News for the Hospitality Executive
Uncommon Common Sense:
Transient Rate Strategies to Take to the Bank
By Jil Larson, July 22, 2010
Recently overheard from a Director of Sales: “We need to drop our rate that week because we have no group base and we’re past the booking window.”
Translation: We need to drop the transient rate, the one already identified as being the optimal price point for demand conditions that week, to compensate for a lack of group base.
A host of questions spring to mind. If the transient rate currently in place is the one we believe will generate optimal transient revenues from the projected transient demand, and it should be, why would we want to lower the rate to make it not optimal? Misery loves company, but just because group has tanked that week, we’re supposed to take transient down with it?
This person may also believe hotels need to increase their transient rates on nights when they do have a group base, regardless of whether or not they are projecting to sell out or what conditions are in the marketplace. This line of thinking is not unusual, just annoying. I’ve heard the same comment in many markets from many different people over the past 10+ years.
Here are three selling strategies to take to the bank. Literally.
Conditions: A large event is taking place in the market that will fill several properties (external compression). This is the one that justifies a transient price increase. Even if your hotel isn’t projecting to sell out, it can often maximize revenues by raising rates if the other properties in the market have done so due to their high demand.Too often hotels unintentionally suppress their room revenues by tying their transient pricing strategy to the size of their group base. Size doesn’t matter. Put yourselves in the shoes of the individual traveler and you will quickly realize this. Your hotel rooms provide the exact same value at 50% occupancy than they provide at 90% occupancy. And that’s assuming travelers even know your occupancy, which of course they do not. If your property has this bad habit, it’s time for a new strategy.
P.S. In follow up to the comment made by that Director of Sales, it turns out the hotel actually wasn’t past its group booking window and picked up a few small groups. The transient price point wasn’t dropped, and the hotel sold out every night of that week. All weeks should do so poorly.
Jil Larson is a twenty-five year veteran of the hotel industry with revenue management leadership experience within the Starwood, Marriott, Intercontinental, and Fairmont organizations as well as that of several independent hotels.
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