La Quinta - Revenue Channels
In this reponse, I have triangulated the data provided by the company to help estimate the amount of revenue coming from a particular channel. Below you will find detailed analyses of La Quinta's revenue, including details on specific pages of La Quinta's 2017 SEC filing report where the figures came from.
First, the composition of La Quinta Holdings Inc. revenue consists of five major sources namely, room revenues, franchise fees, management fees, other hotel revenues and brand marketing fund revenues from franchised and managed properties (p.51). These include both online and offline channels. However, their consolidated statement of operations does not include any data regarding revenues associated with management fees, which I suspect is being merged with one of the other four revenues they report.
La Quinta Statement of Operations 2017
The revenue figures below represent La Quinta’s overall operating performance and system-wide and segment occupancy rates for the year ending December 31, 2017. (p.56)
• Room revenues – $819,547,000
• Franchise and other fee-based revenues – $114,600,000
• Other hotel revenues – $18,972,000
• Brand marketing fund revenues from franchised properties – $27,511,000
• Total Revenues $980,630,000
“The percentage of comparable system-wide consumed room revenues” attributed to both internal and external revenue streams were (p.12):
• Property Direct – 41.7%
• Online Travel Agency – 23.8%
• LQ.com – 18.0%
• Call Center – 11.6%
• Global Distribution Systems – 4.9%
With these two analyses, we can calculate the fraction of revenue coming through what channel.
Property and Direct
This channel comprised 41.7% of the total revenue generated for 2017. Therefore, we can calculate 41.7% of total revenue to determine the total amount of dollar value generated from the property and direct channel.
(41.7/100) × $980,630,000 = $408,922,710
Online Travel Agency
This channel comprised 23.8% of the total revenue generated for 2017. Therefore, we can calculate 23.8% of total revenue to determine the total amount of dollar value generated from the online travel agency channel.
(23.8/100) × $980,630,000 = $233,389,940
This channel comprised 18.0% of the total revenue generated for 2017. Therefore, we can calculate 18.0% of total revenue to determine the total amount of dollar value generated from the LQ.com channel.
(18/100) × $980,630,000 = $176,513,400
This channel comprised 11.6% of the total revenue generated for 2017. Therefore, we can calculate 11.6% of total revenue to determine the total amount of dollar value generated from the call center channel.
(11.6/100) × $980,630,000 = $113,753,080
Global Distribution Systems
This channel comprised 4.9% of the total revenue generated for 2017. Therefore, we can calculate 4.9% of total revenue to determine the total amount of dollar value generated from the global distribution system channel.
(4.9/100) × $980,630,000 = $48,050,870
KEY TAKEAWAYS AND TRENDS
Despite the ongoing spinoff talks, La Quinta remains famous for its one of a kind loyalty program, which according to them, about 80% of their bookings are direct, of which half are via the company’s loyalty program. The program includes additional new features and enticements such as the ‘Redeem Away’ allowing visitors to redeem points and earn free nights.
To ensure the company leverages on return clients’ data, they use the La Quinta Returns to optimize Google searches. The program inputs customer data into Google AdWords with Customer Match, which ensures that when they search, La Quinta always shows up. This way, the company can bid higher for its customers and facilitate creating enduring relationships with repeat clients. On their SEC filing report, La Quinta noted that as of December 31, 2017, they had over 15,000,000 members in the La Quinta Returns loyalty program. Approximately 3,000,000 of those members are considered active customers who have redeemed or earned La Quinta points in the last 18 months (p.11).
Marketing remains crucial for every business, especially those in the hospitality industry. That said, La Quinta partnered with Independent Agency Horizon Media in 2016 which will oversee their paid media activation and communications planning across all channels. According to EVP and CMO Julie Cary, Horizon’s strategic thinking and data-driven insights impressed the company, and that they have the talent and tools required to sail across the ever-changing media landscape. The article also noted that La Quinta spent around $35,000,000 on measured media in 2015.
In conclusion, “the percentage of comparable system-wide consumed room revenues” attributed to both internal and external revenue streams were: Property direct (41.7%), online travel agency (23.8%), LQ.com (18.0%), call center (11.6%), and global distribution systems (4.9%) which equates to revenues of approximately $408,922,710, $233,389,940, $176,513,400, $113,753,080, and $48,050,870 respectively.