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Chicago Doubletree Lifts Off with Custom RM System from Kokua

How does an older hotel achieve revenue liftoff? In this case, it all starts with a hotel management firm, Kokua Hospitality, LLC, which was founded by its parent, The Chartres Lodging Group, LLC, with the mandate to become the operator of choice for strategic institutional and select private lodging investors by producing superior results as turnaround specialists.

Created by veteran lodging investment and management experts, Kokua Hospitality strives to blend best-in-class operating practices with an owner’s DNA. The firm manages a growing portfolio of hotels and resorts nationwide, including DoubleTree by Hilton Chicago Magnificent Mile, DoubleTree Suites Houston by Galleria, Inn of Chicago, Axiom Hotel, Hyatt Place Waikiki Beach, and The Queen Kapiolani Hotel Waikiki Beach.
The Hotel Challenge: Older Underperformer
Kokua had been managing the DoubleTree by Hilton Chicago Magnificent Mile in Chicago since 2007. As an older property, the hotel was not performing as well as its competitors. The hotel’s main competitor was also part of the Hilton family, so it was difficult differentiating itself from a product perspective next to its competition. 

As a result, the DoubleTree by Hilton Chicago Magnificent Mile was not capturing its natural market share of demand or revenue. Kokua Hospitality has a wonderful reputation for turning underperforming hotels into market leaders.

However, in this particular case, the firm knew that to be successful, it had to customize its revenue management technology and approach. The leadership team at Kokua Hospitality decided to develop a proprietary platform in-house. 
Near the end of the Great Recession, Kokua saw an opportunity.  As a third party hotel management company, Tufano knew the “one size fits all” of current revenue management systems did not work for a company like Kokua Hospitality with a diverse hotel portfolio.  To address this problem, Kokua developed a custom, proprietary system in-house with the help of a seasoned RM consultant/developer that could fit their current needs.
The Solution: Throw Away the RM Cookie Cutter

The solution was to reinvent the approach and technology behind how hotels set prices in the market place.  Up until this point, the focus was solely on using historical data to forecast demand and optimize prices.  The third party solutions and hotel brand revenue management solutions were all doing essentially the same thing. 

This model was outdated in the new economy and Kokua knew that in dynamic markets like Chicago, it needed to utilize multiple data sources as well as utilize a much more sophisticated forecast and optimization engine. The RM Advantage platform that they designed is customized to the specific systems and qualities of each of Kokua’s branded and independent properties to offer insight in customer booking preferences, destination demand tracking, market intelligence, providing automated price recommendations, and more.

The initial development phase was 6 months, followed by an extensive 6 month testing and proof of value phase.  As a third party management company, Kokua manages many different types of hotels in many different locations.  The firm wanted to test their concept, technology, and process with each of these to ensure their solution was solid.  Every quarter, Kokua continues to release new features and can do so because of their agile technology and the company’s culture of innovation. 
The Payoff: RPI Lift

The investment has paid off. From 2014 to 2015, the DoubleTree by Hilton Chicago Magnificent Mile grew its STR index score by 8 percent. The hotel increased its RPI (Revenue Penetration Index) from a 75 to a 79.2 year over year.  In other words, the hotel increased their performance by 5.3 percent relative to its competitor set.  This metric is how most hotels gauge success from month-to-month.  A 5 percent lift is a significant result.

Kokua Hospitality said the results were especially gratifying because with one of the older properties in its hotel competitor set, it could typically only compete when there was market-wide compression.  At this point, the Chicago Doubletree is not only competing, it is leading in growth even during off-peak periods.

Looking at the popular revenue management software tools that exist today for hotels, they tend to fall into two categories:  Too simple and rules-based or overly complicated, expensive to maintain and not adaptable to the unique needs of individual hotels. As a result, one of the major goals at Kokua was to create a tool that utilized sophisticated technology while still being flexible, adaptable and, most importantly, user-friendly.  Kokua believes it found that balance.

Kokua Hospitality will continue to develop new features of the RM Advantage and is already rolling the system out to its newest hotel acquisitions.
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