Javier Benito was speaking before an
audience of reporters a few months ago, and he posed an interesting
question: How much revenue do guests generate in hotels? Typically,
the hotel industry calculates revenue per available room, or
RevPAR.
But Benito, who is
Starwoods executive vice president and chief marketing officer,
contended that RevPAR doesnt go far enough.
He was interested in
the amount of money guests are spending in a hotel on top of the
room rate, for things such as room service, spa treatments,
business center services, dry cleaning and phone calls.
Benito, who came to
the hotel industry after holding executive posts at Coca-Cola,
contended that when those other service purchases are added in,
guests generate far more revenue for a hotel than just the daily
room rate.
To a certain extent,
hotels already know that. Otherwise they wouldnt have services such
as business centers, spas and restaurants. Yet, determining the
total revenue generated during a guests stay remains surprisingly
elusive.
The room is a huge
part of [a hotels revenue], but there is also other revenue
generated in other areas, and we wanted to get an idea of what
those other things are, said Bobby Bowers, vice president of
Hendersonville, Tenn.-based Smith Travel Research, the lodging
industrys leading source for performance data. We definitely think
it is an important thing to track.
But gathering that
data, he said, is not simple.
Bowers ought to know.
His company has been at it for at least five years.
In gathering the
data, Bowers said that Smith Travel Research asked hotels for not
only the revenue from room nights sold but revenue from food and
beverage, such as room service, and other
revenue at the property that does not relate specifically to the
room.
Such information can
be tracked, since guests are likely to bill most on-property
expenses to their room.
But not every hotel
chain provides Smith with the data.
The participation
that we have is mainly on the upper-end hotels, Bowers
said.
That makes sense,
since upper-end hotels are more likely to offer services such as
spas and restaurants than economy or midscale properties. So they
are more likely to track them when gauging the overall performance
of a hotel.
Another difficulty in
tracking the data on individual spenders, Bowers said, has to do
with a lack of uniformity.
We run into problems
because the [different] property management systems are not
consistent, Bowers said. They dont classify things the same way. A
lot of it is much like the same kind of challenges when you are
tracking financials. If one company calls one thing an expense,
another company will call it a non-expense. There are a lot of
classification issues.
But that is steadily
beginning to change, as many hotel chains such as Hilton, Marriott
and Hyatt seek the same answers as Benito.
Over the past year or
so, there has been a push to have hotels report all of the
components of revenue, Bowers said. It is hugely important to do
it, but we havent gotten there.
The data could prove
crucial for the hotel industry, because determining how much guests
spend and where they spend it gives hotels the intelligence they
need to figure out how to get guests to spend even more.
That, in turn, can
open up all sorts of marketing opportunities.
If you think about
that and how you actually start to tap into and maximize that, you
are going to be very successful, Benito said. In order to do that,
you have to provide experience to people in the hotel that they are
willing to pay for.
Ultimately, the more
guests spend while in a hotel, the more valuable the room and the
more profitable a hotel is to investors.
In the meantime,
Bowers said, attaining that metric industrywide remains the Holy
Grail of how you benchmark the industry.