The Super Revenue Management Challenge of the Super Bowl
“Good Luck Getting Rooms for Super Bowl LIII.” Headlines like this appeared in the Super Bowl Host city as early as last summer.
NB: This is an article from Revenue Analytics
Now, one week before the New England Patriots are set to play the Los Angeles Rams, there are virtually no rooms available to book in Atlanta and very few even in the surrounding suburbs.
While the Super Bowl is a great draw, it’s hardly the only thing that drives people to Atlanta. There’s existing demand for the Atlanta Metro area’s 100,000 rooms – 65% of which are full on any given weekend that doesn’t hold the world’s largest sporting event. City planners expect upwards of 2x the room capacity in visitors to attend corporate-sponsored spectacles and the big game (200k vs. 100k).
This is a Super Revenue Management Challenge.
Those of us in Revenue Management are passionate about using price to correct supply / demand imbalances. But the craziness surrounding an extravaganza like the Super Bowl challenges rational thinking. Nosebleed seats at the game are going for $4,000. Want something a little closer to the action? Prepare to pay $10,000 per seat. Past that, hope you don’t need both kidneys.
Now that the match-up has been determined, rabid fans need rooms. While your team may have needed good luck to get to the big game, you’ll need more than that if you want to find a room. The fact that so many hotels sold out prior to the match-up being determined indicates that they may have sold too cheap. On the other hand, a Motel 6 in downtown Atlanta has economy rooms which ordinarily sell for $79 still has rooms available for $1,000. The Barclay Hotel, regularly $109, is listed at $1,199. If you sell too cheap and too early, you leave money on the table. If you hold out for high prices, you risk having empty rooms or alienating customers when you drop the price at the last minute.
What’s the right strategy?
Opportunities to maximize the potential from extraordinary events are precious. They occur periodically in the form of sporting events, concerts, political and other conventions. They need to be handled with care to assure not only maximizing the current opportunity but assuring long term success.
Here are a few tips to help you price like a world champion during extraordinary times.
Get ahead of the game. Create a winning game plan.
Planning for such an extraordinary event begins up to two years in advance. Use data from previous, similar events to inform your decisions. The extent to which you can get a price premium during the peak is a function of incremental demand versus the underlying supply of rooms. During the last Super Bowl, hotel data firm STR found that Atlanta hotels sold at three times their daily average. Super Bowl XLVII in New York where there is a tremendous supply of rooms, the average room commanded only a 80% premium. A 500% increase by contrast is what Indianapolis hoteliers enjoyed during Super Bowl XLVI.
Stay true to your brand.
All your rooms won’t be sold at the max price. A tier of prices which reflect your brand positioning should be available in the market. Your floor might still be twice your top daily rate. Establish upside prices which capture the opportunity and create a ceiling to avoid uncertainty or regret from overshooting the target. Merely jacking up price, even if scarcity warrants it, can be off-putting to guests. The Super Bowl won’t be in Atlanta every year and if you’re a national chain to a business traveler the ramifications and be long-lasting and costly. Be sure to provide incremental benefits such as additional services or event-related memorabilia commensurate with the price tiers. Leave your guests with a positive impression of your brand and the experience, not a memory of being fleeced.
Play to your strengths.
Just like the teams participating, it is wise to play to your strengths. Large hotels with catering capabilities and convention space can negotiate large blocks of rooms with corporate sponsors that bundle ancillary services into a package price which includes the room at elevated prices as well as minimum charges for other services required to be bundled with the room. Boutique firms can add non-elective concierge services or access to exclusive venues during the event in order to boost perceived value as well as price.
Extend the opportunity to shoulder periods.
Think beyond just the day itself. Super Bowl LIII in Atlanta will be played on February 3. However, there is a 10-day period, January 26-February 4, in which ancillary events are held. As you know, revenue management maximization is not just about price. Adept use of inventory controls to set the minimum length of stay is critical to extend the peak pricing opportunity into the shoulders and to prevent short-term guests from cherry-picking the peak days. Maximum length of stay controls should be applied before ramp-up to the event occurs to protect the high-earning potential.
Tighten cancellation policies.
You can’t rely on overbooking to manage the volatility of demand as the event unfolds. STR data during the recent NFL Playoff period showed that bookings originating in Louisiana were the third highest source. When the New Orleans Saints were eliminated from Super Bowl contention in overtime, the desire of most Louisiana residents to attend the game tanked along with their willingness-to-pay. A judicious cancellation policy with mandatory prepayment would have the Saints fans forfeit their rooms and allow you to re-sell them to the jubilant and largely price inelastic Los Angeles Rams fans.
Managing the extraordinary opportunity presented by such an event is a monumental task. Demand may be erratic and come from channels you don’t normally expect. Improper setting of price or complex length-of-stay controls could have disastrous consequences without the right technology. Moreover, the existence of such an overwhelming event could distract you from effectively managing other opportunities that arise. Systems employing advanced algorithmic techniques and artificial intelligence can help with optimal pricing and length of stay controls. They can also continuously monitor bookings to work with human intelligence sending alerts when new opportunities arise, or revenue is at risk.
Following the above should help you navigate the tricky waters of Super Bowl LIII in Atlanta – or the next global event that comes into your territory.
Take it from us here in Atlanta – when it comes to the Super Bowl, you don’t want to celebrate too early – be smart and play the long-game.