The State of the Rate: The Battle to Recover Hotel ADRs
By Mike Kistner President, Chief Executive Officer & Chairman of the Board, Pegasus Solutions | January 23, 2011
Recovery continues in both the corporate and leisure travel markets. While the leisure sector sustains a slow but steady pace, corporate travel has eclipsed the recovery with both strong booking volumes and record-high growth in average daily rates (ADR). However, despite the significant increases in reservations of greater than +24% over 2009 each month since April, according to data reported in The Pegasus View, hotel revenue is still being hampered by weak ADRs, particularly in the leisure sector. What's a hotel to do? Examine and understand the state of their rates, then seize control of their pricing strategy by understanding their market position, their guests and their resources.
Know your worth and the actual price customers are willing to pay
The negative influence of depressed ADRs is easing for many hotels, and has begun to round the bend for others. Whether you are trying to fan flickering hopes of ADR growth or basking in the warm glow of rising rates, the key to altering the state of the rate to more favorable conditions is to harness the power of strategic pricing.
Better pricing isn't simply about offering the lowest ADR your hotel property can afford. Any salesperson worth their salt knows that price points are simply a tool. They can be used to differentiate your product and maximize your value proposition. We need to consider each consumer as an individual, not a target market, and realize that each has an idea of what they're willing to pay.
For example, an online consumer and one walking through your front door are going through very divergent purchasing processes. The same room often could, and typically should, be offered at appropriately different prices. A common misnomer is the idea that you must abandon rate parity to do so. Additionally, this field of thought suggests the goals of ADR growth and driving business to your homepage can't be accomplished while utilizing third-party channels. In truth, rate parity and effective use of the GDS and alternative distribution systems (ADS) channels are vital in achieving these goals.
It's truly a balancing act for a hotel to create revenue in a depressed market with minimized lead times, without compromising ADR-related brand identity. It takes an agile user of competitor intelligence, market analysis and comprehensive reporting to emerge on top.