Starwood Preferred Guest - Are you a High Revenue Guest?

Walking through the lobby the other morning I overheard another guest proclaiming his status and how much money he spent at this specific property. It got me thinking, what dollar amount makes you a true "High Revenue Guest"?

Personally, I know a colleague of mine did a long stint at a Chicago property totaling 60K (F&B included). He's so involved at that property that they ordered specific fitness equipment per his request.

If you are one of these people, how much (if you don't mind), and do you notice any special perks?

I thinks there's a distinction between revenue and nightly revenue. I probably spent 50-60K at one property early this decage, but that was over two years. My company had very good negotiated rates and I've spent the last year mostly in a Westin and FS Marriott at $130-150/night - probably not high revenue vs. their ADR. (But I do know the screen shows "Top 50 Guest" at one of the properties when I check in, so it's worth something).

I thinks there's a distinction between revenue and nightly revenue. I probably spent 50-60K at one property early this decage, but that was over two years. My company had very good negotiated rates and I've spent the last year mostly in a Westin and FS Marriott at $130-150/night - probably not high revenue vs. their ADR. (But I do know the screen shows "Top 50 Guest" at one of the properties when I check in, so it's worth something).

This is a good distinction - from the property's perspective, I'm sure high revenue guests are great, although wouldn't they really prefer those that are also high margin?

What is your def of high revenue? I spend over 10K on hotels/yr, with a stay or so of $2K in the mix. Never got anything special for dropping 2K+ at a hotel. Maybe because I'm not a corporate spender.

I do wish SPG would add a spend threshold to reach Plt.

This is a good distinction - from the property's perspective, I'm sure high revenue guests are great, although wouldn't they really prefer those that are also high margin?

No expert on hotels, but I'd guess that most hotels==> largely fixed cost business==> high revenue=high margin

Some hotels have a list. I know I am #6 of 50 and a colleague of mine is #2 for the quarter.

I'm at about 15K so far mostly at Sheraton and W HK.

I'm getting a goodies plate besides my 500pt plat amenity at W HK, is that a perk?

What is your def of high revenue? I spend over 10K on hotels/yr, with a stay or so of $2K in the mix. Never got anything special for dropping 2K+ at a hotel. Maybe because I'm not a corporate spender.

I do wish SPG would add a spend threshold to reach Plt.

I could be wrong, but I'd suspect $10K/year would be quite a bit lower than the spend threshold if they did have one.

No expert on hotels, but I'd guess that most hotels==> largely fixed cost business==> high revenue=high margin

Agree on the fixed cost nature of the business. My thought was that corporate rates for example may drive that margin way down. But I have no idea what the cost may be to operate a hotel on a per room per night basis (I would imagine that the property knows this, and that there is a significant amount of variance).

Regardless, I would assume that the property would be hoping that even low margin on room rate customers will utilize high margin services like room service.

Maybe margin by customer is just too hard a metric to track; revenue per customer is certainly easier.

I think I'm an invisible high revenue customer. I say invisible because my travel is mostly for recreation, so my wife and I rarely return to the same hotel. So, take all this in the context of no ongoing relationship with the hotel.

Before the latest economic downturn, I'd book whatever the best room the hotel would sell to me online that cost $2000 a night or lower. This has ranged from the Presidential suite to a standard room. My business is seriously down these days, so now I'm down to $1000 a night or lower. That still can range from the Presidential suite to a standard room, obviously depending on the hotel

I would say, on average, my treatment as a high revenue/margin guest has been mixed, at best.

The positive: The staff is _always_ nice to us. I really don't know how far a hotel would go to satisfy requests, as we generally don't make any. So any perks are things that happen without us asking. That said, the perks we have received from various hotels include:

A welcome note from the manager.

On rare occasions, we have had a fruit bowl waiting for us in the room.

On rare occasions, we have had the manager call us in the middle of our stay just to make sure everything is going OK.


The negatives:

Obviously, the money;).

Seriously, the biggest hassle from my POV is that booking the nicer rooms can be a nightmare. I used to be willing to call hotels to book, and I quickly learned that most hotels are flat out insane when it comes to selling their best rooms. A typical scenario is perfectly illustrated by the following sequence which happened at the Royal Pacific hotel at Universal studios in Orlando.

I call up to book a room that is listed on the hotel's web site as only available via a telephone reservation. The hotel personal have no idea what room I'm talking about, but they agree to research it after I tell them what web page to look at. Half an hour later I get a call back that only one person can actually book that room, and they are not available, but will contact me. Three days later, that person calls me and I book the room. When we get to the hotel, the front desk personal don't know how to check us in because there is something "special" about the room, that they don't know how to handle. We have to wait half an hour because only one person knows the unusual procedure of checking us into that room.

Now, none of this is the end of the world, but let's think about this. I was paying about six times what a normal room cost. And because of this, the hotel:

1) Would not let me book the room on-line.
2) Flat out told me I didn't know what I was talking about when I first called them.
3) Took 3 _days_ to call me back to reserve the room.
4) Made me wait at the front desk half an hour to check in.

If I had booked a plain Jane room, NONE of this would have happened. I've noticed that when a hotel will sell you the room on-line, none of this kind of nonsense happens. Hence, my rule, I won't select any room I can't book on-line. This still leaves me frustrated because the average hotel will describe the wonderful suites they have, but they won't sell them to me online, so I won't touch them.

The bottom line is. The frustration of booking what I want overwhelms the minor positives and makes me feel treated significantly worse as a high revenue guest than I felt as a low revenue guest.

Meeting organizers are probably the highest-revenue guests a hotel can have. Five digits is a very high spend for a single guest, but a cheap meeting.

The suites horseguy mentions may be reserved for meeting organizers, speakers, or brides, so the property may be checking that they don't need it for those purposes before selling the room.

I spend about 18-20k $ at the same hotel a year (it's a hilton). Some of the perks I received were:

1. VIP invitation to an ATP tournament the hotel was sponsoring with free food and drinks and court side seats
2. weekly room upgrades when available without my profile being set to that
3. fruit basket
4. written welcome note by the manager

and one which is very important to me...I ALWAYS get a room no matter if the hotel is completely booked or even overbooked. They have always managed to make room for me. ^

I think one of the reasons why many hotels pamper their high revenue but low margin guests is that a lot of times they are key to the hotels' profitability. They help filling up the rooms in low season and "paying the bills."

and one which is very important to me...I ALWAYS get a room no matter if the hotel is completely booked or even overbooked. They have always managed to make room for me. ^

I think one of the reasons why many hotels pamper their high revenue but low margin guests is that a lot of times they are key to the hotels' profitability. They help filling up the rooms in low season and "paying the bills."

My girlfriend works at a hotel and your last point there sums it up. They make sure that their frequent guests always have rooms even during times like now when they could sell that room to a leisure traveler at 2x or 3x what the corporate rate is, because come wintertime when business is down and theres basically no leisure travelers, those frequent guests are the ones who are still bringing in some revenue and paying the bills. The other hotel the owners have does not have this base built up yet and they were having days last winter of 10 guests or less in the hotel of 80some rooms. Not the way to bring in any sort of money.

I could be wrong, but I'd suspect $10K/year would be quite a bit lower than the spend threshold if they did have one.

Then again, one could do 25 mattress run stays for, say, $70/night, and get Platinum - all for a cost of $1750. Achieving platinum is relatively cheap but, yeah, I don't travel like that either ;)

...The suites horseguy mentions may be reserved for meeting organizers, speakers, or brides, so the property may be checking that they don't need it for those purposes before selling the room.

In some cases (e.g. the single Presidential suite in a hotel), I'm sure you are correct. In most cases I've personally observed, this is just pure silliness on the part of the hotels. For example, the Hyatt Regency Grand Cypress hotel's factsheet says that the hotel has 750 rooms and 67 suites. None of the 67 suites can be booked on-line that I can figure out. This is typical of many hotels. Last fall I was booking a family get together in the Orlando area, and ran into this insanity with almost every hotel I looked at (including SPG's Dolphin and Swan hotels).

When I used to work at a Starwood property, most suites were blocked from booking on-line due to issues with how the website would determine availability. I originally posted this in this thread (http://www.flyertalk.com/forum/starwood-preferred-guest/932493-booking-suites-line.html).

It used to be (and perhaps still is) a logistical issue. Let's say that the Westin Peachtree has 40 suites:
* 25 Master Suites
* 10 Executive Suites
* 4 Governor Suites
* 1 Presidential Suite
(This is all totally hypothetical, of course.)

Now, for a given week, let's say that the Governor Suites (GS) are reserved as follows:
GS #1: Occupied Tuesday, Thursday & Friday
GS #2: Occupied Monday, Tuesday & Wednesday
GS #3: Occupied Monday, Wednesday & Thursday
GS #4: Occupied Monday, Tuesday, Wednesday, Thursday & Friday

Now if you go on-line and say that you want a Governor Suite for 5 nights (arriving Monday), the computer system will look and see and see that a GS is available on every night of the week. (Most systems do not look at specific rooms, but rather room categories to see if they are available for sale on given nights.)
Monday: GS1 is available
Tuesday: GS3 is available
Wednesday: GS1 is available
Thursday: GS2 is available
Friday: GS2 & GS3 is available
So in this case, you'd be allowed to book a 5-night stay, despite the fact that you'd have to jump between suites during your stay.

If there are enough suites in a specific category, some hotels will allow them to be booked on-line, figuring that they can juggle the room assignments around. However, when there are only a few suites to choose from, then hotels will often require a call directly to the sales office or in-house reservations to confirm availability and make a reservation. No on-line bookings allowed. Often times hotels will block their suite inventory from central reservations for the same reason.

I have stayed at St Regis Singapore twice (1N each) and both on FWN, so zero Revenue from me. And I have been staying at SGS Bangkok 2N per annum for the last 3 years, always on C&P and never on a revenue stay. But regardless of the non-existant revenue from me at these 2 hotels, I am glad to say that I am still given full plat recognition and more importantly not treated like a second-class citizen. :D

Is seven weeks the same room in a seasonal hotel enough???

The positive: The staff is _always_ nice to us. I really don't know how far a hotel would go to satisfy requests, as we generally don't make any. So any perks are things that happen without us asking. That said, the perks we have received from various hotels include:

A welcome note from the manager.

On rare occasions, we have had a fruit bowl waiting for us in the room.

On rare occasions, we have had the manager call us in the middle of our stay just to make sure everything is going OK.




I'm staying for 12 nights at the Westin in Sydney, and tonight, after 1 week, the staff came up with a fruit basket and bottle of Red wine as a gift from the hotel.

This is the first time that I've stayed at this particular hotel, and I'm currently gold member for Starwood with 33 nights to go (not including this stay) to reach Platinum.

I guess being Winter here and staying for a long stay may factor in.

I've had this a lot with NH Hotels that I usually stay with in Amsterdam. There is almost always a fruit basket or wine left in the room, the business card of the Manager with a signed note welcoming me, and I've even been escorted to my room and a chat with the Duty Manager to make sure everything was ok.

I have stayed at St Regis Singapore twice (1N each) and both on FWN, so zero Revenue from me. And I have been staying at SGS Bangkok 2N per annum for the last 3 years, always on C&P and never on a revenue stay. But regardless of the non-existant revenue from me at these 2 hotels, I am glad to say that I am still given full plat recognition and more importantly not treated like a second-class citizen. :D

I don't believe these would be considered no revenue stays. Yes, there's no cash flow leaving your pocket on the FWN stays and limited cash flow on the C&P stays. However, my understanding is that SPG provides some sort of revenue to the individual property (in this case the St. Regis Singapore) to pay for these stays. I'm sure that someone more familiar with the inner workings of the Starwood system could describe the revenue scheme with more accuracy.

I saw this metric once - the numbers to be considered a "high spend" traveler at various brands.

It was on InsideFlyer.

Over $15,557 annually was considered high spend.

( Low was $2790. Moderate was $5095 )


I also read elsewhere that "One-half of U.S. Hotel Revenue Comes from One-fourth of Guests "

One more statistic I read: The super-affluent spent $61,200 annually on hotels and resorts, while the affluent spent $2,400.

I stayed at the Hilton in Cardiff for 3 weeks a month over a period of 7 monthd. I got to know the staff very well during that time and they would do little favours for me if I asked (though I rarely did). I was able to store things at the hotel for the 1 week a month that I wasn't there. I did get several upgrades but not tons since my stays were 3 weeks long so it is harder to score upgrades in this case. I got regular free bottles of wine, chocolates, and fruit baskets.

Also, for 2 of those months I was on crutches. They went out of their way to help me, ensuring I was assigned rooms close to the elevator, calling me before delivering room service to arrange a "secret knock" before opening the door so I didn't have to get up to open the door for them, in wet/slippery weather allowing me to lean on them as I hopped down the front steps (one bellhop actually almost helped carry me! He was such a cutie too :) )

I was able to book a room during the Rugby World Cup when every hotel in the greater area was sold out.

If I ever have to do business in Cardiff again, I will definitely stay at the Hilton.

When I used to work at a Starwood property, most suites were blocked from booking on-line due to issues with how the website would determine availability. I originally posted this in this thread (http://www.flyertalk.com/forum/starwood-preferred-guest/932493-booking-suites-line.html).

Your point is well taken. I'm a programmer so I can easily see how a system like that happened. It screams out either ancient mainframe assembler (which makes changing the program difficult), and/or a complete disregard for this situation. Neither scenario gives me, the customer, the warm fuzzies.

As my frustration with this issue has grown over the years, I've been staying more at Hilton hotels, because they clearly have solved this.

Your point is well taken. I'm a programmer so I can easily see how a system like that happened. It screams out either ancient mainframe assembler (which makes changing the program difficult), and/or a complete disregard for this situation. Neither scenario gives me, the customer, the warm fuzzies.

As my frustration with this issue has grown over the years, I've been staying more at Hilton hotels, because they clearly have solved this.

To make it worse, if you had a SET code you could probably look at the suites.

let's say that the Governor Suites (GS) are reserved as follows:
M T W T F
GS #1 - X - X X
GS #2 X X X - -
GS #3 X - - X -
GS #4 X X X X X
Now if you go on-line and say that you want a Governor Suite for 5 nights (arriving Monday), the computer system will look and see and see that a GS is available on every night of the week. (Most systems do not look at specific rooms, but rather room categories to see if they are available for sale on given nights.)
Monday: GS1 is available
Tuesday: GS3 is available
Wednesday: GS1 is available
Thursday: GS2 is available
Friday: GS2 & GS3 is available
So in this case, you'd be allowed to book a 5-night stay, despite the fact that you'd have to jump between suites during your stay.

(I've changed what you wrote above to a “calendar” for ease of reading.)

Your point is well taken. I'm a programmer so I can easily see how a system like that happened.

I'm still missing something. Why isn't it possible to move some guests around before they arrive? In the above example, move the Tuesday-night guest from suite 1 to suite 3, and the Thursday/Friday guest to suite 2. (Continue swapping suite 1 and 2 stays until there is no overlap.) Now suite 1 really is available all week.

The “moving” and “swapping” doesn't actually need to happen in reality, of course. Just check guests in to whichever suite is available on the day they arrive. (If someone is checking in, there can be a maximum of N-1 stay-in-the-same-suite requirements that day for an N-suite hotel, so you can't possibly break any.)

This could only result in a problem if customers reserve specific suites, in which case wouldn't it be easier to just add a room type (e.g. Governor Suite with River View) instead of requiring phone bookings for all suites?

To make it worse, if you had a SET code you could probably look at the suites.

...or a ZXH code, if the suites are available for X days. Most US properties in large cities have state-resident SET codes, which let you look at suites even if you don't qualify. Which is off-topic in this thread, I guess, but still strange.

Sorry. Error

The overall high spenders as a group would be large consulting firms in a city with large, long term projects. I knew of a project which had been going on for few years, had same people staying there for 2-3 years, in many cases in the same hotel.
$150 X 3 Days X 45 weeks = $20K+
You might have 30-50 people staying there, generating $600K-$1M of revenue a year. These hotels tend to be pretty open with status match, ensuring you get a room during high capacity, hosting appreciation events, etc.

To make it worse, if you had a SET code you could probably look at the suites.

Unfortunately, I made the mistake of googling SPG SET codes and have several. I don't use them (I am a stickler for not breaking rules). But they let me see what I am missing. This really annoys me.

I spend about U$5k per annum on 4P Shenzhen. It might be considered moderate for US properties but I think it's very high for a property in China.

Regardless, I would assume that the property would be hoping that even low margin on room rate customers will utilize high margin services like room service.


Room Service is actually a loss-making activity. They only do it because it's required by the star and diamond systems.

I think one of the reasons why many hotels pamper their high revenue but low margin guests is that a lot of times they are key to the hotels' profitability.

No. Low margin transactions dilute profitability, by definition.

I saw this metric once - the numbers to be considered a "high spend" traveler at various brands.

It was on InsideFlyer.

Over $15,557 annually was considered high spend.

( Low was $2790. Moderate was $5095 )


I also read elsewhere that "One-half of U.S. Hotel Revenue Comes from One-fourth of Guests "

One more statistic I read: The super-affluent spent $61,200 annually on hotels and resorts, while the affluent spent $2,400.

Very interesting information damon88. Thanks for sharing. ^

Your point is well taken. I'm a programmer so I can easily see how a system like that happened. It screams out either ancient mainframe assembler (which makes changing the program difficult), and/or a complete disregard for this situation. Neither scenario gives me, the customer, the warm fuzzies.

As my frustration with this issue has grown over the years, I've been staying more at Hilton hotels, because they clearly have solved this.

For what it's worth, I should also point out that it was nearly 10 years ago when I worked there. The technology has likely changed, however it appears that the practice of blocking suites has not.

(I've changed what you wrote above to a “calendar” for ease of reading.)



I'm still missing something. Why isn't it possible to move some guests around before they arrive? In the above example, move the Tuesday-night guest from suite 1 to suite 3, and the Thursday/Friday guest to suite 2. (Continue swapping suite 1 and 2 stays until there is no overlap.) Now suite 1 really is available all week.

The “moving” and “swapping” doesn't actually need to happen in reality, of course. Just check guests in to whichever suite is available on the day they arrive. (If someone is checking in, there can be a maximum of N-1 stay-in-the-same-suite requirements that day for an N-suite hotel, so you can't possibly break any.)

This could only result in a problem if customers reserve specific suites, in which case wouldn't it be easier to just add a room type (e.g. Governor Suite with River View) instead of requiring phone bookings for all suites?


Great point. My example lacked enough detail complexity, thus making it easy to solve with some simple reassignments. I also concur that it should be easy enough to deal with inventory management issues if suites were offered on-line.

As you mentioned, a lot of the troubles might disappear if the suites/rooms were not pre-assigned. This is one of the reasons that properties generally don't pre-assign rooms.However, there are certain scenarios when properties will block certain rooms in advance:

Guest requires a special type of room/suite, such as connecting rooms with specific types of bedding.
Guests which are part of a group need to stay near each other.
Returning guest wants to stay in the exact room where they stayed previously during a special occasion. (For example, I had a number of requests from couples who were celebrating their anniversary and wanted to stay in the same room which they stayed in on their wedding night or during their honeymoon.)
If a property is sold out or oversold, then it's (or at least was) common to assign rooms in advance in order to best accommodate everyone who had a reservation.


All of this said, I'll mention again that it has been a while since I've been in a role where I had to deal with these sorts of issues. There are front desk managers here on Flyertalk that could add a lot to this discussion. (Which, I'll admit, is a significant tangent from the OP's original question -- sorry about that!)

I have stayed at St Regis Singapore twice (1N each) and both on FWN, so zero Revenue from me. And I have been staying at SGS Bangkok 2N per annum for the last 3 years, always on C&P and never on a revenue stay. But regardless of the non-existant revenue from me at these 2 hotels, I am glad to say that I am still given full plat recognition and more importantly not treated like a second-class citizen. :D
When I used a FWN at a St Regis last year, I was chatting with the staff and had the opportunity to explicitly ask them whether Starwood pays them for such stays. The answer was yes (I think the formula depended on the SPG category) and moreover, they get paid at a higher level if the hotel's occupancy percentage for the night exceeds some threshhold--i.e., there's more compensation if the hotel becomes full after the FWN room is reserved.

On this stay, I was given a very nice (AFAIK not a standard select) suite. I found myself explicitly spending much more than I otherwise would have on food and wine, partly because I was so pleased with my treatment and the room and partly as almost a thank you to the property. In fact, I think I spent more money than I would have if I had just reserved a room and paid for it.

No. Low margin transactions dilute profitability, by definition.

low margin transactions dilute % margin, but not $ margin. an incremental low margin transaction will create profit $'s while bringing down profit margin. most business owners will tell you they would prefer the extra dollars.

low margin transactions dilute % margin, but not $ margin. an incremental low margin transaction will create profit $'s while bringing down profit margin. most business owners will tell you they would prefer the extra dollars.

yes, all profit is incremental. obviously.

most business owners are idiots (not that your specific example is necessarily wrong).

i work in pricing, and what businesses think are low-margin transactions, are often actually negative margin transactions - which is why they're so dangerous and detrimental.

This is a decent quick guide:
http://download.mckinseyquarterly.com/popr03.pdf

When I used a FWN at a St Regis last year, I was chatting with the staff and had the opportunity to explicitly ask them whether Starwood pays them for such stays. The answer was yes (I think the formula depended on the SPG category) and moreover, they get paid at a higher level if the hotel's occupancy percentage for the night exceeds some threshhold--i.e., there's more compensation if the hotel becomes full after the FWN room is reserved.



If occupancy rate is below certain percentage, I remember was 80 or 85% SPG pays them $ per point, then if rate is above 80 or 85%, but below 95%, SPG pays them diff $ per point, if rate is above 95%, SPG pays them ADR.

actual percentage may be off, but just give u a idea. ur room is not free, neither to u or to the hotel, u spend money to get points to redeem, hotel gets paid when u redeem.

I think one of the reasons why many hotels pamper their high revenue but low margin guests is that a lot of times they are key to the hotels' profitability.

Huh? :confused:

No. Low margin transactions dilute profitability, by definition.

That is a very much simplified and short sighted view looking at it from a cash management perspective.

You are comparing high margin transactions to low margin transactions. But in the case of low season hotel utilization it is low margin vs. NO margin/turnover.

Huh? :confused:

Ok, very easy. In low season you still have to cover your (fixed/variable) costs. If you can not do that, there are two possibilities:

1. use the money in your bank account to cover the costs --> you are not earning interest
2. use the bank's money to cover the costs --> you are paying interest

both will increase your total costs (direct/indirect) and thus reduce your profitability....in sesame street words.

If you now substitute "low season" by "recession" you are also endangering your business if you don't manage to at least cover part of your costs. Sometimes it will even make sense to accept a negative margin rather than no cash flow at all.

I'll leave the economists to debate whether I'm a profit centre or cost centre for the hotel, but I've noticed that once I cross about 3+ weeks with a hotel (regardless of revenue, always booked at our corporate negotiated rates) I am extended special treatment, regardless of SPG status. Once I hit 3+ months at a hotel, normally the GM of the hotel takes an interest in making sure that I'm happy with the service that I'm getting.

My travel patterns have changed (many more short stays, not so many repeat stays) so overall SPG status has become more important to the quality of my stays, but when I was spending extended time at a single property, it was 3/4 weeks that made the tipping point between "regular Joe" and "VIP".

That is a very much simplified and short sighted view looking at it from a cash management perspective.

You are comparing high margin transactions to low margin transactions. But in the case of low season hotel utilization it is low margin vs. NO margin/turnover.


Your first point is wrong. I do profit consultancy for a living.

Your second point is right...but short-sighted and simplistic; it isn't a straight choice between low margin and no margin.

Your first point is wrong. I do profit consultancy for a living.

Your second point is right...but short-sighted and simplistic; it isn't a straight choice between low margin and no margin.

I thought you worked in pricing??? How does you being a profit consultant make my point wrong? Since you work in profit consulting I am sure you are aware of the problems associated with full cost pricing and it's long term implications on profitability and pricing.

It is a pretty straight choice between selling a room and not selling a room, isn't it? :confused: I agree that most hotels will probably prefer selling 100% of their rooms to extended stay, high margin tourists. Unfortunately for most hotels this option is not available 365 days/year...for example in "low season."

I've spent about 30k at one property in the last 12 months and what I might consider perks are:

1. Upgrade is a given - when they couldn't accommodate me once, they were very apologetic but that was because i was checking in at like 7am and needed a room asap;

2. Early Check in - I have arrived from redeyes and checked in as early as 6am; once they were at capacity and I had to wait about 2 hours to check-in and one of the front desk agents went to the room with the cleaning staff to help clean faster; after that time they told me to call and let them know if I would need to check-in super early and they'd block a room from previous night (no charge to me) - used that perk once or twice;

3. Specific Rooms - "Hi Mr. Hurley - I see you prefer low floors, rooms ending in 18 or 19, is that right"?

There are several staff at the hotel that know me and do the "little things" as well. None of these are huge perks but I do appreciate some of these little things that they do and it keeps me coming back to that hotel.

Sometimes it will even make sense to accept a negative margin rather than no cash flow at all.

If your business needs cash from negative margin transaction to survive, then it's fundamentally screwed anyway.

I thought you worked in pricing??? How does you being a profit consultant make my point wrong? Since you work in profit consulting I am sure you are aware of the problems associated with full cost pricing and it's long term implications on profitability and pricing.

It is a pretty straight choice between selling a room and not selling a room, isn't it? :confused: I agree that most hotels will probably prefer selling 100% of their rooms to extended stay, high margin tourists. Unfortunately for most hotels this option is not available 365 days/year...for example in "low season."

I manage profit by understanding price. Price is the single biggest profit lever.

It's not a straight choice between selling a room and not. It is a choice between selling a room at an infinite range of profitability points.

My point is that what non-experts think of as a low margin transaction (and therefore making a contribution to fixed costs, cash, and some tiny incremental dollar profit) is often a negative margin transaction.

I could be wrong, but I'd suspect $10K/year would be quite a bit lower than the spend threshold if they did have one.

FWIW, Hilton's point threshhold for Diamond translates to $10k of spend, and the stay/night requirements are otherwise comparable to SPG plat.

All of my high revenue stays ($10k+/stay) are never at SPG properties. I use SPG becuase its cheap and I can transfer miles to my carrier of choice.

Sometimes it will even make sense to accept a negative margin rather than no cash flow at all. emphasis added by controller1




I will agree with the sometimes but only in the case of temporary liquidity problems. Otherwise it's a ticking time bomb.

I was given an inside look some years back at my SPG account spend and how it stacked up against other platinums...I was a little below the median...which really hacked me off...I wanted to know how people were spending less than me and getting platinum status! :mad::mad::mad:;)

Just do what I do, earn your platinum status from 100% 4p stays.

emphasis added by controller1




I will agree with the sometimes but only in the case of temporary liquidity problems. Otherwise it's a ticking time bomb.

No question about that!

It would be interesting to know the percentage of plats that actually make it by stays AND nights even though the 25 stays and 50 nights do not really make you a high revenue guest I guess.

I said in another thread that Europeans must give the highest revenue per Platinum. First of all there is the Euro itself which is worth much more than the dollar (ditto for GB Pounds), then there are very few cheap Four Points in Europe. So Plats who do all or most of their stays in Europe give significantly higher revenue to Starwood than any US or Asian Plat.

Of course the hotels operating costs are higher here than in the US, but if we are talking revenue, then Europe rules.

And therefore, I think Starwood should make a special category of "Super Platinum" only for Euro members. :p

As Intercontinental Hotels Royal Ambassador members are told that we represent the top 1% of all frequent stay members. It is believed by some that this mean 1% of revenue, but IC keeps this metric confidential. But FWIW I have been an IC RA for many years now with mostly Euro stays.

As Intercontinental Hotels Royal Ambassador members are told that we represent the top 1% of all frequent stay members. It is believed by some that this mean 1% of revenue, but IC keeps this metric confidential. But FWIW I have been an IC RA for many years now with mostly Euro stays.

I really like the idea of an extra elite status based on revenue. One additional benefit I would like might be a free hotel program credit card with some additional goodies or extra points for reaching certain revenue barriers.

No. Low margin transactions dilute profitability, by definition.

Given that a hotel in, say, Phoenix does not fill on any night during July or August, which do you think they'd prefer: (1) a high margin customer, paying $200/night for 2 nights, or (2) a low margin customer, paying $100/night for 7 nights? Which would increase their profit more?

Or are you measuring "profitability" on a per-something-that-doesn't-matter basis, like occupied room-nights?

Given that a hotel in, say, Phoenix does not fill on any night during July or August, which do you think they'd prefer: (1) a high margin customer, paying $200/night for 2 nights, or (2) a low margin customer, paying $100/night for 7 nights? Which would increase their profit more?

Depends on whether it costs more or less than $60/night to clean the room. If the servicing costs are less than $60/night to service the room, I'd prefer the long-stay guest. If the servicing costs are more than $60/night, I'd prefer the short-stay guest.

Assuming that the servicing cost is less than the room rate, I'd be happy with either guest, as either would help cover the fixed costs.

Depends on whether it costs more or less than $60/night to clean the room. If the servicing costs are less than $60/night to service the room, I'd prefer the long-stay guest. If the servicing costs are more than $60/night, I'd prefer the short-stay guest.

Assuming that the servicing cost is less than the room rate, I'd be happy with either guest, as either would help cover the fixed costs.

I have always assumed that variable costs in hotels were quite low, so that the steady revenue is always a good thing. I could be wrong.

Depends on whether it costs more or less than $60/night to clean the room. If the servicing costs are less than $60/night to service the room, I'd prefer the long-stay guest. If the servicing costs are more than $60/night, I'd prefer the short-stay guest.

Assuming that the servicing cost is less than the room rate, I'd be happy with either guest, as either would help cover the fixed costs.

The difference in costs between an empty and occupied room is under $10/night.

One customer provides $630 towards profit. The other provides $360. "happy with either" describes someone who is soon to be an ex-hotel manager.

The difference in costs between an empty and occupied room is under $10/night.

One customer provides $630 towards profit. The other provides $360. "happy with either" describes someone who is soon to be an ex-hotel manager.

Well, to start, you're making an assumption about the variable cost of the room. Second, you're making the assumption that if you sell a room for two nights at $200, it will automatically sit vacant for the rest of the week. But if I sell it for two nights at $200, I can discount it for the next five nights to another customer (on Priceline, perhaps) for $60/night and make the same gross revenue. If I can sell it for $75 for the next five nights, I'm better off than with my $100x7 customer. The gamble is whether I can sell the room or not.

My point was that the answer to "which customer is more profitable" is linked to the variable cost, so there's not one right answer to the challenge you proposed. And while the variable cost may be $10 in some markets, I live in Switzerland, where I assure you the variable cost is much higher. But even in Phoenix, I think you're underestimating the variable costs significantly.

You have laundry, front desk time, back-office time to process the paperwork, housekeeping, toiletries, (potentially) concierge time, maybe breakfast if it's included in the rate, alcohol/food consumed in the club, management time if someone has a problem, and the cost of rectifying any customer service issues you may need to address (in the form of comped food & beverage, rooms, upgrades, etc). And let's not forget the cost of loyalty points (at $0.02, the 500 loyalty points for a one-night stay cost you $10 alone. Plus another $10 if they take the platinum amenity points). There are a lot of hidden costs beyond a few bottles of cheap shampoo and 20 minutes of a housekeeper's time to consider.

And I stand by my statement. If I have two rooms that would otherwise sit empty, and the room rent I can achieve is higher than my variable cost for the room, both propositions ($100x7 / $200x2) are good decisions because they make positive contributions. Crucially, I need to have two rooms available (so I am not in a position of having to make a choice between two customers) and I need to be sure that I can't achieve a higher rate from another customer for the same rooms, if I'm at capacity (eg, no good selling a $100x7 room if there's a high likelihood that a $200x2 customer is coming in tomorrow).

That, in a nutshell, is the dilemma facing hotel managers: how to balance the demand with the market price. It's why you have full rack when the hotel is at 100% occupancy and Priceline when it's empty.

Well, to start, you're making an assumption about the variable cost of the room. Second, you're making the assumption that if you sell a room for two nights at $200, it will automatically sit vacant for the rest of the week. But if I sell it for two nights at $200, I can discount it for the next five nights to another customer (on Priceline, perhaps) for $60/night and make the same gross revenue. If I can sell it for $75 for the next five nights, I'm better off than with my $100x7 customer. The gamble is whether I can sell the room or not.

My point was that the answer to "which customer is more profitable" is linked to the variable cost, so there's not one right answer to the challenge you proposed. And while the variable cost may be $10 in some markets, I live in Switzerland, where I assure you the variable cost is much higher. But even in Phoenix, I think you're underestimating the variable costs significantly.

You have laundry, front desk time, back-office time to process the paperwork, housekeeping, toiletries, (potentially) concierge time, maybe breakfast if it's included in the rate, alcohol/food consumed in the club, management time if someone has a problem, and the cost of rectifying any customer service issues you may need to address (in the form of comped food & beverage, rooms, upgrades, etc). And let's not forget the cost of loyalty points (at $0.02, the 500 loyalty points for a one-night stay cost you $10 alone. Plus another $10 if they take the platinum amenity points). There are a lot of hidden costs beyond a few bottles of cheap shampoo and 20 minutes of a housekeeper's time to consider.

And I stand by my statement. If I have two rooms that would otherwise sit empty, and the room rent I can achieve is higher than my variable cost for the room, both propositions ($100x7 / $200x2) are good decisions because they make positive contributions. Crucially, I need to have two rooms available (so I am not in a position of having to make a choice between two customers) and I need to be sure that I can't achieve a higher rate from another customer for the same rooms, if I'm at capacity (eg, no good selling a $100x7 room if there's a high likelihood that a $200x2 customer is coming in tomorrow).

That, in a nutshell, is the dilemma facing hotel managers: how to balance the demand with the market price. It's why you have full rack when the hotel is at 100% occupancy and Priceline when it's empty.

Can we just agree that a sold room that helps cover fixed costs should be preferred over an unsold room before the discussion about e.g.

1. is concierge time a variable cost
2. how does room demand react to price changes in the hotel business
3. ...

breaks out? ;-) I think we all agreed that 100% utilization in a given year is a very rare thing in the hotel business and that you'd better sell as many rooms as possible to cover your costs. Interesting consulting case for my next job applicant by the way.

One question remains: what makes you a high revenue customer??? I just passed the 10.000€ in June for this year which I think is ok but I know my parents for example easily spend more on a hotel during a 2 week vacation which would not even get them gold status with SPG, right?

Can we just agree that a sold room that helps cover fixed costs should be preferred over an unsold room before the discussion about...

Yes*

* (Provided that the room is sold at a rate greater than whatever the variable cost associated with the room is. Selling a room for a penny will result in a net loss, and the room is better left empty.)

If your business needs cash from negative margin transaction to survive, then it's fundamentally screwed anyway.

Do you really believe that this is true for a perishable commodity where the cost of service/carriage is extremely low? (excluding dilution of course)

Yes*

* (Provided that the room is sold at a rate greater than whatever the variable cost associated with the room is. Selling a room for a penny will result in a net loss, and the room is better left empty.)

Originally Posted by flo0816
Can we just agree that a sold room that helps cover fixed costs should be preferred over an unsold room before the discussion about...

;)

Well, to start, you're making an assumption about the variable cost of the room. Second, you're making the assumption that if you sell a room for two nights at $200, it will automatically sit vacant for the rest of the week.

I am making an assumption about the variable cost (which is a number around what I've been told by hotel managers).

Part of the assumption I specified was that the hotel does not fill (Arizona in the summer) during the week in question. So there is no chance to sell this room at a discount, because there are other empty rooms that aren't selling at that discount.