|By Sara K. Clarke, The Orlando Sentinel,
Fla.McClatchy-Tribune Regional News
August 22, 2009 - Not too long ago, most people didn't want to see the inside of a $10 hotel room.
But with travel down noticeably this year because of the recession, even high-end hotels in Orlando are offering eye-opening specials in an increasingly desperate attempt to put more heads in beds.
The Monumental Hotel -- a former Crowne Plaza on International Drive south of Sea World -- offered rooms for $10 one night last weekend. A couple of days later, the Red Roof Inn across the street from the Orange County Convention Center beat it out with a 1-cent promotion.
Even the world's largest Marriott, the Orlando World Center Resort near Walt Disney World, will slice 25 percent off for anyone willing to book a four-night stay.
Experts warn hoteliers against discounting the way mothers warn children against going out in cold, wet weather without a coat: You'll catch your death.
"It hurts the business, it hurts the market fairly significantly, because it will take a number of years to recoup the rates," acknowledges John Brost, general manager of the Best Western Lakeside in Kissimmee. Yet even Brost's hotel has cut its room prices 10 percent to 12 percent in hopes of attracting a bigger share of the tourists bound for Disney.
When travel nationwide slumped after the Sept. 11, 2001, terrorist attacks in New York and Washington, average hotel occupancy in Orlando plummeted 27 percent that month, and the average room price slid 11 percent. Occupancy returned to pre-9-11 levels within three years, however, while it took four years for room rates to recover all their lost ground.
"The bottom line is the operator is stuck between a rock and a hard place," said Richard Maladecki, president of the Central Florida Hotel & Lodging Association. "They need to fill those rooms because, obviously, yesterday is not going to happen again."
Through the first half of this year, hotels in the Orlando market were 10.6 percent less full per night on average than in the same period in 2008, according to Smith Travel Research, which tracks the hospitality industry. Not surprisingly, the market reacted with price cuts: The average room rate in the first six months of 2009 was $101.39 a night, or 11.4percent less than what hoteliers charged last year.
But though the link between going out in damp, dreary weather with no jacket and catching a cold has generally been debunked by decades of medical research, studies of hotels' financial performance suggest that discounts, while boosting market share, hurt the bottom line.
A recent study released by the Cornell University School of Hotel Administration, for example, warned against a "race to the bottom" by hotels hoping to lure more guests. The study of U.S. room rates from 2001-07 found that hotels that set their prices higher than direct competitors -- in good times and bad -- generated more room revenue over time. Those that discounted, the study concluded, weren't able to stimulate demand enough to make up for the price reductions.
"The evidence seems to suggest that lower prices mean lower revenue," the researchers wrote.
But for places such as Red Roof Inn, it's not all about the revenue. The hotel said it recorded a "significant pickup" in business before and after its 1-cent deal when it tried the promotion in Massachusetts.
"We want to entice those customers to give us a try and bring them out into the travel world," said Andrew Alexander, the company's executive vice president.
"It's both about increasing your profits immediately and increasing your profits in the long term," Alexander said.
Sara K. Clarke can be reached at firstname.lastname@example.org or 407-420-5664.
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