Avoiding Rate Price Wars and Keeping the Rack Rate High
By Johan Creytens Owner & General Manager, Hotel Heritage, a Relais & Chateaux Property | March 06, 2011
One of the challenges general managers and hotel owners face, during a global economic crisis is to keep their property afloat. Competing with local area hotels for last minute guests is a major issue in the downturn. Success in attracting these last minute guests will affect your revenue. This competition can result in price wars, which often flare between competing hotels. This will affect how hoteliers set rates in 2011.
Competing hotels offering last minute specials, or heavy discounts, can raise the intensity of price wars. Knowing how to meet this challenge is important for survival during the fiscal crisis. Becoming aware of a price war affecting your hotel and identifying the right tools to counter it will prove helpful in the short and long term.
Industry experts warn not to drop rates and to increase them whenever possible. While the complex process of developing the right rates for each room type differs within each hotel, it is generally easier for boutique independent hotels to adjust (and fight) price wars due to their flexibility.
In today's environment, the traveler has the upper hand in determining the room rate. Experts tell us that 2011 is the year of "value". Hoteliers are working hard to be creative and accommodate that philosophy as the economy has caused hotels to frequently out price one another. Meanwhile, travelers seek value and the lowest possible rate when booking a hotel - even a luxury hotel. Often, travelers book last minute, hoping to take advantage of lowest rates in the area. What does all this mean to hoteliers doing what they can to keep their hotels alive through the global downturn?
Below are some thoughts on what to consider during a price war with competing properties:
1. Establish and really understand your competitive advantage
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