HAMA Sales & Marketing Efficiency Study Hospitality Asset
Managers Association
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kalibri LABS. Confidential & Proprietary Information Agenda
HAMA Sales and Marketing Efficiency Study Acquisition CostsA Deeper
Dive Frank Camacho, white paper author Solutions in process
Industry, Brand, Hotel
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kalibri LABS. Confidential & Proprietary Information
Booking Brands and Stay Brands
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kalibri LABS. Confidential & Proprietary Information HAMA
Sample P&L Database 468 hotels from 2009-2012 Data elements
Total Sales and Marketing Spend Commission Expense (retail only)
Total Revenue Room Revenue Number of rooms Group/Transient split
Same store340 hotels
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kalibri LABS. Confidential & Proprietary Information Chain
Scale Hotel Chain ScaleNumber of Hotels in Sample Luxury69 Upper
Upscale120 Upscale209 Upper Midscale69 TOTAL468
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kalibri LABS. Confidential & Proprietary Information
Management Type Number of Hotels in Sample Franchise/Mgt Company295
Brand Managed162 Owner Operated11 TOTAL468
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Location Type Number of Hotels in Sample Urban195 Suburban145
Resort46 Airport41 Interstate/Highway30 Small metro/town11
TOTAL468
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kalibri LABS. Confidential & Proprietary Information Size
of Property Number of Guest Rooms Number of Hotels in Sample <
150193 150-299149 300-44973 450-59923 600+30 TOTAL468
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Segmentation Dominant Business TypeNumber of Hotels in Sample
Transient408 Group60 TOTAL468
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Partial Chain Representation ChainNumber of Hotels in Sample
ChainNumber of Hotels in Sample Marriott202Fairmont19
Hilton92Independent13 Hyatt36Four Seasons12 Starwood28Kimpton11
IHG23Denihan9
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kalibri LABS. Confidential & Proprietary Information
Commissions Rise at 2x the Rate of Revenue Growth (retail
commissions only)
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Contribution to Operating Expenses and Profit RangesNYC 2012 Cost
TypeLow ContributionHigh Contribution Commissions Only 80%90%
Commissions + Sales/Marketing 70%80% 2013 Kalibri Labs Source:
Kalibri LabsNYC Prototype test
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13 HAMA White Paper: The Rising Costs of Customer Acquisition
Upper Upscale & Luxury Segments F Camacho Consulting
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14 Topics Background Room Revenue and Acquisitions Costs
2009-2012 Sources of Cost Growth Fee examples Growth by Category
Comparison to Franchised properties Growth Varying by Brand
Recommendations
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15 Background and Approach During economic recovery costs
typically rise at a slower pace than revenues concerns this wasnt
happening Analyzed P&L for 6 properties in detail over a 4 year
period Developed framework to examine costs of customer acquisition
Started with 468 U.S. and Canadian properties in the Kalibri
database representing over $7 billion in revenue Focused on 104
upper upscale and luxury, managed properties with brand
affiliations
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16 Finding 1: Flow Through Was Not Improving - Customer
Acquisition Costs Rose Almost 23%
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17 Acquisition Costs Can Be Driven Centrally or By Local
Decisions Acquisition costs divided into five categories, two
external and three internal: External costs: Brand allocations
including those for Brand marketing, advertising, promotions,
national and global sales offices, and loyalty programs. Third
party commissions both transient/travel agent and group
Internal/Property Costs: Local/property marketing and sales
programs Local/property marketing and sales staffing and related
expenses Other local expense including reservations
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18 External Fees Related to Customer Acquisition Vary in Type
and Amount By Brand Charge CategoriesFairmontFour Seasons
IntercontinentalMarriottRitz Carlton Westin Reservations
Brand/CROxxxxxx Outside/GDSx(included above) xxxx Marketing
Marketing Feexxxxxx Performance/Online Marketing xxxx Ad
Co-op/Clustersomex Loyalty Program FT/Transientxxxxx Group/TAxxxxx
Sales GSO/NSO(in Brand) xxxx Cluster/Regionxx Referral Programsxxx
Commissions Transient TAxxxxxx Groupxxxxxx
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19 Finding #2: External Costs Grew 54% Faster 37% for brand
allocations and 34% for retail commissions
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20 Finding #3: Local Marketing & Sales Budgets were held
down
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21 Franchised Properties Saw Even Greater Increases in Third
Party Commissions
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22 Finding #4: Rising External Costs Further Tilt the Balance
of Spending 2009 Acquisition Costs: $348MM2012 Acquisition Costs:
$424MM 49%
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23 Finding #5: Total Acquisition & Retention Costs Vary
Widely By Brand
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24 Third Party Commissions Account For Much of the Variance in
Acquisition Costs Third parties can contribute to revenue growth
However, dont drive revenue increase as fast as costs growth
Different brands approach them quite differently Three brands grew
revenue faster than commission expense
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25 Finding #6: For the top 10 Brands included in this study,
Commission Growth ranged from 10% to 72% 3 Brands Grew Revenue
Faster than Commissions
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26 Conclusions 1.Customer acquisition costs should be a major
discussion item between Owners and Brands. 2.If Brands become less
able to deliver uncommissioned revenue, they have a lower economic
value 3.While costs have been offset by reductions in local
spending, owners shouldnt allow local Sales and Marketing to be
crippled 4.In new management agreements, customer acquisition costs
must be clearly stated and ownership has the right to approve
incremental fees 5.Tracking the costs of customer acquisition
should be an ongoing focus for every property 6.Luxury and Upper
Upscale segments were studied, but all segments should be
concerned
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Sales and Marketing Spend Declining in Efficiency
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kalibri LABS. Confidential & Proprietary Information HAMA
Study Metrics* Net RevPAR Revenue (Commissions + Total Sales and
Marketing)/available rooms Net Sales and Marketing Efficiency How
much net revenue is generated for every $1 spent in sales and
marketing? Revenue - Commissions Total Sales and Marketing * ~500
hotels; P&L data only; retail commissions only
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kalibri LABS. Confidential & Proprietary Information Net
Sales and Marketing Efficiency
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kalibri LABS. Confidential & Proprietary Information
Notable Highlights Branded luxury hotels were more efficient in
sales and marketing spend than the branded upper upscale However,
independent and small chains outperformed branded luxury hotels in
sales/marketing efficiency Luxury hotels were 11% better in S&M
Efficiency than the Upper Upscale, but with a 100% premium in ADR
and revPAR that was a surprisingly narrow margin; they were 18%
more efficient in sales and marketing efficiency when total revenue
was considered Commissions in upscale hotels grew more quickly than
other chain scales between 2009 and 2012 but it was a close contest
Group hotels held steady in S&M efficiency from 2009-12 and
were 9% more efficient than transient hotels (based on total rev);
transient were more 19% more efficient on rm rev; transient
declined over time largely due to the steep rise in
commissions.
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Solutions: Industry, Brand and Hotel Hospitality Asset Managers
Association
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kalibri LABS. Confidential & Proprietary Information
Measure and Manage Major brands have agreed to share data to create
these metrics for brand, hotel and industry use Change the metrics
to evaluate hotel performance each month; if you want Net Revenue,
then reward on Net Revenue Contribution to profit Net RevPAR Net
Sales and Marketing Efficiency
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kalibri LABS. Confidential & Proprietary Information
Contribution by Channel Commissions and Transaction Fees Erode the
Revenue that Flows Through to Profit COPE: 85.7% 2013 Kalibri
Labs
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kalibri LABS. Confidential & Proprietary Information
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HAMA Sales & Marketing Efficiency Study Questions?