| Basic Yield Management

...... CONFIDENTIAL INFORMATION ......

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1 All of your e-Distribution Under One Roof...and Old School Customer | Basic Yield Management

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2 All of your e-Distribution Under One Roof...and Old School Customer Service | Basic Yield Management

All of Your e-Distribution Under One Roof... and Old School Customer Service

Document Overview— How to Implement a Basic Yield Management Strategy ......

Document Includes—

• Yield Management Basics

• Detailed Yielding Checklist

• Sample Yielding Strategy

• Research References

3 All of your e-Distribution Under One Roof...and Old School Customer Service | Basic Yield Management

A Basic Yield Strategy Checklist

How to Implement Research & Planning a Basic Yielding Strategy o Forecast Unconstrained Demand ...... o Target Potential High Yield Periods Effective Yield Management requires a o Review LXR Stay Controls combination of 3 simultaneous activities— o Monitor Reservation Systems o Adjust Original Plan as you go 1 ] Research 2 ] * Forecasting Unconstrained Demand 1 3 ] Stay Controls o Identify Historic Trends ...... o Define Market Segments o Evaluate Demand by Market Segment Basic Yield Management Planning Checklist o Utilize Historic Booking Practice Data Make a plan. o Define Competitive Set [usually 6-10 Hotels] o Competition Then, adjust o Subscribe to rate-reporting service o Changes to the Marketplace the plan o TIMS Reports [Travel Information o new Rooms based on Management Service.] www.timsreports.com. o Renovations - Upgrades actual results. o Property Closings

1 * Pricing Note: Unconstrained Demand = [ see LXR document “LuxuryRes Competive-Set Pricing Strategy,” [ Number of Rooms that have been Sold ] + [ Number of Rooms detailed pricing calculations ] that can be Sold ] - [ No Shows and Cancelled Reservations] continued...

4 All of your e-Distribution Under One Roof...and Old School Customer Service | Basic Yield Management

A Basic Yield Strategy Checklist

Market Trends Have a Yield Meeting at Least Weekly

o Overall Demand Patterns o Include all Key Managers and Staff o Weekends- up? down? o Review Previous Week’s Results o Midweek- up? down? o Preview Upcoming 30 Days o new Activity Patterns o Set Rates based on Competitive-Set o Check for “Tuesday Peaks” ADR analysis o Look Long Term— +30, 60, 90 Days Out Special Events o Discuss any Recent Changes o Set 90, 60, 30-Day Benchmarks o Analyze Area Events Calendar o Re-project Unconstrained Demand o Conventions Accurate o Increase or Reduce Stay Controls o School Vacation Schedules Competitve-Set o Reset Rates o Holiday Day-of-Week Patterns Pricing is o Document all Control Changes o Target Potential “High Return” Periods critical to the success of any Yielding Strategy.

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5 All of your e-Distribution Under One Roof...and Old School Customer Service | Basic Yield Management

A Basic Yield Strategy Checklist

SAMPLE— Adjustment to Original Plan ......

o Set Stay Pattern Control if... [see LXR documents “Event Yielding Strategy,” and “Yielding Peak Tuesdays”] you project Unconstrained Demand will be Greater o Set Minimum Night Requirements - 2 or 3 night than Supply based on— o Set Long term stay discount - 5 or more nights The ‘LuxuryRes • Historic Trend Information – Strong Demand o Set Closed to Arrival - No “peak day” Arrival Competitive-Set • Current Year Event Calendar Information o Set Inventory and Rate/Room Limitations Pricing Strategy’ o • Successful [or Budgeted] Marketing Efforts Hold-back Smaller Lower Priced Rooms provides o view Feature Rooms Closed [sold out) detailed pricing calculations. then... Ongoing Activity o Set and Adjust Rates based on Competitive-Set o Set Rates in Relation to Competitive-Set ADR analysis day-by-day analysis [see LXR document “LuxuryRes o Hold Frequent Revenue Meetings with Key Staff Competive-Set Pricing Strategy,” detailed o Compare Actual Occupancy with Original Forecast pricing calculations] o Check Reservation Status Continuously

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Endnotes References Definitions

1 “Lodging Demand for Urban Hotels in Major i Unconstrained Demand— Metropolitan Markets,” by Linda Canina Ph.D. [sometimes referred to as “Inelastic Demand” ] and Steven Carvell Ph.D. Unconstrained Demand is the level of demand that exists for a given perishable asset [hotel This premise is supported by industry data as a rooms] without reference to the levels and whole and most recently in the Canina/Carvell stay-controls that the seller will ultimately select Study. The study looked at demand trends in the to constrain it. top 22 urban markets in the U.S. 1989-2000 and included data from over 6,000 hotels. We highly ii ADR—Average Daily Rate is a measure of the recommend that all hoteliers involved in any as- weighed average price or rate for a given perish- pect of Yield Management read this study. able asset based on the number of units sold at Call the LXR office and ask for a copy to be the different price levels. In the Hotel industry, emailed to you. Room-Level ADR reflects the sale of identical rooms at different [for example, rack rate, 2 “Why Discounting Does Not Work: The Dynamics corporate discount, tour operator package rate, of Rising Occupancy and Falling Revenue etc.] ADR is usually calculated on the Property among Competitors,” by Cathy A. Lenz Ph.D. Level. The primary value of ADR is as a pricing and Linda Canina Ph.D. efficiency measure.

iii RevPAR­— Revenue Per Available Room. RevPAR is an important metric for measuring hotel room revenue performance, calculated as follows: total room revenues / rooms available. [Do not confuse RevPAR with ADR!)

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