100 Years of Advancing Destinations

STR's Compression Study 101

Author: Joy Lin
Posted: January 22, 2014
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One of the topics spotlighted at the Convention Sales Forum last month was a compression study, presented by  Rachel Benedick, Visit Denver's Vice President of Sales & Services, to a great amount of interest. The study was performed by STR, Inc. for Visit Denver.

"Compression studies are statistical analyses utilizing a combination of CVB room block  and event data alongside STR’s extensive hotel data.  With detailed day of the week data, the compression analysis builds a baseline of 'low-booking' days," explains Wendy Posten, Research Analyst for Destinations at STR. "Accounting for seasonality and inflation, we are able to examine the revenue per available room variance between low-booking days and days when the CVB has an event planned."

Each compression study performed at specific times for different destinations reveals very unique insights, but overall it shines a bright light onto the positive incremental impact that DMOs make for their hotel partners. ("Incremental" being the operative word, as you're often evaluated based on the difference you make.) While it requires significant collection and analysis of reliable room night, occupancy, and revenue data over time, this kind of study is a great way to understand your DMO's contribution to revenues and room nights, and to advocate for your funding and growth.

Find Your Tipping Point

One of the key findings that a compression study reveals is at what level of room-night bookings does a DMO start to generate more revenue per available room than is average for hotels in that destination. This tipping point determines when your incremental impact is going to be most felt on your hotel partners' bottom line. It helps you set appropriate room-night goals and target sales efforts toward the right business.

Compare Transient versus Group Business

What's more profitable, transient or group business? Helping your hotel partners understand how they differ in your destination puts a DMO's work in a context that hotel revenue managers understand. A compression study shifts the dialogue from "What have you done for me lately?" to "What can we do together to drive revenue?" as hoteliers are better able to assign value to group business and provide competitive proposals.

Determine DMO "Lift"

There's an old adage that states, "A rising tide lifts all boats." But exactly how much is that lift? A compression study assists in helping you and your stakeholders understand exactly how room-night demand changes due to the efforts of a DMO, even for hotels that don't officially participate in DMO-referred business.

Slice and Dice Your Data

The best part about compression studies is you define the segments that you're interested in understanding, whether it's by event, geography, or time. Knowledge is power, so understanding when, where, who feels your impact - and by how much - is all information that you can unleash to:

  • Educate your community,
  • Set impactful goals, and
  • Empower decision making.

"The compression study allows STR to build a predictive analysis based upon statistical assumptions which help CVBs to see how revenue per available room are impacted by events that are booked to the city, what areas are impacted and at what level those areas are impacted," said Posten. "Each compression study is highly customized to your destination; including but not limited to event focus, number of events, geographic regions, class segment, and revenue per available rooms."

For more information about STR's compression studies, please contact Brittany Baldwin, CGSP, Director of Business Development, Destinations, at brittany@str.com.