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Playing the Rate Game

Positioning -- Positioning -- Positioning!



Carol Verret / October 2002
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If the three important factors in real estate are location, location, location, the big three in playing the rate game are positioning, positioning, positioning! 
            
The last edition of this newsletter aroused vigorous debate via email, at a seminar that I presented for the Wisconsin Innkeepers Association annual meeting and at a corporate seminar that I recently conducted. Let me say it one more time, I am not advocating a wholesale reduction of the rate structure of any hotel. What I am advocating is the positioning of the rate structure vis- a- vis product and rate category and the discounting of rates to fill opportunity periods in the form of special promotional rates for certain time periods.
            
Selective discounting has to be well targeted by market segment or specific client profiles that can address those opportunity periods. This principle works equally well for corporate based hotels as well as resorts.
            
Let's look at some specific examples. A corporate hotel is running in the mid sixty-percentile midweek. This is significantly lower than in previous years and their midweek prime occupancy period is running one day shorter than in the past. They now are running 60-65% Tuesday and Wednesday nights while Mondays and Thursdays have fallen to approximately 50%. For simplicity's sake, let's say that this is a 100-room hotel, which means that on any given night, they have between 35 and 50 rooms to sell. There is a highway construction project in the area and their competition for that business is a limited service property across the street.
            
In this situation (an actual one) the General Manager was smart enough to realize that an additional 15 rooms for five nights a week was worth lowering his rate to $46 ONLY for this specific group. He included a coupon for a $4 discount on a full hot breakfast, something that he does for all of his government accounts (a segment that has increased by 15% due to this) and successfully landed the business even though his competitor was offering a rate $2 cheaper.
            
Say what you will about lowering rates but this hotel is running ahead of last year in revenue, market share penetration and REVPAR in a market where all of these indices are declining among the competitive set.
            
Let's look at another example, a resort situation. This property is newly renovated and presents well. However, the statistics indicate that their Occupancy and REVPAR has been declining in inverse proportion to their rate. In addition, an aggressive competitor is 'dogging' their rate, that is, the competitor is entering into the reservation system a promotional rate that is $10 to $30 less based on opportunity periods. Once the GM realized this, he met and in some periods reduced his promotional rate to be slightly lower than theirs. He is only offering so many rooms at this rate so he can build his occupancy and rate structure. This is called yield management, an art that has been lost of late. When this GM analyzed his actual fill nights in high season, he realized that there was some opportunity there as well, i.e., he was not as full as he thought at mid-week during high season. The hotel is now actively targeting a lower rated market segment; skiers at colleges and universities within drive distance, who have the potential to use the resort during this period. The rate is very discounted rate and they are promoting it directly to the institutions student unions and through student newspapers. Creative thinking out of the box!
            
I challenge you to do the following:
  • Make sure that your rate is positioned properly against the competition by shopping their reservation system and analyzing their positioning on the electronic distribution channels. They may be undercutting you without your even knowing about it.
  • Analyze your data for the past two years. In many ways 2001 was not representative, especially Q4. Find out how many 'fill nights' you actually had versus what you think you had. 
  • Use this data to identify opportunity periods where selective discounting can benefit the hotel.
  • Think creatively out of the box. Develop a strategy with your sales department and reservations to 'fight back' and target those market segments that can fill your  opportunity periods 
  • Be willing to take risks. Not every idea will work or work immediately. If you are cost-analyzing your promotions, you won't be out of pocket too badly if the first idea doesn't produce as well as you thought. Move onto the next one. 
These are examples of rate positioning and selective discounting to fill rooms that would otherwise be left empty. Stubbornly holding on to a rate structure or rate because 'the product is worth it' will leave you with declining revenues, REVPAR and market share.  Your product is only worth what people are willing to pay for it at any given time.


Carol Verret is a twenty-year veteran of the hospitality business, having begun her career with Four Seasons and Westin Hotels in Montreal, Canada.  She most recently was Vice President Sales and Marketing for Sunstone Hotels before she left in 1996 to start her own business.  Carol Verret Consulting and Training provides consulting and training services to the hospitality industry in the areas of customer service and sales.  For a complete description of her services, access her web site at http://www.carolverret.biz/.   Comments and feedback are appreciated and can be
communicated via phone at (303) 618-4065 or email at carol@carolverret.biz. Be sure to subscribe to Carol's free monthly newsletter: ResultsWoW Customer Service by sending an email to:Subscribe-on@carolverret.biz. Put Subscribe in the subject line. 

© 2002 all rights reserved 


 
Contact:
Carol Verret
  3140 S. Peoria St, PMB 436
  Aurora, CO 80014
(303) 618-4065
Web Site: http://www.carolverret.com/
Email: carol.verret@worldnet.att.net
Also See: The Rate Game - Playing to Win / Carol Verret / October 2002
The Challenge of Marketing Independent Boutique Hotels / Carol Verett / August 2002
Hotel Sales in a Limited Service Environment - The Rules Have Changed / Carol Verett / August 2002
The General Manager’s Role in Sales -Chief Marketing Officer of the Hotel / Carol Verret / April 2002
100% Market Share Penetration is Not Good Enough / Carol Verett / January 2002
The Key to REVPAR Recovery –  New Business Development / Carol Verett / December  2001
Trash the 2002 Marketing Plan - And Just Start Over / Carol Verett / September 2001
How to Use Consultants Effectively –  A View From the Other Side  / Carol Verret / August 2001
How Soft Is Your Hotel's Economic Landing?  / Carol Verret / Aprl 2001
The ‘Value Proposition’: Marketing Yourself to Prospective Employees / Carol Verret / January 2001
Generation Y:  Motivating and Training a New Generation of Employees / Carol Verret / November  2000
Why Customer Service Seminars Don't Work / Carol Verret / October 2000
Creating a Culture of Customer Service / Carol Verret Consulting and Training / Sept 2000 
FAT, DUMB AND HAPPY – The Seasonal Boom and  Bust Cycle / Carol Verret / August 2000
Surf's Up - Ride the Wave or Miss the Boat -The Effective Use of Technology in Hotel Sales / Carol Verret / July 2000 
Measuring Effectiveness of  Hotel Sales Departments / Carol Verret / June 2000
Hotel Sales Training - The Need for Immediate Results / Carol Verret/ May 2000



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