Category Archives: Hotel Reports

Do Hotel Guests Care About ‘Pricing Practices’ Or A Good Deal?

A new Center for Hospitality Research (CHR) study released by Cornell University’s School of Hotel Administration found that hotel guests are more likely to think a rate setting practice is fair when they know how the rules work.

The hotel revenue management study involved showing one of eight distinct scenarios to 815 U.S. respondents, and asking whether the hotel was acting fairly in that particular scenario. Taylor, who is a marketing analyst for the Venetian Resort Hotel Casino, conducted this study for his senior thesis at the Cornell School of Hotel Administration, where Kimes is the Singapore Tourism Board Distinguished Professor in Asian Hospitality Management.

“We know that hotel customers accept the idea that hotel rates will change, but we don’t know when guests will think of those rate changes as being fair,” said Kimes. “We tested three factors that we thought would influence guests’ perceptions of fairness—type of trip, amount of information, and hotel brand class, in this case either five-star or three-star. Of those three factors, only familiarity with the rate rules had a strong effect on perceptions of fairness.”

As a result of this strong indication that guests want to know the rules, Taylor and Kimes suggested that hotel revenue managers focus their efforts on increasing guests’ familiarity with their pricing practices. While this does not necessarily mean publicizing all of a hotel’s rate fences, hotels could post the conditions for a particular rate class on its website, and indicate ways for guests to lock in a particular rate (typically, by booking far in advance). In the current environment, Taylor and Kimes suggest that reservation agents and front-desk clerks can explain differential rates and their associated conditions, thus shifting the guest’s focus away from simply asking for a discount.

I am surprised that hotel guests, many of whom are seasoned business travelers, really care about this sort of pricing practice.  These sorts of revenue management decisions begin with their flight arrangements, transitions to their car rental and then to their guest room rate.  It’s simply a matter of supply and demand.

What prospective guests should really be concerned about, as it relates to fairness, is a booking made through an OTA.  The OTA negotiates a wholesale rate with the hotel, often 25 percent to 50 percent less than published daily rate, and sells the guest room at the hotel’s published rate.  Now that’s “fair”???

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PKF Revises 2010 Hotel Forecast, Sees Less Severe Rate Decline

PKF Hospitality Research today raised its expectations of U.S. hotel demand and rate performance for 2010, based on a better-than-expected performance in the third quarter of this year.

The firm still expects 2010 rates to decline compared with 2009 levels, but it now is forecasting that level of decline to be 1.5 percent. That is about half the level of the 3.1 percent decline PKF issued in its September forecast.

“We are forecasting that, on average, properties will continue to suffer year-over-year declines in revenue and profits from an already dismal 2009,” PKF Hospitality Research president Mark Woodworth said in a statement. “However, given the deceleration of room rate discounting that we observed during the third quarter of 2009, we believe the severity of the losses incurred in 2009 and 2010 will be less than previously forecast.”

The forecast update comes after rates did not decline to the level PKF had forecast for the third quarter of 2009. Smith Travel Research reported a 9.8 percent year-over-year decline for the quarter, 2.2 percentage points better than PKF’s forecast from earlier in the year.

PKF also improved its demand outlook. It now expects demand to rise 1.9 percent in 2010, up from its September forecast of 1.6 percent. This outpaces the expected supply growth levels, leading to an occupancy increase of 0.4 percent in 2010, the first time the metric has increased in three years, according to PKF.

The firm said lodging demand would post a year-over-year increase in the first quarter of 2010, its first increase after eight consecutive quarters of decline.

Source BTNonline