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It's a Terrific Time to Be a Consumer:
Hotels Willing to Deal

By Tom Daykin, Milwaukee Journal SentinelMcClatchy-Tribune Regional News

January 16, 2010 --The recession is technically over, but demand for travel is still way down, so a lot of high-end hotels and resorts are willing to cut a suite deal to fill their rooms.

Bill Otto knows this from personal experience. Over the recent holidays, Otto and his family enjoyed a three-bedroom suite, with an ocean view, at a California resort for just $300 a night. Normally, he said, the rate would have been $1,500 a night.

Otto, president of Milwaukee-based Marcus Hotels and Resorts, admits to having mixed feelings about the stay, which he mentioned during a speech at this week's meeting of the Wisconsin Business Travel Association. On one hand, he said, it vividly demonstrates the weakness in corporate and group travel, which hurts Marcus and other hotel operators.

But, he added, "It's also a terrific time to be a consumer."

Other hotel industry observers agree. With another difficult year expected for hotels in 2010, travelers will find opportunities to upgrade their stays at bargain prices, said consultant Greg Hanis.

"The consumer is definitely in the driver's seat because of the recession," said Hanis, who operates Hospitality Marketers Inc., based in Pewaukee. "Demand is down."

Low occupancy levels "will likely provide little pricing power for hotel owners" this year, according to a forecast from Robert W. Baird & Co. Demand isn't expected to increase until 2011, according to Baird.

Meanwhile, there are deals to be found.

A search on of four-star hotels in Chicago's Magnificent Mile area found a standard guest room at Hotel Monaco, a luxury boutique inn, priced at $95 for a Saturday night stay on Jan. 23. That's a 20% discount from the $119 rate advertised at the hotel's Internet site.

Marketing consultant Jay Sorensen is traveling to San Francisco during the first week of February for a business conference. He found rates at upper-end downtown hotels -- such as Sheraton, Marriott, Hilton and Hyatt -- ranging from $110 to $130 a night in one of the nation's most expensive hotel markets.

"I was absolutely amazed," said Sorensen, president of Shorewood-based IdeaWorks Co.

Discounts also can be found on lower-priced hotel rooms, Hanis said. He's staying next week at a La Quinta in El Paso, Texas, for $57, 20% lower than the $70 rate found at Expedia .com.

Hanis said he got that cheap rate by calling the hotel directly after checking on rates through online agencies. Hotel operators are sometimes willing to go below the rates offered at Expedia and other online booking agencies, he said.

That's because hotels sell blocks of rooms to those booking firms at a discount, Hanis said. The online firms then mark up the rates they offer to consumers in order to make a profit.

Cost-cutting debate

For high-end hotel operators, there's a running debate about whether offering deep discounts is a good idea.

Cutting rates does help attract more travelers, especially leisure travelers.

But increased demand also means more wear and tear at the hotel, which brings higher maintenance costs, Hanis said.

"In the long run, it could cost you more to lower your rates," he said.

At The American Club, in Kohler, management generally avoids cutting rates during lean times, said Scott Anderson, president of the hospitality and real estate division at Kohler Co., which owns the pricey resort.

If customers get used to paying lower rates, he said, they might balk to attempts to increase those rates when demand improves.

Another argument to making rate cuts is that more guests will generate higher revenue at a resort's restaurants, golf course, spa and other amenities.

But the lower room rate also could attract less-affluent customers who wouldn't want to pay for such services, Anderson said.

For both leisure and business travelers, it's a good time to upgrade from where they normally stay, said Hanis and Otto, whose company operates such upscale hotels as downtown Milwaukee's Pfister Hotel.

"Luxury hotels are becoming more of a bargain," Hanis said.


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