Speak to any hotelier and the issue that consistently surfaces is the challenge of moving rates to the level they need to be. Whether we’re speaking about a limited-service hotel or a luxury property, hoteliers around the world are finding it virtually impossible to raise hotel rates. Given the industry is recovering from one of its most challenging recessions, the issue has become even more precarious. How can you justify raising rates when occupancy levels are mediocre at best, and when consumers expect frugality at every turn?
Now, a recent study by l’Ecole Hôtelière de Lausanne (Switzerland) and RateTiger substantiates that reality, stating rate parity is the key factor affecting hotels’ distribution and revenue strategies today. The study suggests hotels are neglecting the fundamentals of revenue management with an eye to alternative distribution techniques.
The study found revenue managers are using channel-management tools and price-shopping reports, up to 11 times a day, on average, to drive revenue on their main channels. “However, as they struggle to maintain price consistency,” reads the report, “they are seeking new ways to improve exposure, reach new markets and increase direct bookings.”
According to Horatiu Tudori, senior lecturer, Revenue Management, Ecole Hôtelière de Lausanne, “Retail sites are continuously monitoring rate parity, placing a lot of pressure on hotels to update rates on their channels.” This, in turn, is forcing hoteliers to spend more time managing rate parity and ensuring rate integrity, and consequently taking them away from defining more sophisticated strategies to reduce the cost of distribution and increase RevPAR.
Fuelling these changes is the fact that OTAs are getting bigger and increasingly influential. “We cannot fight against them, so we are trying to find some other ways of communicating our offerings and being exposed on the web,” reads the study.
Rate parity and the burgeoning power of OTAs is forcing hoteliers to source new revenue and booking streams. According to the study, hoteliers are now focusing on direct sales by developing new corporate contracts, better promoting their own web sales and maintaining faster availability and rates on non-conventional distribution channels to stay ahead of the game.
Clearly it’s a pressing issue, and one that needs to be addressed quickly. As John O’Neill, president and CEO of Vancouver-based O’Neill Hotels and Resorts, says in this month’s Top 50 overview. “Rate growth has not kept up with the increase in expenses, and it’s in the industry’s best interest to charge an appropriate amount for the services we provide. That will allow hotel owners a chance to re-invest in their product and keep it in top condition. In that case, everyone wins … including the guest.”
July/August 2012 feature articles: