Latest / The Modern Hotelier / #320: Hotel P&L Benchmarking & The Impact of the World Cup | with Jan Freitag & Amanda Hite
Transcript
- The Modern Hotelier #320: Hotel P&L Benchmarking & The Impact of the World Cup | with Amanda Hite & Jan Freitag === David Millili: Welcome to a special episode of The Modern Hotelier. We are excited to be the media partner for the Hotel Data Conference here in Nashville at the Grand Hyatt, hosted by the CoStar Group. I got a chance to sit down with some of the leadership and discuss what's going on in the industry. We are here with Amanda Hite, president of STR. How you doing? Amanda Hite: I'm great. Thank you. David Millili: Thanks for sitting down with us. We've got a couple questions for you. So what challenge in hotel financial performance were you trying to solve with the new P&L benchmarking features? Amanda Hite: I think for hotels, you know, the challenge is how do we make money, and for STR, particularly for our benchmarking platform, we're building out our CoStar with STR Benchmark where we have all the data in one place. We know that our customers want to be able to minimize the number of platforms that they're going to, and we're trying to bring as much data into one place where owners, management companies, brands, asset managers can come together and have one source of truth where everyone's looking at the same data set and able to have conversations and make decisions around the same data set in the same place. David Millili: With the ability to benchmark more than 100 departmental line items, what new insights can hotel owners and operators uncover? Amanda Hite: Well, I think the important thing about being able to benchmark all of the line items, both revenue and expenses, is understanding what's happening in the market. You are oftentimes focused on, obviously, on your own hotel and your profitability, but there are market dynamics at play that you need to consider. You know, right now we're seeing rising costs in the undistributed expenses. So yes, margins are declining, and it's really coming from undistributed expenses. So being able to see is what happening at my hotel in that undistributed expense category, what's happening across the market, in another market, is it exactly the same? Like, there's-- that's super helpful. And then also getting to being able to benchmark yourself, not just against the market, but against a group of competitive set hotels too. David Millili: So how does profit flow analysis help hoteliers better understand where revenue is turning into profit or where it's being lost? Amanda Hite: Well, you know, top-- right now, top-line revenue is growing. We have seen in the last three months that the revenue growth is outpacing expense growth. And so yes, our GOP is going up, but margins are actually declining. So that's the important part of, like, every dollar of revenue that's coming in, understanding is it flowing through to the bottom line, and are we increasing our efficiency and profit margin as revenues are increasing? David Millili: All right. One feature that stood out is supporting the entire asset life cycle. Why is it important for owners and investors? Amanda Hite: Yes. In this environment where a lots of hotels are refinancing, you've got owners and investors looking for assets to buy. I mean, an important part of that is what is the profitability of this asset? The thing about the hotel asset class is, you know, you're making a real estate investment if you're the investor wanting to buy that piece of property, but hotels, you've got to have a great operating business, and you have to know that while you hold that asset, you can make money at it. And that's an important part of selecting what hotel am I going to go look at. And being able to have the profitability benchmarking in STR Benchmark allows that owner, investor, the management company, the asset manager all talking about it and being on the same page, setting the same kind of goals for each other. So I think that's important. And then the operations, you know, as you look at we're operating the hotel, making sure that we're staying profitable, growing the margins. And then when you're getting ready to sell, that you have all of the market intelligence throughout the, not just about hotels, but just the real estate intelligence that is offered through CoStar, and understanding what are investors looking at, who's got money, who's out there looking to buy. You can really see the entire life cycle of real estate in CoStar. David Millili: So if a hotel could implement just one takeaway from these new benchmarking tools, what would have the biggest impact on profitability? Amanda Hite: Well, I think, you know, our goal is to be able to provide the best information that is allowing hotels to understand their portfolio and, or their one property and benchmark it against the market, against a set of competitors to be able to make better business decisions. You know, the challenge for hotels and our companies that work with us is there is so much data that they're consuming every day. Not just within our platform, CoStar with STR Benchmark, but everywhere. So we're trying to build out tools that can help someone look at what they need to focus on to ultimately be able to drive revenue and profitability gains. And we're working on building out our STR analyst. It's our AI tool in our STR Benchmark part of CoStar. And the goal there is, like, we want you to have the STR analyst. When our clients call to talk to our analytics team, like, we want to be able to put that in product for them to be able to focus when you come into product every day knowing, like, "What are the hotels that are in my portfolio that are dragging my RGI this week or this month? Like, who's got the largest impact? Where is-- What hotel do I need to focus on to have the most gains in, you know, occupancy?" Whatever your strategy is, it will be different for everyone. But being able to do that in a natural language sort of search discussion in a chat within the product is going to be very important to be able to help focus. Everyone's got so much data, not enough time, and we need to be able to help focus on these are the pieces of data that you have to pay attention to. This is what's gonna make the difference in driving that revenue gain or profitability gain for your hotel. So we're really excited. We have not released it yet, but we're in active development to build out this in the product, and I know it's something that our customers have been saying, like, "Help us. Help us focus on where to go to make the best decisions for our property or our portfolio." So that's ultimately what we hope to do to help them drive more profitability in their business. David Millili: What makes HDC different, and why should someone in hospitality attend? Amanda Hite: I think what makes HDC different is, well, number one, this is the conference that sort of kicks off the budget season. That's why we've planned it this way. And I think it's-- I was talking to a lot of people over the course of the last two days. I think everyone comes here with such a curiosity for what's happening. We all get our own assumptions of, like, we know everything that's going on in the industry in our day to day. We feel like we know it. But attendees come here with this real curiosity of like, "What do I not know?" Or, "Let me meet and interact with someone who has a different perspective that maybe I've never considered or heard, and learn from that, have a takeaway, and be able to apply that to what I'm doing in my business." And you know, we have a wide range of roles and personas of people that are attend this conference, but ultimately everyone loves the data and has this, like, drive to learn more. It's good. I think every speaker that I talk to is like you, you really have to know what you're talking about because our attendees are always gonna ask the questions that you don't get asked anywhere else because they have this just real yearning for, to learn and engage and hear those perspectives. So it's different than, you know, no one's here doing a deal. David Millili: Right. Amanda Hite: When you think about most of our conferences across the industry are investment conferences, and no one's here trying to do a deal. You do have software providers, other vendors to the industry that are here and, but it's all tied to how do we learn more, to be able to take actionable decisions in our business. David Millili: Yeah. Amanda Hite: And have the best information to do that. David Millili: That's well said, for me, it's that conference when I talk to everybody, whether they're hoteliers or tech people, it's like I have to be there, and I have to get this information, and I'm learning something new every year, and it's important. Like you said, it's right before budget season, so, one that you gotta be at if you're in hospitality. Amanda Hite: Yeah. And I think it's the only one where you can say like It's like what data set should we be looking at? Or what If you could dream up anything. I mean, that's-- there's a lot of ideas here that are thinking about what else should we be doing to make us better as an industry to be more informed, to make better decisions in the future. And I don't know, I don't think you get that at a lot of conferences because they're more built on a specific sort of role and purpose, whether it's investment or, you know, sales and marketing or something like that. David Millili: All right. Well, this has been great. I thank you so much, Amanda, for sitting down with us. Yeah. We appreciate it. Thank you. Amanda Hite: I appreciate it. David Millili: I'm here with Jan Freytag from Costar. Thanks for joining us, Jan. Yeah, Jan Freitag: Thanks for having me, and thanks for coming to HDC. David Millili: So the president of FIFA compared the World Cup to a hundred and four Super Bowls, but your analysis suggests that it's closer to thirty from the hotel revenue perspective. And what really surprised you most when you looked at the numbers? Jan Freitag: So I think first of all, that statement was a little silly. Right. You know. So the Super Bowl is the largest cultural sports and TV event in America and happens once a year, and the impact is outsized to whichever market has it. So room rates grow by like a hundred percent, and RevPAR goes up a hundred and thirty percent. And for the FIFA games, there was definitely an impact. You know, room rates went up, I don't know, sixty percent in Kansas City or thirty percent in New York, but sometimes occupancy actually declined- David Millili: Right ... Jan Freitag: because the corporate meeting planners were like: "Whoa, you know, I don't want to be in Boston with the Tartan Army or wherever the Norwegian rowers, you know, are. We don't need our meeting to be right against that to compete for restaurant seats or hotel seats or airfare." You know, and so that the occupancy was lower or just grew very little was maybe a little bit of a surprise. And on the room rate side, I think the World Cup delivered. David Millili: So kind of on that same theme, give us some more insight. Why doesn't the World Cup generate the same level of hotel revenue as a Super Bowl despite the massive global audience? Jan Freitag: Yeah. So the global audience is an interesting statement, right? So we had hope. We, Brand USA, US Travel, we all had hoped that having access to this global event would increase the number of international travelers to the US. That did not happen. Right. So yeah, there were more people from, let's say, England that came to the US than the-- in June of twenty twenty-five, but there were fewer Germans, certainly fewer Italians because Italy didn't qualify. Right. You know, fewer Spaniards, for-- fewer Portuguese. So the international inbound numbers did not get a lift. So a lot of the demand was just local, and I think as the World Cup continued to build momentum, suddenly, you know, everybody talked about it, right? You talked to your hair guy about it. Yeah. And you suddenly, like, talked about it at work at the water cooler, and suddenly it was just really a thing. And so that, I think, drove a lot of the room demand a little bit later on. I think the early games, some of them weren't sold out because honestly, the draw just wasn't that interesting. Some of those early games or smaller teams, they just didn't have following anyways. Right. You know, and so I think that didn't really drive room demand. So the-- I think it was-- it's a little bit of, like, June was okay, but July really we saw the later games. That really when the impact on ADR happened. Also true because those were in larger markets, like New York saw the final, Miami saw the bronze medal game. David Millili: All right. So when you look at this, what are the factors that have the biggest impact on hotel revenue during mega events like the World Cup for the host cities? Is it match schedules, length of stay, or something else? Jan Freitag: Yeah, so I think the schedule mattered wherever Argentina played. You know, that was a really big deal. I think Miami did a really nice job just saying, "Hey, it doesn't matter who plays here. We're just having a party." Right. You know, and so I think people came to be part of the fan festivities and the fan festivals. I think the length of stay is an interesting question. So I talked to some operators who said in, you know, March, "Oh yeah, World Cup, baby," you know. So it's gonna be four-night minimums, six hundred dollars, and then they didn't see the demand pick up, and so they're like, "Uh-oh." And then they had to sort of take their restrictions down, and suddenly it was just, "Oh, just come on match day," you know, and you pay whatever you do, which was a much higher room rate. But I think a lot of people dropped their restrictions, and then they saw room demand pick up. So I think this idea of restricting what customers can do was not super helpful, especially the later stages. You didn't know where England was playing. Like, you knew that they probably advanced to the next round and the next round, but you're not gonna book a hotel because you don't know yet which city you're in. David Millili: No, that makes a lot of sense. All right, so what lessons can hotel owners learn and revenue leaders take away from this year's World Cup as they prepare for future large-scale events? Jan Freitag: So I think a couple of things. It's that the World Cup was five weeks, but really the impact was only on match day and the day before. So you had holes in your availability and corporate group demand really pulled back from the cities because they thought, "Oh, this event takes place for five weeks every night in this market." That was not true. So I think being proactive in your communications and being proactive in understanding where your demand holes are and to say, "Oh, hey, local group," you know, or regional group, regional meeting planner, "Hey, we're gonna have a need period because everybody sort of stays away from our market. Can you help us out? And we guarantee there won't be any fans around because there are no games around." I think that's number one. I think number two, yeah, I think pricing of course is stout, you know, on game day and the day before. But I think that the occupancy wasn't as strong, is sort of an indicator of people saying, "Oh, maybe I'm a little turned off by that room rate." So I think continuing to navigate that demand versus room rate teeter-totter, I think that continues to be important. And then I think just being able to, for the fans to have a full World Cup experience, if they're coming from another city, from another country, and they know nothing about your town, you know, just being able to say, "Hey, there are a couple of restaurant options, but... And also, we have a restaurant option here, and maybe we cater our menu a little bit more towards your palate of the country that you're, where you're coming from." David Millili: So looking ahead, do you expect future World Cups to become more valuable for hotels, or has this tournament redefined how we should measure the economic impact of global sporting events? Jan Freitag: I think global events like this, the Olympics, the Men's World Cup, the Women's World Cup, they are unique in that the whole world is watching and international travelers hopefully are gonna continue to come, but also the local travelers are going to, you know, local meaning like in a, a two-country, three-country radius are coming. That is going to continue. I think what we learned is that pricing can be pretty healthy. I think what we learned is that people are turned off by being too restrictive and having maybe too high a rate or having too much of, oh, you need four-night minimums or a certain minimum length of stay, that that did not help. Has it defined how we think about global events? I think because room rate's gonna continue to increase just because of inflation, I think every new event, and we're all now looking at the Olympics in LA, in two years, every new event will have more pricing power. And so I think maybe you can say that this is the beginning, you know, of a new definition of what success looks like, but it's gonna be around room rate. David Millili: For those who haven't been to HDC, what makes HDC different than other events? Jan Freitag: So HDC is a day and a half of hardcore data, so we call it internally PowerPoint Palooza because that's literally what it is. You know? It's dark rooms with PowerPoint. And we sell out every year. We added 100 seats this year from 720 to 820, and we still have a 50-person wait list because the people who are here care about one thing, and that's data, how it connects to revenue management, how it connects to sales and marketing. These are either local operations folks or regional operations folks who are knee-deep in the data, and they, of course they get the star port, the subscribers to SDR and to the SDR benchmark. But this allows them to take a step back and talk to fellow practitioners to say, "Hey, what are you seeing? Hey, here's how I'm tackling this. What are you seeing? Help me out, and let's do some sharing." Not, not on the pricing side obviously, but just on best practices, you know? And I think that's why this conference continues to sell out, because it's the right people talking about the right thing, and it's all about the data. David Millili: That's great. Thank you very much, Jan. Jan Freitag: My pleasure. David Millili: Thank you. That does it for another episode of The Modern Hotelier. We had a great time partnering with the Hotel Data Conference here in Nashville. I really enjoyed my conversation with Amanda and Jan, and whether you're a tech company, a hotelier, owner, management group, this is an event you need to attend, especially before budget season. Hope to see you again soon.