Carol Verret Consulting 
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The Rate Game -
Playing to Win



Carol Verret / October 2002
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Confusion abounds in regard to where the rates should be. There is still a segment of the hotel population that is in denial and wants to keep rates at their 2000 level because "the product is worth it." Sales is frustrated that they are losing business to other hotels that are slashing rates in a bid to increase occupancy and getting grief from above because they can't "sell the rate." Neither stubbornly maintaining rates nor 'slashing' works in the current economic climate. 

The nature of the rate game has changed. In the above scenario which side is playing the game to win? Neither. If this were a gaming table in Las Vegas, both sides would lose their shirts.

Make no mistake, in the first scenario the product is only worth what someone is willing to pay. If fewer people are willing to pay, market share declines and the REVPAR and Yield Indices are out of balance. In the second scenario, slashing rates may build market share penetration but REVPAR and Yield will decline to unacceptable levels.

I would submit that there is a smarter way to play this game so that both sides have win-win and ultimately the hotel wins. However, only certain players can play this game.

The first qualification is that you had to have enjoyed market share above 100% until at least Q4 2001 and your current published rates are positioned well against the competition in your product category. All others shouldn't come to this gaming table until they have at least established the second qualification above.

Leave the published rate structure alone. You have probably already noticed a sharp decline in rack, corporate and other programs tied to rack rate as well as a sharp increase in the discount market segments. Somewhere in the middle is the 'value rate.' This is the rate that the middle 50% of your customers are paying, those that have negotiated rates or LNRs, large group rates, etc. The increase in rooms in the discount segment should offset the loss in rack segments. It is the average rate paid by your locally negotiated accounts that is probably your 'value rate' in the market. By 'value rate', I mean the rate that is considered good value by those in your local market with the potential to give you business and those that call the hotel directly rather than Central Reservations. This should become your 'sell' rate across the front desk for walk-ins and reservations.

Discount everything else like crazy! Actively seek out and aggressively bid on tours, one-time groups like construction crews and large groups from accounts that you know are bidding out meetings or groups. Selectively trade rate for volume in Q4 2002 and Q1 2003. This takes a certain amount of skill on the part of the sales person.

Here are some of the steps to follow: 

  • Prospect all those files that you previously rejected because the rate was too low.   
  • Keep your eye on your competitor's parking lot for tour buses and company vehicles. Know who is using your competition at what rate - if you don't know call and shop them. 
  • Get a clear understanding of the lowest rate you can quote and the guidelines. You want to be able to close on the first call - don't be in the position of having to check and call back. If you can pique the prospect's interest you need to be able to act on that opportunity. 
  • Call them and grovel - indicate that you are offering substantial discounts on a limited basis. 
  • The first person to quote a rate loses! Ask them what rate they are looking for, their budget for this project, what they are currently receiving elsewhere and what it would take to get their business. You may not be able to meet or beat the rate but at least you know what the ballpark looks like and you can value-add to make your slightly higher rate more attractive. 
This strategy works if you are projecting few or no 'fill nights' in the fourth and first quarter. You have inventory to sell. Anything that you sell in these circumstances is incremental.

The benefits to the hotel include increased market share, incremental revenue and the ability to retain staff during a down period. This is playing the Rate Game to win!

Make no mistake about it -- those properties that maintain or increase market share in these economic times will be the ones well positioned to move the rate when the economy begins to turn upward! 



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 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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