Extended-Stay Hotel

Challenge

A newly opened downtown extended-stay hotel was heading into the summer months with virtually no business on the books. The owner and brand team suggested that more volume corporate business and leisure packages be sold to increase the forecasted occupancy of 45% for July and August.

Solution

Gordon Carncross, a G7 member, analyzed the situation and determined:

  1. Volume corporate would require special rates beyond August and would dilute the Average Daily Rate (ADR) for the busy autumn months. It would also be difficult to get the companies to encourage its travelers to change hotels in such a short period of time. The off-season was six months away, which would give the Sales Team time to put group business on the books.
  2. Selling leisure packages made sense but they alone wouldn’t bring the occupancy up to the desired level.

The solution that Gordon recommended was to lower the Best Available Rate (BAR) rates by $40 and get the message out through all available channels to increase the occupancy. Then, after the summer was over the rates would be increased to their previous level.

Results

Month Occupancy Actual Occupancy Variance ADR Actual ADR Variance RevPAR Actual RevPAR Variance
July 83.9% + 38.9 pts. $138.71 – $21.29 $116.38 + $44.38
August 94.3% + 49.3 pts. $138.82 – $21.18 $130.90 + $58.90

 

The hotel increased BAR rates by $40 in September. Because the hotel didn’t have contracted low-rated volume corporate, they were able to see a substantial increase in ADR without losing occupancy.  September occupancy was 92.0%, ADR was $182.52 with a RevPAR of $167.92. The sales team did indeed book group business for the off-season and the hotel has since continued to lead its competitive set in RevPAR index for 5 years.