Hotels - Revenue Channels

Delivered March 15th, 2018. Contributors: Nicole C., Nitin P., Rachel L., Janelle S. and

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Holiday Inn Express - Revenue Channels

The exact channel revenue breakdown for specifically Holiday Inn Express was not publicly available in the annual and investor reports done by its parent company, IHG. Their reports were also not broken down by country. In order to search for this information, I thoroughly examined IHG annual and investor reports for the last 3 years, IHG and Holiday Inn Express websites, as well as third-party articles, surveys, and reports on the hotel industry. Instead, I was able to find IHG's global percentages of channel revenue contribution, which includes revenues from Holiday Inn Express for 2016:

Online travel agency (15.6%)
Global Distribution System (12.9%)
IHG Rewards Club (14.6%)
Call Centers (10.7%)
IHG Digital (21.4%)
Other channels (24.9%)

After finding similarities with IHG's and the top 50 hotel companies' channel breakdowns, it can be assumed that the breakdowns for Holiday Inn Express should not be too far from either the top 50 hotel companies' or IHG's channel breakdowns.

Through triangulation, I was also able to calculate that 25.91% of all revenue for Holiday Inn Express is from digital channels. Calculations are explained below. This may be due to industry trends towards digital media use and the mass popularity of its rewards program, which is offered on its mobile app and company website. The IHG Rewards Program was rated the #1 hotel rewards program in the world for 10 years by Global Traveler magazine.
Channel BreakdownAlthough the channel breakdown for specifically Holiday Inn Express was not publicly available, I was able to find the global channel breakdown of its parent company IHG, which includes revenues from Holiday Inn Express. IHG's global percentages of channel revenue contribution in 2016 were:

 15.6% OTA (Online Travel Agency)
 12.9% GDS (Global Distribution System)
 14.6% IHG Rewards Club Hotel Direct
 10.7% Call centers
 21.4% IHG Digital (Web & Mobile)
(for a total of 75.1%)

All other channels, including direct conventional walk-ins, could be assumed to be included in the remaining (100% — 75.1%) 24.9%.

IHG's data is quite similar to the data from the top 50 hotel companies. According to data from TravelClick, the channel breakdown of the world's 50 leading hotel markets in 2015 was as follows:

 37.9% Direct Conventional (walk-ins, meetings/groups, direct call-in)
 16.1% GDS
 12.0% OTA
 21.8% Web Direct
 12.1% CRO (Central Reservations Offices via call centers/email)
(for about 100% with discrepancies due to rounding)

Data for GDS, OTA, Web/Mobile Direct, and call centers were fairly similar, with differences (IHG % — Industry %) being -3.6%, 3.6%, -0.4%, and -1.4% respectively. Considering this insight, the channel breakdowns for Holiday Inn Express exclusively should not be far from either the top 50 hotel companies' or IHG's channel breakdowns.

The biggest difference between the data from IHG and the top 50 hotel companies is the isolated data from IHG Rewards Club, which is covered later in the brief. 
Digital ChannelsTriangulation was made to further support the assumption that a large percentage of Holiday Inn Express revenues came from digital channels.

• IHG reported that it had $4.6 billion digital revenues in 2017.
• Holiday Inn Express total gross revenue in 2017 was $6.7 billion.
• IHG's total gross revenue for hotels in 2017 was $25.7 billion.

We can calculate the percentage of IHG revenues that come from Holiday Inn Express by:

($6.7 billion / $25.7 billion) * 100 = 37.74%

Thus, Holiday Inn Express revenues make up 37.74% of IHG's total revenue. If so, we can then calculate 37.74% of the $4.6 billion digital revenues:

 $4.6 billion * 0.3774 = $1.736 billion

Now we can calculate the breakdown of digital channels for Holiday Inn Express:

(digital revenue / total revenue)
($1.736 billion / $6.7 billion) * 100 = 25.91%

This means that potentially 25.91% of all revenue for Holiday Inn Express is from digital channels. This may be due to the fact that IHG Rewards Club can be easily accessed digitally through its mobile app or direct website.

It could also be due to overall industry trends. According to Site Minder, "digital media is quickly becoming the only viable way for hotels to sell their rooms," and in 2017, "57% of hotel bookings were made online."
IHG Rewards ClubIHG aims to reinforce direct bookings (via its mobile app, direct website, call-ins, etc.) over indirect reservations (i.e. via online travel agencies). This is emphasized by its rewards club benefits only being available for direct reservations. This philosophy is applied to all of its hotel companies, including Holiday Inn Express. With 14.6% of IHG revenue coming from the rewards club, it should be assumed that the rewards program is a key revenue channel for IHG's hotel chains, including Holiday Inn Express.

 PRnewswire.com explains that "with more than 100 million enrolled members globally, IHG® Rewards Club is the first and largest guest loyalty program in the hotel industry." It was also named "Best Hotel Rewards Program in the World ten years running as voted by the readers of Global Traveler magazine."

In May 2016, IHG introduced its "Your Rate by IHG Rewards Club" promotion, which offered exclusive discount rates for rewards club members if and only if they book directly through IHG. By doing so, IHG sought to provide cheaper rates than the average online travel agency. 

In 2017, there were 2 million app downloads and bookings increased by 50%. IHG also integrated its rewards program with GrubHub and OpenTable, making IHG Rewards Club the "first hotel loyalty program to reward members with points for ordering takeout and dining out."

ConclusionAlthough the channel breakdown for specifically Holiday Inn Express was not publicly available, I was able to find the global channel breakdown of its parent company IHG, which includes revenues from Holiday Inn Express. There were similarities when comparing the data from IHG and the top 50 hotel companies, and it can be assumed that the overall channel breakdown for Holiday Inn Express would be quite similar to both sets of data. Through triangulation, I was also able to find that 25.91% of all revenue for Holiday Inn Express is from digital channels. This may be due to industry trends towards digital media use and the mass popularity of its rewards program, which is offered on its mobile app and company website.

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Fairfield Inn - Revenue Channels

Fairfield Inn and Suites is a 25-year-old hotel brand that is the second largest brand of Marriott International. The brand owns 775 hotels that are spread across the US, as well as India, Brazil, and Mexico. The brand will soon add 330 more properties under its umbrella, which are the largest number of projects that are in the pipeline of Marriott portfolio. The stepwise revenue breakdown, along with the required triangulations, of the hotel brand is presented below.
METHODOLOGYAfter thorough research through the official website of Fairfield Inn and Suites, no specific information related to the revenue breakdown could be found. However, it has been clearly mentioned on the official website that the hotel belongs to the portfolio of Marriott International, and the majority of its revenue details and loyalty program details are given in the name of Marriott International only. So, the research is based on the details provided for the Marriott International as a whole. Additionally, to dig further into the details of revenue breakdown and to carry out the required triangulations, the research relies upon a report on the US-based hotel bookings by Saber Hospitality Solutions, which partnered with Marriott International, in October 2016, to manage its distribution, operation, and reservation services for external channels. This is because there were no other revenue details provided on the official website of Marriott International. A deep dive into the research is below.
BRAND RELIABILITY Fairfield Inn and Suites is a 25-year-old hotel brand that is the second largest brand of Marriott International. The brand owns 775 hotels that are spread across the US, as well as India, Brazil, and Mexico. The brand will soon add 330 more properties under its umbrella, which are the largest number of projects that are in the pipeline of Marriott portfolio. With 54% of total Fairfield Inn and Suits bookings, Marriott Rewards Member Paid Nights program enjoys a loyal customer base. Due to lower booking costs, 60.7% of total reservations are made through Marriot's own booking channels, which includes its mobile and web platforms.  This is because its innovative platforms offer unique features like Apple Pay and mobile check-in across its full portfolio that also includes Fairfield Inn and Suites. The international brand was the first to adopt these innovative features in its mobile and web applications. Other than this, the brand's channels attract a huge customer traffic owing to its unparalleled loyalty program, which includes Marriott Rewards Member Paid Nights program. Both these programs offer exclusive booking rates to the members and offer to "Look No Further Best Rate Guarantee," that strengthens the customer's confidence towards the brand. Due to the seamless booking experience offered by its web and mobile platforms, the customers are encouraged to use the direct channels for booking instead of outside channels. Owing to huge customer demand the brand's two-chat feature on the mobile app is now available at more than 4,000 Marriott properties around the globe.
BRAND PARTNERSHIPUnder the preceding header, it was stated that 60.7% of total customers use Marriot's own channels for bookings and reservations, which also include customer's direct check-in at the property. So for the rest 39.3% customers, it is obvious that they use outside channels  to carry out the bookings. In order to leverage the profitability of the customers that use outside channels, Marriott International has partnered with Sabre Hospitability Solutions, in October 2016, to develop and distribute a new booking channel - www.MarriottWholesalers.com. The travel agencies and other booking service providers can now "search real-time hotel net rates and inventory globally to create tailor‐made packages for their customers." The international hotel brand chose Sabre Hospitality Solutions as their technology partner owing to its great market experience, quick service delivery and capability in the field of hospitality. Additionally, "Sabre Hospitality Solutions provides distribution, operations and marketing solutions" to more than 32,000 properties across the globe primarily through its Software as a Service (SaaS) model.  
BRAND REVENUE BREAKDOWN AND TRIANGULATIONSAccording to the official website of Marriott's Fairfield Inn and Suites, it was stated clearly that 60.7% of its bookings and reservations come from its own channels which include bookings made through its official website, mobiles, call centers, and direct check-ins. This means that 39.3% (100% — 60.7% = 39.3%)  of its bookings or reservations are made through outside channels. According to Sabre Hospitality Solutions (with which Marriott International partnered in October 2016), 34% of total outside reservations, in the US-based hotels, are made using the services of online travel agencies. So, this means that rest 5.3% reservations (39.3% — 34% = 5.3%) are made through outside travel agents and other external sources. Additionally, Sabre Hospitality also suggests that out of all the internal reservations, only 5% reservations account to direct walk-in at the property, and 18% account to the reservations through hotel's own call center. This means that out of the 60.7% of own channel bookings, only 37.7% (60.7% — 18% — 5% = 37.7%) are made through hotel's website and mobile platforms. Moreover, the official website of Marriott's Fairfield Inn and Suites indicates that 54% of total reservations are carried out by the members of hotel brand’s loyalty program, Marriott Rewards.
CONCLUSIONIn conclusion, the majority of Marriott's Fairfield Inn and Suites revenue (60.7%) comes from the bookings made through its own channels which include, the bookings made through official web and mobile applications (37.7%); through official call centers (18%); and through direct check-in at the property (5%). The rest 39.3% revenue includes the revenue generated from the bookings made through online travel agecies (34%), and through external travel agents and other channels (5.3%). Moreover, 54% of hotel's revenue comes from the bookings made by the members of its loyalty program, Marriott Rewards.

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Hampton Inn - Revenue Channels

IntroductionGlobally, loyalty programs make up the most bookings for Hilton, with 57% of bookings, followed by phone or walk in bookings, making up 33%.  Online Bookings, both directly through the Hilton website and through online travel agencies make up about 5.4% of booking each.  This represents a push for direct bookings by Hilton through encouraging app use and the loyalty program.

METHODOLOGYThere is no direct data for Hampton Inn's booking channels, mainly because it is a subsidiary of Hilton Corporation.  As a result, we've used Hilton Corporation information as a proxy for Hampton Inn.

BREAKDOWN OF BOOKINGS BY TYPE Globally
A. Loyalty Programs

Loyalty programs made up the largest percentage of total bookings, amounting to 57% driven by 71 million members.  

B. Online and Mobile

Online and mobile bookings amounted to 250 million unique site visits per year as of May 2017 and made up 5.4% of total bookings.

C. Online Travel Agencies

While there is no specific data as to the percentage of bookings through online travel agencies, online travel agency bookings usually equal online and mobile bookings.  This means that it is likely that such bookings also can safely be considered to equal around 5%.

D. Customer Care/Walk-Ins

Based on the percentage of bookings through other channels, it appears that up to 33% of other bookings take place either through calls directly to the customer care line or through walk-ins.  

WHY BOOKINGS HAPPEN THROUGH SPECIFIC CHANNELS Hilton started pushing hard for direct bookings, as opposed to bookings through external sites.  This was due to the extremely high commissions that these external sites can collect, often as much as 15% to 20%.

Hilton started offering perks such as free WiFi, points, etc. to customers who book directly through Hilton channels.  Additionally, the Hilton app allows a host of perks such as choosing a room upon booking, a digital key, and using a smart phone to control lights and HVAC in a hotel room.  All of this ultimately encourages use of the Hilton app.

CONCLUSIONIn conclusion, a majority of Hilton's bookings are either from the loyalty program or directly through their website or mobile app, with a small percentage coming from external websites.  A drive by Hilton to encourage guests to book directly and use the mobile app appears to be behind this move away from external travel sites.

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La Quinta - Revenue Channels

La Quinta earns its revenue, a net income of $152.0 million for 2017, through a mixture of online and offline channels. With 3 million active members providing half of its direct bookings, La Quinta Returns has successfully enhanced La Quinta's brand. While direct and offline reservations seem to be falling, La Quinta is building an effective online presence.
Revenue breakdown 2015-2017In its 10K SEC Filings, La Quinta breaks its revenue streams into five categories, listed from the smallest to the largest percentage:

1. Global Distribution Systems: Reservations made through corporate travel planners, offline travel agents, and reservation agents who offer group or special service bookings. For 2015, 2016, and 2017, revenue from global distribution systems accounted for about 5 percent of revenues. 

2. Call Center: Reservations made by guests who call toll-free numbers and speak with reservation agents with access to a central computer network. The percentage of revenues brought in by La Quinta's call center has risen from 8.6 percent in 2015 to 9.9 percent in 2016 and to 11.6 percent in 2017.

3. LQ.com: Reservations made by guests shopping for rooms on the brand website or mobile application. The percentage of revenues brought in by LQ.com has fallen from 19.2 percent in 2015 to 18.8 percent in 2016 and 18.0 percent in 2017. 

4. Online Travel Agency: Reservations made through third party travel websites. The percentage of revenues brought in by external online travel agencies has risen from 18.3 percent in 2015 to 21.0 percent in 2016 to 23.8 percent in 2017.

5. Property Direct: Reservations made by guests who call or walk into a specific hotel without a reservation. The percentage of revenues brought in by property direct reservations has fallen from 49.0 percent in 2015 to 45.3 percent in 2016 to 41.7 percent in 2017.
LQ.com and online travel agenciesIn November 2016, EVP and CFO Jim Forson reported that while many bookings are property direct, and 35 to 40 percent of La Quinta reservations are made the same day, La Quinta's revenue through online travel agencies has increased since it added Booking.com to its distribution channels. 

This shift reflects La Quinta's largely successful work toward engaging travelers as they do trip research. According to a Google case study, La Quinta has achieved a 131 percent increase in click-through rates, a 27 percent increase in conversion rates, and an 83-percent increase in conversion volume since it changed its online search strategies through bidding differently for customers who had visited LQ.com and developing a more comprehensive set of keywords. 
Loyalty program contributionAt a June 2017 Goldman Sachs conference, President and CEO Keith Cline reported that 80% of La Quinta's bookings are direct, and half of them are through the company's loyalty program. This loyalty program, La Quinta Returns, has recently been enhanced with new benefits such as "Redeem Away!", which allows participants to use points for a greater variety of purchases, and "Instant Free Nights," which allows participants to use mobile phones to redeem points for a free night when they check in. 

La Quinta has also used La Quinta Returns to optimize Google searches. It input customer data into Google AdWords with Customer Match, ensuring that La Quinta both showed up and was able to bid higher for its customers.

According to La Quinta's 2017 10K SEC Filing, La Quinta Returns boasts more than 15 million total members, 3 million of whom had earned or redeemed points within the previous 18 months. 
ConclusionLa Quinta's revenue comes from five main sources: property direct reservations, online travel agencies, LQ.com, its call center, and other global distribution systems. Of those five, the property direct reservations are most significant, at 41.7 percent, but have fallen by more than 7 percent over the past three years. The fastest-growing revenue source is online travel agencies, which has grown 5 percent over the same period. La Quinta owes much of its success to its loyalty rewards program and to its data-driven approach to online searches.