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.

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Sales & Marketing: Selling Experiences

There are innumerable strategies that Hotel Sales and Marketing Directors employ to find, engage and entice guests to their property, and those strategies are constantly evolving. A breakthrough technology, pioneering platform, or even a simple algorithm update can cause new trends to emerge and upend the best laid plans. Sales and marketing departments must remain agile so they can adapt to the ever changing digital landscape. As an example, the popularity of virtual reality is on the rise, as 360 interactive technologies become more mainstream. Chatbots and artificial intelligence are also poised to become the next big things, as they take guest personalization to a whole new level. But one sales and marketing trend that is currently resulting in major benefits for hotels is experiential marketing - the effort to deliver an experience to potential guests. Mainly this is accomplished through the creative use of video and images, and by utilizing what has become known as User Generated Content. By sharing actual personal content (videos and pictures) from satisfied guests who have experienced the delights of a property, prospective guests can more easily imagine themselves having the same experience. Similarly, Hotel Generated Content is equally important. Hotels are more than beds and effective video presentations can tell a compelling story - a story about what makes the hotel appealing and unique. A video walk-through of rooms is essential, as are video tours in different areas of a hotel. The goal is to highlight what makes the property exceptional, but also to show real people having real fun - an experience that prospective guests can have too. The June Hotel Business Review will report on some of these issues and strategies, and examine how some sales and marketing professionals are integrating them into their operations.