As cycle nears end, benchmarking required to be reborn
As cycle nears end, benchmarking required to be reborn
02 DECEMBER 2019 8:44 AM

The thinking and analyses of benchmarking continues to dominate hotelier discussion, and the industry’s most nimble minds are not satisfied the terminology, emphasis and focus have reached any type of apex.

MANCHESTER, England—Hoteliers are in no doubt benchmarking has been one of the major, if not the most major, catalysts of the last decade helping fuel hotel performance, and the data is only getting better and more involved, according to sources.

Now hoteliers are considering how benchmarking might change as the industry reaches what many consider the end of a cycle.

Speakers on a panel at the recent Annual Hotel Conference titled “Sitting on the bench or pressing it” indicated one goal is the analyses of rooms benchmarking, not just around the primary sale, but all the way through the profit and loss account.

That changes depending on the operating business model, sources said.

“At the core is the transparency of data, and doing something with it. It is output rather than the input,” said Jonathan Walker, managing director of the 40-room No. 15 Great Pulteney in Bath, England, and a former director of hotel performance and operations support, Europe, at InterContinental Hotels Group.

“It is not cash from benchmarking, but the cash you are missing if you do not have it, and the ability to articulate that to stakeholders,” said Kym Kapadia, chief commercial officer at Aprirose Real Estate Investment, which in 2017 bought from Bain Capital the 26-asset QHotel portfolio for £525 million (at the time equivalent to $706 million).

“We’re seeing a shift in relevance of the historic data. It is now about looking ahead, monitoring pick-up and pace and about the business on the books,” said Steven Cote, product manager at Forward STAR, a division of STR, the parent company of Hotel News Now.

Nick Turner, managing director at Owners Management Group International, a hotel-management company in the lifestyle and boutique space, said even more importance has to be placed on getting the competitive set right.

“Otherwise it is rubbish in and rubbish out. It has to be right on an asset-by-asset basis, and it starts with the right comp set,” Turner said.

“No one understands the business better than the GM on the ground, and it takes analysis and experience and talking to people,” he added.

Sources said hoteliers now are focused on analyses of revenue-generation indices, comparing individual revenue per available room with that of the comp set and seeing how that metric changes for individual hotels when the market changes.

Kapadia said keeping on top of the numbers has changed enormously as the number and range of stakeholders have increased.

“It can be subjective in terms of the numbers of layers of ownerships and their opinion, and you have to look at the unemotional numbers,” she said.

She said hoteliers still need to understand what they are and where they want to go before they get deep into the arithmetic.

“Learn from best in class and overtake them, and remember there always are a cycle and an exit,” Kapadia said.

“It is so important to have feasibility on any acquisition and investment. Yes, the forward-looking data is huge for the cycle, business plan and exit. Who knows, but with some insight and rationality, you’ll have a good guess.”

Hoteliers who are not part of large portfolios or multi-brand platforms still are being nimble in what data they want and how to get it.

“You have to have a vision as to where the product will be pitched,” Walker said. “We do a lot of research on product we might not know. We look at location, style, size, the obvious things, but also a few extra things … the quality side, being aware and curious as to what else is happening in your market.”

Unlocking potential
Hoteliers need to keep up to date, as third parties certainly are doing so, Walker said.

“Last year, we were looking to open a hotel in Bristol, and we had a really awkward two-hour meeting, as (the other party) knew far more than we did. Benchmarking has to be ingrained, as a deal will only be passed to the bank if all the steps are passed,” he said.

Cote said third-party collaboration of data and aggregating portfolios against one can provide more comfortability.

One problem with performance data is the obsession with RevPAR.

“All is more advanced in the rooms product. There is a need to be more clever in the rest of the building,” Aprirose’s Kapadia said.

Cote said taking meaningful information from net RevPAR, with distribution costs subtracted from rooms revenue, is difficult in a country such as the United Kingdom, where “about 70% of revenue comes in from rooms … and there is no definite statement as to what net RevPAR is.”

The meaning of net RevPAR also needs standardization, Cote said.

“You have to have a benchmark, which is why it is currently more blurry due to the variation of definitions. Someone has to take a stance. After all, someone must have come up with RevPAR? I do not know who or when that happened?” Kapadia said.

Turner added the industry has to continue to be supportive of the data and the terminology of it, and that thinking has to be adopted by universities and hotel schools.

Walker said he does not believe the franchise model will change quickly because it remains very focused on RevPAR.

Sources also said there is a danger of “analysis paralysis” due to there being perhaps too many tools to look at.

“Who is to say we should at any time be happy with our current state? And then how do we turn it into an actionable strategy, especially when you have multiple stakeholders to talk to?” Kapadia added.

Owners Management Group International’s Turner, who also manages the Laura Ashley hotel and tearoom brand, said metrics on leisure clubs—membership rates, attrition, cost of acquisitions—and F&B remain in their infancy, if they exist at all.

He added one shortcoming is that this operational excellence often comes at the expense of creativity and communicating with customers.

“A broad view is necessary, on consumer data not historical,” Turner said.

“I know what is good or not good for my business. It’s easy to look at the stats and the relevant costs, but it is not good enough only to look at the lowest costs. (One also must look at) the quality and what is right for the guest,” No. 15 Great Pulteney’s Walker said.

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