By Jim Rozell , Founder and CEO
It seems that every day we are shown a new and exciting sale from hotel companies. Whether it is a “Make Your Break” sale or a “Global Sale” – discounted rates appear to be the new norm in the hotel industry. Summer has historically been “sale time” in the industry, which ironically is usually the busiest time for most of the US/CA.
So, all these sales are driving the price down – correct? Maybe or maybe not. To help the industry better understand the future of published rates Hotel Compete has created a tracking mechanism for overall rate growth.
As this will be the inaugural post about rate growth, we figured it would be a good time to let you in on how we calculate growth rates.
Each week we will be taking a snapshot of the future rate values for more than 46,000 hotels in the USA (we will be layering in other countries over time). Each hotel is considered “comparable”. Essentially it has a similar sample of “future” dates as it had last year. To put it simply, if it was open and published rates last year AND this year, it likely made the cut.
What are “future dates”? We sample each hotel for a 90 minimum day rate sample. That sample includes a dense population of the next 60 days and sparse snapshots of 30 random dates after 60 days from now. For example, hotel A is checked for each of the next 60 check-in dates and 30 “other check-in dates” after that through 330 days into the future. Any “special event” that is non-recurring is excluded (think Super Bowl).
Each date is “weighted” accordingly, so that the closer in dates are weighted more. Dates where the hotel is closed out are assessed using the last rate that was available before close out.
Rather than simply using a single rate for each hotel and averaging those prices, we weigh the rate by number of rooms at the hotel. This ensures that the 2,000 rooms at the Hyatt Chicago are more influential than the 45 rooms at the City Suites Hotel in Chicago.
The balance of the formula is a trade secret and while we aren’t as protective as Colonel Sanders, we are pretty protective. We’d share it, but then we’d have to…. well you get it.
Rate Trends by Hotel Class
We further have our own logic for hotel classification (we’d happily share that with you if you contact us). Essentially, we assign all hotels into 5 categories. The highest is luxury (think 4.5+ star) hotels and the lowest is roadside motels (think roadside, pull your car up to the door property in Paducah, KY).
We don’t generically group you into a category based on brand or your ADR. We categorize based on the services and amenities you list about yourself via the various on-line channels. If you have a spa, 3 gold star restaurants on-site, a concierge and award-winning artistic features, you are likely a luxury hotel in our world. If you offer a free hot breakfast, free parking, no restaurant, etc. You are probably in our “Limited Service” category and so on.
Luxury hotels, while pacing the industry in growth, are lagging in their historic growth rates (we’ll cover this at a later date). Basic Service Hotels on the other hand are REALLY struggling right now. This might be a result of the numerous sales currently in place, but that is a deeper dive.
Rate Trends By Brand
If we look at the data a Brand Parent Company level has (think all Choice Hotels, not just Comfort Suites). We can see that hotels whose portfolio falls largely in the lower end of the hotel class spectrum are lagging the rest of the industry in rate growth.
Taking a slightly deeper look by reducing the sample to ONLY the Limited Service and Basic Service categories, the pattern is clearer. And it is a reminder of how impactful a single hotel company can be on the overall reported industry results.
Over the next few weeks we will be publishing a few different snapshots of the trends and data. We will ultimately land on a set of metrics we will update weekly in some form of dashboard for our readers to reference regularly.
If you have any questions or wish to have access to a deeper dive (region, state, brand, etc.) we are happy to share some answers. Please send all inquiries to [email protected] (no we won’t try to sell you something – yet).