ehma cyprus 2016 - "drivers & trends of luxury hospitality"

Kalibri Labs © 2016, Confidential

Demystifying the Digital Marketplace

Mark V Lomanno

[email protected]


A Value Shift has been Underway: Market Cap Contrasts

2

$64 B

15.9 B

$17.7 B $12 B

$9 B

$484 B

$573 B $300 B

$9.5 B

$26 B

$21.6 B

Updated: 3.7.16


Historically Travelers Booked Directly with Stay Brands

Consumer Stay Brands


Booking Brands Now Dominate Consumer Point of Entry

Consumer Stay Brands

Booking Brands


Google That

Uber will do what?

Who bought who?

The Demise of the RFP

Amazon is here today, gone tomorrow

Booking.com boss is “clicking” mad; Expedia boss issues warning

5


“Organic search” …a quaint term from the mid-2000s

6


Google’s Travel Ecosystem Google Destinations App

Source: BCG and Hilton Worldwide


Future: Peer to peer services


Tech Consolidation – who is buying who and why?

9


Business Travel: The RFP Gets a One-Two Punch

10


Surprise, surprise…from Amazon

11

21st April, 2015

16th October 2015


“Book Direct” Gains Traction

12

GIANT Booking.com attacks tiny Triptease



Highlights of U.S. Hotel Performance


• Kalibri Labs Industry Database • Guest stay and cost of sales information from 25,000 hotels to date,

primarily in North America, expansion to Europe 2016 & Asia 2017

• Representing 100+ brands – 3,000,000 rooms

• Major Chains and smaller chains and independents

• Over 5 billion transactions; 100 million added monthly

• External Data Sources & Research • Airbnb and Hotel Performance

• Consumer Reviews and Hotel Performance

• Group & Meetings Profile Data

• Airline Arrivals, Consumer Behavior and the Billboard Effect

• Lifetime Value Analysis and Loyalty Programs

Helping hotels improve

performance by evaluating

customer acquisition results

based on revenue net of

acquisition costs


Direct Bookings are Declining Direct-to-Indirect Channel Share Ratio Total US - 2011-2015

1,0

2,0

3,0

4,0

5,0

6,0

7,0

2011 2012 2013 2014 2015

Median US Transient Direct-to-Indirect ratio

Note: direct is brand.com, voice and property direct; indirect is OTA, GDS and FIT Wholesale U.S. Hotels over $100 rate

4.3

2.7


Revenue Capture for Total U.S. Market : 2015 vs. 2014 As Hotel Revenue Leakage rises, Real Estate value erodes

Net Revenue Revenue Capture

2015 $120,400,000,000 82.8%

2014 $112,800,000,000 83.2%

Change 6.7% -0.4%

$112.800.000.000

$123.200.000.000

$132.800.000.000

$135.500.000.000

$120.400.000.000

$132.000.000.000

$142.600.000.000

$145.400.000.000

$0 $20.000.000.000 $40.000.000.000 $60.000.000.000 $80.000.000.000 $100.000.000.000 $120.000.000.000 $140.000.000.000 $160.000.000.000

Net Revenue

COPE Revenue

Hotel-CollectedRevenue

Guest-Paid Revenue

Revenue Capture Loss (-0.4) = $572.8 m


Demand Share Slippage: Property Direct, Voice & Group

70%

80%

90%

100%

110%

120%

130%

140%

2011 2012 2013 2014 2015

U.S. Demand Share Growth by Source of Business 2011 - 2015

Voice Property Direct Group High Discount


Demand Share Growth: GDS Stable, Brand.com and OTA

70%

80%

90%

100%

110%

120%

130%

140%

2011 2012 2013 2014 2015

U.S. Demand Share Growth by Source of Business 2011 - 2015

Brand.com OTA / ETA GDS High Discount


OTA Share Growing in all Segments Total U.S. 2011-2015

5,6%

7,6% 8,7% 9,0% 9,2%

15,8% 16,5%

14,1%

11,8% 12,2%

14,5%

18,7%

0,0%

2,0%

4,0%

6,0%

8,0%

10,0%

12,0%

14,0%

16,0%

18,0%

20,0%

Economy Midscale Upper Midscale Upscale Upper Upscale Luxury

OTA % of Transient Room Nights*

2011 2012 2013 2014 2015

+35% +36% +57% +85%

*Economy & Luxury Chain Scale analyses in progress


Brand.com Grew 22% and OTA Grew 70% New York City 2011-2015

Hotels over $200 rate

Brand.com

OTA


OTA Surpasses Groups in ‘12 and Brand.com in ‘13 New York City 2011-2015

Hotels over $200 rate


NYC Commissions Rising 3x Rate of Revenue Growth Leveled off in 2015

95%

100%

105%

110%

115%

120%

125%

130%

135%

2011 2012 2013 2014 2015

Commissions Hotel-Collected Revenue Loyalty Investment Channel/Transaction Fees, Other

Hotels with rates over $200


The New Imperative: Net Revenue Metrics

Net Revenue

Revenue earned net of customer acquisition costs

Contribution %

(COPE)

Revenue generated from

each channel net of

commissions and

transaction fees

S&M Efficiency

Net revenue generated

for every $1 spent on

Sales & Marketing


+2 %

-1 %

Revenue Capture - Refining a Classic Metric: Net RevPAR

How much revenue are you earning net of acquisition costs?

$100

$110

$120

$130

$140

$150

$160

$170

$180

$190

$200

P&L RevPAR Guest Paid RevPAR Net RevPAR

Booking Costs

Marketing Costs

Guest

Paid

RevPAR

Hotel-collected RevPAR

Net RevPAR

(Guest Paid Revenue – Acquisition Costs)

Available Rooms Net RevPAR =



Guest-paid RevPAR

Hotel-Collected (or Traditional) RevPAR can look good while Net RevPAR declines.


Contribution by Channel with COPE % Contribution to Operating Profit and Expenses


Overall COPE%: 86.7% 90.55%

Optimal Channel Mix vs. Benchmark

My Optimal Channel Mix

Brand.com 12%

GDS 12%

OTA 26% Property

Direct 7%

Voice 34%

FIT 2%

Group 7%

My Hotel

Brand.com 15%

GDS 16%

OTA 22% Property

Direct 5%

Voice 30%

FIT 3%

Group 9%

Benchmark

Manage and Spend to

Achieve the Hotel’s Optimal

Channel Mix


Portion of the business that is vulnerable to Airbnb Lower rated hotels most exposed

OTA bookings

Transient bookings

Discount

Non-qualified rates

? Corporate

Not Group

Not Contract

Not Wholesale/FIT

Not Government

% of Room Nights based on an average for the 12 months ending July 2015

% of Hotel Room Nights comparable to Airbnb

Upper Midscale Upscale Upper Upscale Luxury

Solid: OTA, Transient Discount and Transient non-qualified room nights Pattern: Corporate room nights


Airbnb Supply & Hotel ADR

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Airbnb data reflects ‘hotel-comparable’ Airbnb listings, as defined on previous slide. Hotel data includes Upper Midscale, Upscale and Upper Upscale chain scales and reflects only the ‘hotel-comparable’ market segments, as defined on previous slide. * Guest paid ADR includes cleaning fees and the Airbnb service charge incurred by the guest at Airbnb listings. Guest paid ADR includes all opaque, merchant, wholesale or other pre-pay commissions paid by the guest at hotels. Airbnb listings with 2 bedrooms are treated as 2 occupied rooms. 3 bedrooms = 2.5 occupied rooms, 4 bedrooms = 3.5 occupied rooms, etc.


22 Hotel Companies

10 Ownership Groups

5 Management Companies

AH&LA Consumer Innovation Forum

Consumer Innovation Forum “Work Streams”

Confidential – Not to be shared outside AH&LA CIF membership

• Addressing increased intermediation and rising costs in a vital segment with

a search engine and booking engine

Groups and Meetings

• Addressing consumer deception and search engine practices • Getting hotels better informed on current & emerging distribution issues

such as new entrants, new business models and skyrocketing acquisition costs

Research and Education

• Enabling more new entrants to create more competition, more choices • Addressing the lack of control over critical hotel content (e.g. availability, rates, inventory, rich media, reviews) • Monetizing content to recover its merchandising value

Content Hub Changing the game

Reinforce connection between meeting planner and hotel

Better informed hotels and consumers

The European Commission Digital Single Market initiative just completed a consultation on the impact of online platforms

Accuracy of price & price advantage Transparency about business model Criteria for search results ranking Identification of advertising Authenticity of user reviews

The European Commission Directorate on Justice is clarifying the operating principles for price comparison sites & platforms

The Macron Law ended all price parity for hotels in France, and the German cartel office ended parity for HRS & Booking.com

33

The Italian Parliament voted in September to remove price parity: Senate ruling expected in Q1 2016

34

4 No, grazie 434 Si, per favore!

The European Hotel Forum is founded as a pan-European forum to research

hospitality-related issues and take action on them as appropriate through

legislative, policy, media and hotel industry educational venues.

European Hotel Forum

Confidential – Not to be shared outside of the European Hotel Forum membership

35

Scope of Work

• Legislative Support

– Review of online digital platform

– Consumer Deception – Unfair Commercial Practices Directive

– Antitrust cases • Including Google

• Research Studies

– Free Riding • Path Analysis Study starting in December 2015

– Economic Impact of Price Parity • Loi Macron study to start in Q2 2016

– Consumer Deception in Europe

– Google Antitrust case

36


Questions?

Mark V Lomanno

[email protected]

ehma cyprus 2016 - "drivers & trends of luxury hospitality"

Presentations & Public Speaking