Keeping The Initiative

Whatever you do, it is vital that you stay in control of your inventory and rates. Keep your pricing flexible but the closer your prices are to your customers’ expectations, the less you will need to change them. You stay in charge by:

• Ensuring it is easy to book on-line from your website.
• Making sure that if you do change rates your own site always has the best deal.
• Maintaining your visibility via internet travel sites and hotel portals. There are plenty of good performing sites but they need constant managing and daily updating with new packages and pictures. If you aren’t able to carry out this daily task, consider outsourcing the activity.
• Setting realistic rates in relation to your competition.
• Communicating well within your hotel. You definitely lose the initiative if someone puts a special rate on an internet site and forgets to tell reception about it.

Testing Price Points

You can do all the research possible and check the competition to destruction, but nothing will tell you your optimum room rates. The only thing you can do is test your ideas to see what nets you the most revenue. This is not so easy with rates that you have to guarantee in advance, such as corporate or group rates. For segments that you use to fill up gaps in your occupancy it is relatively easy. The internet is useful in that you can change things very quickly, so try putting together different ‘packages’ say by adding dinner and entry to local attractions (although you will then have to pay commission on these extras). Use radically different room rates and see if there is any differences in take up.

Commission

Commission paid to third parties is a fact of life if you use agents to help you reach your customers. It is certainly a cost and one that should be reduced if possible. But sometimes you have to think of the alternatives, which may well be an empty bed. If you could have filled that bed at a higher net rate yourself then obviously your strategy should change. However, if you look at commission from the other end, at least you receive 90 per cent of the revenue you might well not have had in the first place and you have the opportunity to generate extra spend on drinks and dinner.

Commission payments can make a big impact on your net rates. If you use a reservation company and you get a booking through the GDS from an agent, you will be paying a reservation fee of around seven per cent, agent’s commission often per cent plus a GDS fee, which adds up to between 20 and 30 per cent of the rate. As long as this is against a high rate then there is probably no issue. However be careful about your distribution channel when you are issuing promotional rates.

Personally I love commission payments! The higher they are the more business you have received through that source. The only difficulty is that the commission invoice can seem very large and usually arrives after the guest has left. An ideal cash flow, but maybe the commission would be more palatable if you had to pay it in advance.

Rate Tactics

Request For Proposal (Rfps)

Depending on how your distribution is set up, you will receive RFPs from travel agent consortia (Carlson Wagonlit, BTI, Rosenbluth, American Express, etc) and commercial organisations. If you feel that there could be business through worldwide travel agencies then you will need to submit your rates for their own-brand corporate rate programme for the following calendar year anytime from the previous June/July. You will have to pay in advance to be submitted to these agencies (anything from US$250 upwards) with no guarantee of being accepted, although these fees are refunded if you are unsuccessful.

There is really not much you can do beforehand to evaluate whether or not you will generate business through these programmes (city and airport locations do best), but it is a fair chance that you will not be accepted unless there is at least some existing traffic to the destination. Of course, once you are in the programme you can keep appropriate records.

Your rates will need to offer some level of discount (usually at least ten per cent), so be careful how this might affect the rates that you offer elsewhere.