Split STAR
Dual Personality of STAR Report

The STAR Report is still the most powerful revenue management tool for the lodging industry. This Report can be even more productive if closely analyzed and, as with any other set of numbers it can also be misleading if misinterpreted.

The core analytical base of the Report is the Competitive Set (CompSet). It consist of a group of at least four competing hotels selected by hotel management. The data collected from this competitive set produces a set of numbers that enables hotel operators to compare their property's performance with direct competitors and manage rates accordingly.

To protect the confidential information of each hotel, the STAR Report uses averages instead of actual figures provided by each competitor. The receiving hotel is then able to view the collective results of the competitive set.  Hotels tend to use tools like the Competitive Assessment Tool to choose the hotels that most likely match their hotels. This may pose a dilemma if every hotel behaves exactly like the receiving hotel: Imagine five Holiday Inns each with 150 rooms, built at the same time, with the same quality of service, the same furniture and in the exact same location. Some could consider this perfect Comp-Set. Still others would consider it a useless Set, since it will not give you any real direction and cannot gauge rate/offer responsiveness.  Since there is no set of exact hotels in the same market, the Comp-Set is compromised of a  range of hotels with different characteristics that represent the receiving hotel's main competitors. The diversity of the Comp-Set hotels is actually advantageous. It helps the property to analyze market responsiveness to rates, offers and restrictions if the diversity of the hotels is analyzed correctly and  if their split personalities are taken into consideration.

Most Comp-Sets are split into two sets of data for each category if the Comps are selected correctly. The most commonly used STAR Report is the Day-STAR, or weekly STAR. If the split personalities of the CompSet are not taken into consideration, enormous revenue potential may well be lost.

Utilizing the split personality of the STAR Report has the potential to increase a 100-rooms hotel revenue by hundreds of thousands of dollars in just one year.

In our sample l, the Comp-Set is selected correctly and most of the properties included in this Set manage their rates and inventory correctly, although often that is not the case.  Additionally, in this sample, the Tract and Comp are running parallel to one another for the purposes of our discussion.

Table 2

The hotel's objective is to increase the RevPAR index to 100% or higher. The first instinct for this hotel is to reduce the gap between the ADR index and the OCC index, or reducing  the rate. However the historical trend does not support this approach, when YTD rate was higher, it did not reduce the YTD OCC.  

Meanwhile the market has been soft for the last 12 months, and OCC has averaged around 65%.  Reducing rates across the board would be a good option if the Tract was strong, but it is not, and it has been running the same as the Comp-Set.  The next option is to change the rates for the  weekdays and weekends. The Sample hotel's OCC is very low for the weekends, and so is the Comp-Set.

A review of the daily rates and occupancy of the STAR indicates that the ADR for the COMP has increased slightly. The OCC for the COMP has dropped, indicating a smaller demand,  and this fact justifies the drop in OCC.  

Historical trends and the current STAR Report do not support reducing the rate on any day of the week. This would mean leaving money on the table, and hotels do not tend to “leave money on the table.”

In the STAR Report above, the first reaction would be to reduce the rate in order to increase occupancy.  However, likely most hotel operators would refuse to do so, since the Comps1, 2, 3 and even 5 are selling at a higher rate than the property (positioned as # Comp 4).  Most franchisers and revenue managers consider an increase or reduction in the rates beyond STAR data a cardinal sin,  particularly when a rate shop would also advise against a rate reduction.  The conclusion is that the hotel is losing OCC for a reason other than rates.

If it is not the rates, then what is it? The focus turns to expensive guest service issues, sales, and added values. In their quest to solve the issue, hotels sometimes hire companies that claim they can train staff to sell  more rooms. Hotels are hire additional sales staff and offer more food or free amenities to the guests. None were necessary, they just failed to analyze the data fully and implement accurate rate strategies. Hotels can fork out cash in this manner for years while the OCC remains unchanged.

However the hotel is still happy, because at the end of the day the RGI/RevPAR Index is around 100% with a higher ADR Index. That is perfect the combination; maximum revenue with a reduction in overhead. Right?

Not really. This hotel is actually losing money on both ends; a- By lost revenue due to lack of correct information and b- By forking out cash in areas where they really don’t need to be spending.   

STAR leaves out the data from each individual hotel in the Comp Set, but our hotel can compile a data sheet with the ADR/OCC of each individual hotel in the Comp. Adding these internally produced data and combining them with the STAR Report is quite possibly the most productive revenue management tool a hotel could ever hope for.

Cross referencing the internally collected data in the Comp-Set with the STAR Data is absolutely critical. Because the STAR Comp-Set has a split personality, this is a characteristic that the STAR Report will not be able to detail.

In this case, we have used various methods to gather data on each individual hotel in the Comp Set.  We have averages for their daily OCC and rate for weekdays and weekends.

The resulting data sheet is as follows:

The most important discovery is that the market changes from the weekdays to the weekends.  Most of the Comp Sets do. The Comp Set hotels behave differently on weekdays and weekend. In this instance; Tier A of the Comp Set, which is Hotel 1, 2 and 3, dropped both in rates and Occupancy, while Tier B experienced increases in both rates and occupancy.  Those of us in the industry know of hotels that sell out Monday through Thursday and are “dead” on the weekends. Many have become accustomed to this trend and regard it as norm.

In this example we are competing with Tier A hotels on weekdays and with Tier B hotels on the weekends. We are actually managing two hotels in the same location, one on weekdays and one on weekends.  Our hotel has two different segments of guests on weekends and weekdays. Theirs expectations are different and their responsiveness to rates is also different.  We have to set two establish two sets of  policies for rates, services, amenities and approach; one for weekdays and one for weekends. This critical distinction would not be apparent if a hotel relied exclusively upon a standard STAR Report.  

In this case, the property in question should in crease rates on weekdays by $10 and reduce rates on weekends by around $20. This will easily add another 10-25% to our RevPAR index.

This is not just a theory; We have implemented this approach in three different hotels:

A  CHOICE property: RevPAR Index increased by 20% within a few months

An IHG property: RevPAR Index increased from the mid-80s to over 140% in 2.5 year period

A Marriott property (a current project): Room Rev for Jan 2013 was close to 70% ahead of Jan 12 while Comp is moving backward, property is continuing the same trend currently.

Some changes were also made in the areas of operations, sales and marketing, and PR. However, the lion's share of improvement in terms of income was the result of utilizing the mathematics of successful rate management, Split STAR and application of supply and demand principals in the right appropriate segments.

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A  CHOICE property: RevPAR Index increased by 20% within few months
in a CHOICE property.

RevPAR Index increased from mid 80s to over 140% in 2.5 years period in an IHG Property.

Room Rev for Jan 2013 is close to 70% ahead of Jan 2012 in a Marriott property while Comp is moving backward.

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