTHER
Operating Expense
80210 - DUES,MEM, & SUBS
Operating Expense
80570 - TRAVEL/TRANS/LODGING
Operating Expense
60003X - COMPLIMENTARY BEVERAGE
Complimentary
80569-001 - TRAVEL-UNALLOCATED EXPENSE
Operating Expense
90011-605 - SERVICE EXP-MBS
Intercompany Expenses
80150 - COMMISSIONS
Operating Expense
80390-010 - OPERATING SUPPLIES
Operating Expense
80410 - COMP-OFF PROPERTY
Operating Expense
80560-010 - TRAVEL MEALS
Operating Expense
80180 - CONTRACT LABOR
Operating Expense
80490 - PROMOTIONAL ITEMS
Operating Expense
18
Potential Results
19
Potential Results – The Finale! Profit POGR $500 $450
GDS $442
FIT Direct $424
$400
OTA Standalone $206
$350 $300 $250
Wholesale $205
$200
IHG $284
Loyalty $253
Group $250
OTA Opaque $118
OTA Package $120
White Label $165
$150
Private Sale $310
$100
$50
Group
Wholesale
FIT Direct
White Label
Loyalty
OTA Standalone
20
OTA Package
IHG
OTA Opaque
Private Sale
GDS
Transcendent Revenue Management
21
Introduce the Elephant: Recognizing Limitations • • • • • • •
Time Technology Benchmarking Brand Guest Adoption Team ROI
22
The Role of Revenue Management in TRM Development Sales & Conference
Venue Managers
Front Line/Support Staff
23
DORM
GM’s
Building Sound Strategy • Positioning Activities – Appropriate for non-peak or low volume – Is your offering and price optimal? • SWOT • Benchmarking tools • Caution towards disrupting current demand
24
Back to the Basics • Yielding Activities (peak) – Identify demand & scarcity by venue/income • • • • •
Annual seasonality Day & week part Customer segment (resident vs. non-resident) Focus on high potential ROI and captivity rate Observation and data collection period
25
Back to the Basics (cont.) – Translate to the fundamentals • • • • •
ARI equivalent Purchase cycle (booking window) Establish baseline performance Create your KPI’s Data and informational requirements
26
Executing the Plan • Identify strategic team • Methods of deployment - Tactics – technology/system administration – training and accountability – frequency • Define Success – goal setting • Period of measurement 27
Easy Ways to Get Started • Elective charges - value of assurance • Don’t get “fixed” in old ways
• Develop special event revenue plans
28
Check and Balance • Honor your value proposition • Don’t forget the guest! – Periodic total trip cost model – Bifurcated strategy for in-house & local guests – Social listening, no news is good news
29
My favorite quote this year! “It’s always been that the non-casino story was the story. It was never the slot machines– they’ve been everywhere for centuries,” Wynn said. “You got to give people something they’re willing to get on an airplane and submit to a body search for,” he said. “That ain’t a slot machine, friends, and it sure as hell ain’t a baccarat table.” Steve Wynn- 2014 G2E Keynote address
30
Why focus on Total Revenue Management? • Applying Revenue Management principles and best practices: 3-5% increase in Room Revenue • Applying profit-based total revenue management: 8-15% lift in Total Profit. • Providing a tool where your Sales manager can quickly provide scientific optimized pricing: 11.4% increase in conversion and a 8.2% increase in group revenue
31
Gaming vs. Non-gaming revenue
32
Non-Gaming Overnight Trip Budget
33
Non-Gaming Day Trip Budget
34
A look at what is ahead in spending patterns • The focus is shifting to target Millennials and not the Baby Boomers or Gen X. • Millennials are reaching the age where they are starting to have spending power. They are starting to accumulate wealth.
35
How many Millennials are there? Population by Generation 72 Million Baby Boomers
81 Million Millennials
50 Million Gen X'ers
36
Growth estimates Skift says by 2020, Millennials will be nearly half the workforce. By 2030, they’re predicted to outspend baby boomers. And they are taking that spending power and putting it behind one of their passions: Travel.
37
2015 Overnight Trips Age Group
Expected change %
Baby Boomers
-1%
Gen X
-6%
Millennials
10%
MMGY Portrait of American Travelers 38
Who are they? • They have grown up using technology. It was not learned. They expect everything to be available all the time. • Content creators: 60% of the content out there. They will leave reviews. • Educated: they stayed in school during the recession and earned higher degrees. They are the most educated generation. • Engaged: they want to share their experiences with others. 39
Preferences • They would rather have a great experience than buy something. • Not as focused on your room product, but rather the common areas. • They enjoy being engaged in groups. • They like to help people and support issues. • They like to be healthy. • They are authentic and crave inspiration and personalization. 40
Change is happening! • Almost all hotel companies are changing their look to attract this new, young customer. Hotel lobbies are becoming a portal to the local culture surrounding the property. • Food and Beverage menu items are changing – Healthy offerings – Craft cocktails & Microbrews
41
Has there been an impact on OTA’s? • 60% of business is coming from meta search engines / clicks • 45% of millennial bookings are done via mobile • OTA’s have launched or retailored brands to target millennials (Cheaptickets, Hotels.com, etc;) • Booking widow averages 10 days less with millennials; rapid information and trained to book last minute
42
Millennial Travel Spend • Millennials are willing to spend money on travel, and the amount they’re spending is increasing. They spent 20% more on trips in 2014 than the previous year. • They are more likely to indulge in hotel services such as food, beverage, dry cleaning and spa treatments. • They’re also more interested in pet-friendly accommodations. MMGY Portrait of American Travelers 43
Millennial Travel Spend • Today Millennial travelers spend less than older people on leisure trips: PhoCusWright says older travelers spend an average of $3,381, while millennials spend $3,217. But they’re not in their peak earning years yet, so look for that number to grow.
44
Summary • Taking the Total Revenue Management approach with your RM strategy increases total profit. • Millennials love to travel and spend money on these ancillary revenues. • Engage this generation thru your brand marketing and with ancillary products that are profitable.
45
2.High-End Boutique insights (Nicole Young, SBE) 3.Demographic/Psychographic insights (Angie Dobney, Rainmaker)
2
Integrated Resorts Insights • Venetian and Palazzo Las Vegas
7,100 Rooms 2.3 million sq.ft. of meeting space 38 Restaurants LOTS to 250,000 sq.ft. Casino Optimize! 3 Theatres 2 Night clubs, 1 Day club 3
Integrated Resorts Insights This is my 10th HSMAI ROC Conference, and the feedback in the survey is the same every year….
Minneapolis Orlando Austin Anaheim Orlando Austin
2006 2007 2008 2009 2010 2011
Baltimore Minneapolis Los Angeles Austin
2012 2013 2014 2015
4
“Give me something I can take back to my hotel AND USE”
Integrated Resorts Insights Revenue Management in 1997 defined as “Selling the right PRODUCT to the right CUSTOMER at the right TIME for the right PRICE” ________________ In 2015 is there more to this definition?
5
Integrated Resorts Insights • I’ll argue there IS more to the definition • Selling the right PRODUCT to the right CUSTOMER at the right TIME for the right PRICE…at
the right COST! 6
Integrated Resorts Insights • Vegas hotels routinely run 90-95% months selling out most nights • Vegas hotels have numerous nights with $500-$1,000 standard room rates market-wide (NYE, CES, Fight Weekends, Memorial Day, Electric Daisy Carnival, AAPEX, etc.)
• When demand exceeds supply, raise rates right? • When demand exceeds supply, optimize market mix to favor higher margin segments right? • But do you REALLY know what’s optimal? 7
Integrated Resorts Insights • To truly optimize the PROFIT for your owners and shareholders, you need to unequivocally understand two sides of the equation: 1. The Marginal REVENUE associated with selling the next room, per segment 2. The Marginal EXPENSE associated with selling the next room, per segment
8
Integrated Resorts Insights • Nobody in your property or company understands Room Revenue like you do. Nobody. • If you’ve completed an in-depth distribution channel analysis for your property or company, nobody understands directly attributable Distribution Costs like you do.
9
Integrated Resorts Insights Two fantastic resources on Distribution. GET THEM!
10
Integrates Resorts Insights • Revenues Per Room – – – – – –
Room Revenue ($237) F&B Revenue ($40) Meeting Room Rental ($17) Casino Theo ($25) Retail Revenue ($10) Resort Fee Revenue ($21)
• Total Revenue Per Guest is $350
11
Integrates Resorts Insights • Expenses Per Room – – – – – –
Rooms Expense ($55)* Includes Sales, Mktg, & Distro costs F&B Expense ($30) Meeting Room Expense ($6) Casino Expenses ($10) Retail Expenses ($8) Resort Fee Expenses ($6)
• Total Expense Per Guest is $115
12
Integrated Resorts Insights • In this simple generic example… Revenues per Room Expenses per Room EBITDA per Room
$350 $115 $235
13
P and L by Market Segment • Now here where it becomes interesting
• Now here’s where it becomes cumbersome • Now here’s where you buy your Controller a beer, because he/she’s going to be your new best friend • Now here’s where you provide REAL value to your organization by making optimal decisions
14
Data is already available – Go get it Methodology • Acquisition • Allocation • Assumption
15
Data Acquisition – Required data • Room Data – Revenues AND Expenses – Room nights and revenue by market segment – Include any resort fees, forfeit deposits, upgrades, etc.
• Ancillary Data – Revenues AND Expenses – Entertainment, meeting space rental, F&B including room service and restaurants, entertainment, retail, etc.
• Cost per Occupied Room – Expense – This should already be defined by the Controller
Historical P&Ls are vital for this process – This data should be available via the Controller Revenue (at a minimum) must be captured by group code to allow market segment association Expenses can later be allocated with some base assumptions
16
Allocation Clearly define the segments: Sales, Wholesale, BAR, OTA, etc. – Allocation is the tricky part and will demand some one on one time with department leaders • i.e. Sales Directors will be your best friend….
Two primary items must be defined for each expense per segment: % of expenses to segment AND distribution of said expenses within each segment Expense TOTAL PAYROLL EXPENSES
Expense Category Electronic Channel Sum m ary Portion Departmental Expense 15%
80150 - COMMISSIONS
Z Do Not Use Commission
80180 - CONTRACT LABOR
Departmental Expense
80185 - COMP-ON PROPERTY
Departmental Expense
80210 - DUES,MEM, & SUBS
Departmental Expense
50% 30% 40% 50%
GDS%
OTA%
33% 12% 100%
33% 88%
IHG%
100% 33%
Sales
30% 50% 50% 40% 50%
Corporate
100% 60% 33% 50%
Tradeshow
Wholesale
30% 33% 12% 50%
10% 33% 88%
Some specific expenses will be impossible to break into % allocations, assumptions will be used to fill the gaps (Next Slide)
17
Expense Line items to Allocate…
Expense 80515 - RENT EXPENSE
Expense Category Detail Operating Expense
TOTAL PAYROLL EXPENSES
Payroll
60001X - COMPLIMENTARY ROOMS
Complimentary
70205 - BONUS-OTHER
Payroll
60010X - COMPLIMENTARY OTHER
Complimentary
80185 - COMP-ON PROPERTY
Operating Expense
60002X - COMPLIMENTARY FOOD
Complimentary
80415-500 - OUTSIDE SERV-OTHER
Operating Expense
80210 - DUES,MEM, & SUBS
Operating Expense
80570 - TRAVEL/TRANS/LODGING
Operating Expense
60003X - COMPLIMENTARY BEVERAGE
Complimentary
80569-001 - TRAVEL-UNALLOCATED EXPENSE
Operating Expense
90011-605 - SERVICE EXP-MBS
Intercompany Expenses
80150 - COMMISSIONS
Operating Expense
80390-010 - OPERATING SUPPLIES
Operating Expense
80410 - COMP-OFF PROPERTY
Operating Expense
80560-010 - TRAVEL MEALS
Operating Expense
80180 - CONTRACT LABOR
Operating Expense
80490 - PROMOTIONAL ITEMS
Operating Expense
18
Potential Results
19
Potential Results – The Finale! Profit POGR $500 $450
GDS $442
FIT Direct $424
$400
OTA Standalone $206
$350 $300 $250
Wholesale $205
$200
IHG $284
Loyalty $253
Group $250
OTA Opaque $118
OTA Package $120
White Label $165
$150
Private Sale $310
$100
$50
Group
Wholesale
FIT Direct
White Label
Loyalty
OTA Standalone
20
OTA Package
IHG
OTA Opaque
Private Sale
GDS
Transcendent Revenue Management
21
Introduce the Elephant: Recognizing Limitations • • • • • • •
Time Technology Benchmarking Brand Guest Adoption Team ROI
22
The Role of Revenue Management in TRM Development Sales & Conference
Venue Managers
Front Line/Support Staff
23
DORM
GM’s
Building Sound Strategy • Positioning Activities – Appropriate for non-peak or low volume – Is your offering and price optimal? • SWOT • Benchmarking tools • Caution towards disrupting current demand
24
Back to the Basics • Yielding Activities (peak) – Identify demand & scarcity by venue/income • • • • •
Annual seasonality Day & week part Customer segment (resident vs. non-resident) Focus on high potential ROI and captivity rate Observation and data collection period
25
Back to the Basics (cont.) – Translate to the fundamentals • • • • •
ARI equivalent Purchase cycle (booking window) Establish baseline performance Create your KPI’s Data and informational requirements
26
Executing the Plan • Identify strategic team • Methods of deployment - Tactics – technology/system administration – training and accountability – frequency • Define Success – goal setting • Period of measurement 27
Easy Ways to Get Started • Elective charges - value of assurance • Don’t get “fixed” in old ways
• Develop special event revenue plans
28
Check and Balance • Honor your value proposition • Don’t forget the guest! – Periodic total trip cost model – Bifurcated strategy for in-house & local guests – Social listening, no news is good news
29
My favorite quote this year! “It’s always been that the non-casino story was the story. It was never the slot machines– they’ve been everywhere for centuries,” Wynn said. “You got to give people something they’re willing to get on an airplane and submit to a body search for,” he said. “That ain’t a slot machine, friends, and it sure as hell ain’t a baccarat table.” Steve Wynn- 2014 G2E Keynote address
30
Why focus on Total Revenue Management? • Applying Revenue Management principles and best practices: 3-5% increase in Room Revenue • Applying profit-based total revenue management: 8-15% lift in Total Profit. • Providing a tool where your Sales manager can quickly provide scientific optimized pricing: 11.4% increase in conversion and a 8.2% increase in group revenue
31
Gaming vs. Non-gaming revenue
32
Non-Gaming Overnight Trip Budget
33
Non-Gaming Day Trip Budget
34
A look at what is ahead in spending patterns • The focus is shifting to target Millennials and not the Baby Boomers or Gen X. • Millennials are reaching the age where they are starting to have spending power. They are starting to accumulate wealth.
35
How many Millennials are there? Population by Generation 72 Million Baby Boomers
81 Million Millennials
50 Million Gen X'ers
36
Growth estimates Skift says by 2020, Millennials will be nearly half the workforce. By 2030, they’re predicted to outspend baby boomers. And they are taking that spending power and putting it behind one of their passions: Travel.
37
2015 Overnight Trips Age Group
Expected change %
Baby Boomers
-1%
Gen X
-6%
Millennials
10%
MMGY Portrait of American Travelers 38
Who are they? • They have grown up using technology. It was not learned. They expect everything to be available all the time. • Content creators: 60% of the content out there. They will leave reviews. • Educated: they stayed in school during the recession and earned higher degrees. They are the most educated generation. • Engaged: they want to share their experiences with others. 39
Preferences • They would rather have a great experience than buy something. • Not as focused on your room product, but rather the common areas. • They enjoy being engaged in groups. • They like to help people and support issues. • They like to be healthy. • They are authentic and crave inspiration and personalization. 40
Change is happening! • Almost all hotel companies are changing their look to attract this new, young customer. Hotel lobbies are becoming a portal to the local culture surrounding the property. • Food and Beverage menu items are changing – Healthy offerings – Craft cocktails & Microbrews
41
Has there been an impact on OTA’s? • 60% of business is coming from meta search engines / clicks • 45% of millennial bookings are done via mobile • OTA’s have launched or retailored brands to target millennials (Cheaptickets, Hotels.com, etc;) • Booking widow averages 10 days less with millennials; rapid information and trained to book last minute
42
Millennial Travel Spend • Millennials are willing to spend money on travel, and the amount they’re spending is increasing. They spent 20% more on trips in 2014 than the previous year. • They are more likely to indulge in hotel services such as food, beverage, dry cleaning and spa treatments. • They’re also more interested in pet-friendly accommodations. MMGY Portrait of American Travelers 43
Millennial Travel Spend • Today Millennial travelers spend less than older people on leisure trips: PhoCusWright says older travelers spend an average of $3,381, while millennials spend $3,217. But they’re not in their peak earning years yet, so look for that number to grow.
44
Summary • Taking the Total Revenue Management approach with your RM strategy increases total profit. • Millennials love to travel and spend money on these ancillary revenues. • Engage this generation thru your brand marketing and with ancillary products that are profitable.
45
