© cedit. mar vila, josep francesc valls, 2006 spanish and european urban hotel strategies against...

© 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 SymposiumResearch Assistant: Marta Molist


Sample

Quantitative research: open-ended survey

Sample: 847 urban hotels associated with Keytel

Response rate: 11%

Error: 9,6%61%

39%Spain

Europe

3%

34%

54%

9%

2 ESTRELLAS

3 ESTRELLAS

4 ESTRELLAS

5 ESTRELLAS

26%

38%

27%

9%

Inferior a 50

Entre 50 y 99

Entre 100 y 199

Igual o más de 200

2 STARS

3 STARS

4 STARS

5 STARS

Less than 50

Between 50 and 99

Between 100 and 199

200 or more


Will prices have to be lowered in the future?

si no ns/nc

0,0%

10,0%

20,0%

30,0%

40,0%

50,0%

60,0%

españa

europa

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)”

SpainEurope


Did average prices increase more than inflation between 2000-2004?


23%

68%

9%

25%

65%

10%

20,00%

72,50%

7,50%

0%

10%

20%

30%

40%

50%

60%

70%

80%

YES NO Doesn't know / Noanswer

Total

Spain

Europe


Have average prices increased more than inflation from 2001-2005?


25%

58%

17%21%

59%

20%

31%

56%

14%

0%

10%

20%

30%

40%

50%

60%

70%

YES NO DK/NA

TOTAL

SPAIN

EUROPE


Price Variation 2001-2005

Nominal Values


SPAIN

14%

23%

23%10%

22%

8%EUROPE

11%11%

9%

29%

29%

11%

Decreased >20%

Decreased < 20%

Stayed the same

Increased <10%

Increased 10 to 19%

Increased > 20%

© CEDIT. Mar Vila, Josep Francesc Valls, 2006Source: ESADE-Keytel 2006

Have average prices increased more than inflation from 2001-2005?

Categories

0%

10%

20%

30%

40%

50%

60%

70%

3 ESTRELLAS 4 ESTRELLAS 5 ESTRELLAS

SINO

Ns/Nc

Yes

No

DK/NA

3 STARS 4 STARS 5 STARS


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

Total 23% 25%

Europe 20% 31%

Spain 25% 21%


In nominal values, In Spain, average prices have increased in 40% of cases, with an increase of up to 20% in 32% of casesIn 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%


RevPAR Variation between 2001-2005


0%

10%

20%

30%

40%

Decre

ased

>20%

Decre

ased

< 20%

Same

Incr

eased

<10

%

Incr

eased

10

to 1

9%

Incr

eased

> 2

0%

SPAIN

EUROPE

Decreased: 38%Same: 10%Increased: 52%


RevPAR evolution in Spain is similar to that in the previous period among Spanish hotels


Fuente: ESADE-Magma, 2005

2005

39%

49%

12%

2006

40%

47%

13%

Increased Decreased Maintained

© CEDIT. Mar Vila, Josep Francesc Valls, 2006Source: ESADE-MAGMA

The previous year’s expectations have been exceeded.

32%

16%

52%

13%

40%

47%

0%

10%

20%

30%

40%

50%

60%

Same Increase Decrease

Forecasts Real


Hotel occupancy rates managed to improve over real average price evolution, although less in Spain:


Total Rest ofEurope

Spain

40%

71%52%

21%31%

25%

0%

50%

Average Price Increase RevPAR Increase


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.


GOP Variation in 2001-2005

Source: ESADE-Keytel 2005-06

0%

5%

10%

15%

20%

25%

30%

Decre

ased

>20%

Decre

ased

< 2

0%Sam

e

Incr

ease

d <10

%

Incr

ease

d 10 to

19%

Incr

ease

d > 2

0%

SPAIN

EUROPE Decreased: 25%Same: 11,84%Increased: 63,16%

Decreased: 17%Same: 38%Increased: 45%

Improvement with respect to B.N.E. evolution 2000-2004


GOP for Spanish hotels exceeds the previous year’s forecast

38%

9%

53%

15%

56%

29%

0%

10%

20%

30%

40%

50%

60%

Same Increase Decrease

Forecasts Real


Total Rest ofEurope

Spain

56%

75%

56%

52% 70%

38%

0%

40%

80%

RevPAR increase GOP increase

Slight improvement in exploitation cost management, especially among Spanish hotels in the sample

© CEDIT. Mar Vila, Josep Francesc Valls, 2006Source: ESADE-Keytel 2006

RevPAR and GOP variation in 2001-2005

Categories

54%

4%

42%

52%

6%

42%

0%

20%

40%

60%

80%

100%

RevPar GOP

CUATRO ESTRELLAS

13%13%

75%

38%0%

63%

0%

50%

100%

RevPar GOP

CINCO ESTRELLAS

48%

10%

42%

35%

16%

48%

0%

50%

100%

RevPar GOP

TRES ESTRELLAS

Ha disminuido Se ha mantenido Ha aumentado

THREE STARS

Decreased Same Increased

FOUR STARS

FIVE STARS


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%.


200615%

68%

17%

YES NO DK/NA

Source: ESADE-Keytel, 2005-06

2005

16%

44%

40%

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.


Can RevPAR be maintained in the future?

48%

34%

18%

Yes No, it will rise No, it will fall

SPAIN

53%

21%

26%

EUROPE

40%

56%

4%


For 18% of the sample, expectations are that it will drop. Greater pessimism in Spain.


Can GOP be maintained in the future?

SPAIN

52%34%

14%

46%

46%

8%

Yes No, it will rise No, it will fall

EUROPE

39%

61%

0%


More favourable perspective for GOP. Expected decrease in 8% of cases. Not expected in the rest of European cities



34,3%

47,8%

17,9%

46,0%

46,0%

7,9%

0%

50%

100%

RevPar GOP

Will increase Stay the same Will decrease

Future RevPAR and GOP Evolution



Future RevPAR and GOP EvolutionCategories

37%

42%

21%

53%

35%

12%

0%

20%

40%

60%

80%

100%

RevPar GOP

3 STARS

Will increase Stay same Will decrease

26%

56%

18%

41%

54%

5%

0%

20%

40%

60%

80%

100%

RevPar GOP

4 STARS


71%

14%14%

57%

29%

14%

0%

20%

40%

60%

80%

100%

RevPar GOP

5 STARS



Price Setting Strategies

SPAIN

0

1

2

3

4

Depends onmoment

Channel Competitors Costs Other factorsEUROPE

0

1

2

3

4

5

Depends onmoment

Competitors Costs Channel Other factors



13%

79%

8%

Any price Generally same Always same

Price Setting Strategies

SPAIN

13%

78%

9%

EUROPE

14%

80%

6%


2005

9%

87%

4%


SPAIN

2,5

3

3,5

4

4,5

5

How treated

Category

Personality

Quality

Hotel

Quantity

Cheap

Existing elements

Brand

The cheapest

Expensive

EUROPE

2,5

3

3,5

4

4,5

5

How treated

Hotel

Quantity

Personality

Quality

Category

Existing elements

Cheap

Brand

Expensive

The cheapest

Which characteristics to clients value most?



SPAIN

3

3,5

4

4,5

5

Impr

ove

facil

ities

Impr

ove

serv

ices

Bette

r com

merc

ialisa

tion

Bette

r coo

rdin

ation

with

Priv

. Sctr

.

Man

age co

mm

ercia

lisat

ion

mor

e

Bette

r bra

nd

Impr

ove

dest

. with

Pub

. Adm

in.

Streng

hthen

priv

. Gro

up

Train

pers

onne

l mor

e

Bette

r org

anisat

ion

EUROPE

3

3,5

4

4,5

5

Bette

r com

mer

cialis

atio

n

Impr

ove

facil

ities

Impr

ove

serv

ices

Man

age

com

mer

cialis

ation

mor

e

Bette

r bra

nd

Trai

n pe

rson

nel m

ore

Impr

ove

dest.

with

Pub

. Adm

in.

Bette

r coo

rdin

ation

with

Priv

. Sctr

.

Streng

then

priv

. Gro

up

Bette

r org

anisa

tion

Necessary improvements to increase rates



Current importance of the various commercialisation channels

Source: ESADE-Keytel 2005-06

3

3,5

4

4,5

Third party webpages

National travel agents

Own webpage

Representative

Direct sales

Reservation centre

GDS

Spontaneous

International travel agents

Tour operators

3

3,5

4

4,5

5

5,5

Tour operators

Own web

Direct sales


Representative

GDS



Reservation centres

Spontaneous

SPAIN

EUROPE


0123456

Future importance of the various commercialisation channels

SPAIN

EUROPE


0123456

Ow

n web


Spontaneous

Direct sales

Representative


GD

S

Reservation centres


Tour operators

Others

Direct sales

Ow

n webpage


Representative

Tour operatorsN

ational travel agents

GD

SInternational travel agents

Reservation centres

Spontaneous

Others


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%.


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.

© cedit. mar vila, josep francesc valls, 2006 spanish and european urban hotel strategies against...

Documents