Monday, July 27, 2009

How Low Can You Go?

What does your guest say about you?

Accommodation providers have been caught with their pants down in an article in the Weekend Herald that exposed senseless slashing of tariff in order to secure a reservation.

Posing as a prospective guest, the writer of the article started out on the premise to write a story on the accommodation bargains available in these recessionary times. Embarrassingly, accommodation providers unwittingly played along by offering tariff through the floor.

From a simple phone around of various accommodation outlets, the desperate discounting has revealed that some in the industry have taken tariff levels back in time by over 20 years.

While this strategy may increase occupancy in the short term, it reduces revenue per average room (RevPAR) to unsustainable levels.

A recent study from Cornell's Center for Hospitality Research, "Competitive Pricing in Uncertain Times." The study compared the effects of pricing strategies among close competitors, first during a weak economy and then during boom times. Using the database of over 67,000 hotels, the study analysed relative pricing, occupancy, and RevPAR observations, from 2001 through 2007.

It was found that hotels that maintained average daily rates above those of their direct competitors experienced lower occupancies compared to those other hotels, but they recorded higher relative RevPARs. This was true in all market segments. It was found that the best way to have better revenue performance than the competition is to maintain higher average rates.

Who has the capacity to share this with the accommodation industry?

25 July 2009
NZ Herald

Beck Vass

If you're planning a weekend away this winter it pays to shop around - and to be a bit cheeky.

A snapshot survey by the Weekend Herald has revealed a range in the accommodation rates and in operators' readiness to offer on-the-spot discounts.

Tourism New Zealand statistics show that occupancy rates in New Zealand fell to just 41 per cent in May - the lowest since 2000.

Some operators, particularly those reliant on Asian visitors, are struggling amid swine flu fears and the recession.

Almost half of 30 hotels surveyed, ranging from luxury resorts to motor lodges around the country, were happy to comply with the anonymous caller's requests to go cheaper.

Hotels belonging to larger chains and those busy with the ski season were less flexible.

But even operators less keen to cut costs were still open to offering deals, such as an extra night for as low as $20, a free breakfast or bottles of wine.

Those in the industry say bartering for bargains is nothing new but, because of the recession, this year's guests will get more.

At Brylin Motel in Rotorua, even the $117 special rates could be talked down to $85.

Pauanui Pines Motor Lodge on the Coromandel Peninsula - already undercutting the $128 advertised special - couldn't go lower than $115 for one night, but when pushed further offered just $140 for two nights.

Some hotels would provide their lowest listed rate but would eventually reveal a slightly cheaper price for a lower-value or single room.

Others even directed the caller to different places.

The Millennium Hotel in Rotorua could not match the $129 special advertised on cut-price accommodation website because only a limited number of rooms were available.

At the Kingsgate, where special rates were $85 and included a room upgrade, a request to pay just $60 was met part-way.

"I can probably go down to $75 but I can't go any lower - and that would be without an upgrade."

The Waterfront Suites in Paihia offered a $135-a-night special rate but, when asked if that was the best they could offer, the staff member suggested calling the nearby Sea Spray Suites, which had $95-a-night rates.

Hospitality Association of New Zealand executive director Bruce Robertson said bartering was common in the industry and was unrelated to visitor numbers.

However, because of the recession, this year more operators were offering extras like free or discounted extra nights, breakfasts, wine and packages that included show tickets to attract guests.

Megan Magill,'s general brand manager, said the website was seeing novel new ways of bringing in bookings by offering free extras such as wine, chocolates, movie passes, ski passes, meals and drinks, tickets to local attractions and free car hire.

"Despite the economic conditions, our booking numbers show people are still travelling but they're perhaps now more price conscious than before, so the marketplace is far more competitive in this economic climate," she said.

"Rather than just lowering the price, our suppliers are moving more to offering value-added inclusions. It's more across the board. Depending on what you're looking for, chances are you can get a better deal now compared to a year ago."

Source: Click HERE

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