Lodging Magazine April 2017 : Page 25

OWNER’S MANUAL ›››››››››› COST OF COMMISSIONS hotels would deal directly with the meeting planner, and, for the most part, not need to pay a commission. Commissions paid as a percent of rooms revenue were lowest at extended-stay properties (2.1 percent). In this segment, it appears that hotel sales managers are still able to deal directly with the corporate travel execu-tives who book the long-term stays. Given recent trends in the convention segment, extended-stay hotel owners and operators should monitor intermediary activity in their segment going forward. Because of the di erences in room rates, the dollar value of the commission paid by a hotel is infl uenced by the average daily rate (ADR). Therefore, it is not surprising that commis-sion payments measured on a $1 per occupied room On average, (POR) basis tend to follow commission the ADRs achieved by the payments are the various property types and chainscales. second largest In 2015, convention expense within the hotels recorded the highest rooms department, commission POR payments among all the property behind labor costs. types ($8.14), followed by resort hotels ($6.22). When analyzing commissions POR by luxury chainscale, prop-erties paid the most ($10.25). Not only do luxury hotels and resorts achieve high ADRs, their guests are most likely to use the services of a travel agent. At the low end of commission POR payments are extended-stay ($2.13) and limited-service ($3.35) prop-erties. These hotels achieve relatively low ADRs, and their guests may not be using intermediaries as much as other travelers. LOOKING FORWARD COMMISSIONS PAID BY CHAIN SCALE Dollars per occupied room* $11 $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $0 All Hotels Luxury Upper-Upscale Upscale Upper-Midscale Midscale Economy $10.25 $5.91 $4.72 $3.57 $3.50 $2.90 $1.71 COMMISSIONS PAID BY PROPERTY TYPE Percent of rooms revenue* 5% 4.5% 4% 3% 3.1% 2.7% 2.1% 2% 2.5% 3% 2.8% 1% 0% All Hotels Full-Service Limited-Service Extended-Stay Suite with F&B Resorts Convention In an e ort to measure the impact of intermediaries on the fi nancial performance of hotels, the American Hotel and Lodging Association’s Consumer Innovation Forum is working with several hotel franchising, ownership, and management companies to establish metrics that measure the “total acquisition cost” of hotel revenue. Commissions are just one component of this equation. Other components include reservation fees, marketing costs, and other expenses incurred to secure revenue. Going forward at CBRE, we will be able to monitor annual changes in the commissions paid to intermedi-aries. This will shed some light on the ability of hotels to control this cost by negotiating more favorable contracts with the intermediaries or increasing the frequency of guests booking directly with the hotel. ■ Robert Mandelbaum is Director of Research DOLLARS SPENT BY PROPERTY TYPE Amount spent on commissions per occupied room* $10 $9 $8 $7 $6 $5 $4 $3 $2 $1 $0 All Hotels Full-Service Limited-Service Extended-Stay Suite with F&B Resorts Convention *2015 $8.14 SOURCE: 2016 Trends in the Hotel Industry $6.22 $4.72 $5.24 $3.35 $2.13 $3.66 Information Services in the Atlanta o ce of CBRE Hotels’ Americas Research. To purchase a copy of Trends in the Hotel Industry , please visit pip.cbrehotels.com, or call (855) 223-1200. APRIL 201 7 LODGINGMA G A ZINE . C OM 25

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