Sunday, February 28, 2010

Setting Future Tariff In Print

One of the vexing problems that moteliers go through every year is the need to engage a crystal ball in order to try and predict appropriate future room tariff levels. The following year’s advertising space in guide books and wholesale rate arrangements need to be fixed many months in advance.

For many operators, there is the added complication of the likelihood that GST will be raised to 15%.

So what to do?

It’s a gimmie that tariff should be increased every year by at least the rate of inflation. For a bit of indulgence the Reserve Bank Inflation Calculator is worth a look to gauge historical CPI changes.

To calculate future tariff, operators should start with their existing tariff, then add a likely guesstimate of the future rate of inflation based on historical trends, add a small margin for good measure and then round it to the nearest whole figure. This should be an exercise that will take about 10 minutes.

The main guidebooks will need to include a motel’s GST inclusive tariff rate range that is usually for 2-persons and this will need to be applicable until late 2011. Although the guidebook reps are out on the road now, it is important to realise that tariff does not have to be set in stone straight away.

I have had a few conversations with moteliers last week that were concerned about a  MANZ newsletter published recently that discussed  the probability of a GST hike in relation to motel tariff.

From what I have been told, there is an inference by MANZ that moteliers should now consider advertising tariff ex-GST. There was also mention about moteliers attaching terms and conditions (tariff riders) to published tariff such as "tariff is subject to change" or "seasonal rates may apply." 

We suggest that ALL tariff published for public consumption should remain GST inclusive. Full details of any GST changes should be announced by the government in the next Budget due on the 20 May. This will give moteliers plenty of time to amend published tariff rate ranges if necessary before publication in the main accommodation guides.

For the accommodation industry to revert back to quoting tariff ex-GST would be a giant leap backwards. Quite simply this would complicate the buying process for the consumer and add that nasty element of surprise. It has taken years to eliminate this draconian practice and it would be a tragedy to go back.

And as for adding tariff riders, this also needs to be discouraged for similar reasons. Setting future tariff requires business acumen and nous. Moteliers should be able to deliver what they promise without having to insert out-clauses.

We say that the accommodation industry should be publishing in guide books clear tariff rate ranges that cover the lowest and highest tariff for a stated number of persons for a specific term. Period.

Curious to get further feedback from other accommodation operators.

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