A key message at this year’s PKF Outlook presentation was that Canadian hotels have been discounting rates heavily in an effort to gain back market share that simply did not exist. The lack of demand was the result of an ongoing global economic crisis that caused a downturn in corporate and leisure travel. It has become apparent that the time for change is upon us, and the need to reevaluate rate strategies is essential.
As of early fall 2009, average daily rate (ADR) in Central Canada was down 5.2% and down 3.0% in Western Canada with an overall national result of a decline of 4.5%. The impact of this was most apparent in the bottom line. Nationally, the decline in average rate meant a loss of $500 million in net income. If rates had been held, occupied room nights may have slipped further; however, the result in net income would not have been as drastic.
How do we move forward? In addition to the yield management practices of the revenue management and sales and marketing teams, hotels can give some ammunition to the front desk and reservation agents by providing strategies to avoid offering or succumbing to guest requests for discounted room rates. The following outlines some front line strategies and some yield management strategies to enable your team to make a difference.
Value add – but value add smartly. Enhance the product offering by adding products or services that are perceived as value to the guest, but actually cost the hotel little or no money. This could be items such as parking or an upgrade to the next room category, to a room with a view or a room with upgraded amenities.
Upsell every guest. At check in, every guest should be offered the option to upgrade to the next room category or add a meal plan to their room rate, such as breakfast, for a nominal fee. To enhance the value, the fee could be less than what the ‘normal’ charge would be for that upgrade and be sure to keep the offer in line with the hotel’s needs, such as offering upgrades to categories where there is excess inventory left to sell.
Have more than one rate. Arm your agents with a tier of rates for the same room category and implement the practice of quoting rates from the ‘top’ so there is room to move down if the guest should ask for a deal.
State the savings. Be sure to offer the ‘normal’ rate or the peak period rate that hotel room would be so the traveler has a reference as to what type of discount they are getting.
Suggest an alternate date of stay. Find out if the traveler is flexible with their date(s) of stay and offer a discounted rate for a day or dates near their range when there is more inventory to sell.
Be up front. If room rates are at a premium because the hotel is close to complete occupancy, then explain that to the traveler. Most people generally understand the concept of supply and demand and will be influenced to take the room at a higher rate if there is a risk that there may not be a room available at all.
Be daring. If the traveler is questioning the quoted rate, ask the traveler what their budget is or what they were ‘expecting’ to pay. You might be surprised to find they offer up a room rate that is higher than what your discounted offer would have been. And they will certainly be satisfied if you agree to their rate.
Incentivize staff. Implement some weekly ‘contests’ or challenges that reward staff for the most upsells, the most rack rates sold, etc. The light competition will also create a positive, ambitious energy in the front office.
Manage all booking channels. Manage your yield (and integrity) so that agents are not quoting rates higher than what is being advertised on the various web channels. The net rate given to a third party booking channel is likely much lower than even a discounted rate offered at the hotel directly. Take advantage of the captive audience to better sell the hotel and use the opportunity to close the sale directly.
Use packaging and opaque booking channels. If room rate discounting is required, save it for packages and opaque Internet channels. Both packaging the room rate with other services and amenities and selling rooms through Internet sites that don’t disclose the name of the hotel, for example, are ways of keeping the discounted room rate undistinguishable by the traveler and by competition.
Encourage early booking. Try to help the hotel industry retrain the consumer to book early for the best rate rather than to wait for last minute offers. Make the best rates available to those that book early and do not sacrifice your own offer by discounting rates for last minute travel. The best rate should always be the one in the early booking offer.
Listen! The traveler may ask you a question about the room or the rate but may not actually be asking for a discount. Listen to what the buyer is saying. Your first response should be to sell the hotel, not the discount.
Regardless of what practices are undertaken, it is important to maintain rate integrity and stand by your product. And be mindful that these strategies are not just for management to execute. Each level within the hotel organization needs to understand the yield management concept in order for the industry as a whole to recover. Gain control of the situation.
Kirstin Hallett, Consultant
PKF Consulting Inc. - Vancouver
