Carol Verret Consulting
The Rate Game -
Carol Verret / October 2002
|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:
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!
© 2002 all rights reserved
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Aurora, CO 80014
Web Site: http://www.carolverret.com/
|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|