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Neil L. Salerno, CHME, CHA

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"What the Heck is Hotel Revenue Management, Anyway?"

 

When Times Get Tough…Get Tougher! 

Sell Harder Before You Cave-in on Rates

By: Neil Salerno

When times get tough, natural human tendency tempts hoteliers to reduce rates in order to drive more business. At least that’s the general idea. Over and over again, this can of worms rears its ugly head every time there is a dip in occupancy. Caution…use some serious thought and harder selling before you cave-in on rates. If you don’t you may be setting yourself up for longer term disappointment.

It’s a common belief that reducing one’s  rate will radically improve occupancy. Don’t we all wish this were true? It would sure make hotel marketing an easier job. The fact is that reducing rates does not generate new demand; never has and probably never will. The usual result is to get the same or only slightly more business at lower rates; most often not enough business to offset the new lower rate offered. 

Before you simply react, take a hard look at your rate positioning; where do your rates reside as compared to the hotels in your competitive hotel set.  Cornell University has a great study on their web site, which discusses this very issue. The best rate position can only be determined by an honest evaluation of where your hotel’s location, facilities, and amenities rank within your competition set, and then set your rates accordingly.

Your published rates define your hotel. Like it or not, people who do not know your hotel will make a value-judgment based upon your published rates. Rates that appear too low will also appear too good to be true.  As the old saying goes, if it seems too good to be true, it usually is. This is the heritage of our free-enterprise society; the freedom to choose based upon our best value judgment. Setting your rates too low can negatively impact your business; instead of improving your hotel’s marketability. 

Your hotel does not exist in a vacuum; your rates should reflect your deserved position among your competition set. Before the franchises started the “lowest rate guarantee” nonsense, we used to sell hotel rooms based upon the merits of the property and the simple principle of supply and demand. The franchises succeeded in re-capturing some market share from third-party aggregators, using this fabricated rate tool, but at the cost of the profitability of their franchisees. Their intention is not to increase demand; it’s intended to steal market share from the third-party sites; pure and simple

They lowered guest expectations, created a market based upon rate instead of merit, and made the Internet a Filenes Bargain Basement. It’s time they found a better way to compete with the third-party sites. It’s time for our industry to go back to selling location and facilities. 

Third-party aggregators serve a very special place in the marketplace. They have the ability to drive many room nights to your hotel. Use this base of business to increase your published rates. They have more power and spend more money marketing your hotel than most franchises. 

Improve your web site’s capture capabilities to get your fair share of direct business and stop relying on your franchise to do all the marketing of your hotel. 

Concentrate on Marketing 

There are few shortcuts to developing business. Generating new business is a long continuous job with big rewards for those who persevere. Easy fixes, such as drastically reducing rates, rarely result in a healthier top line. 

If your rates are properly positioned against your competitive set, it’s time to examine your marketing techniques. Unless you plan to sell your hotel by rate alone, re-evaluate your web site’s effectiveness. Beware of web masters who emphasize all the wonderful “hits” or “unique users” your site is receiving. The best way to judge the effectiveness of your site is to measure the number of reservations you are getting from your site; period.

I have had many clients who thought their sites were perfect, beautifully designed, but the sites were completely ineffective. It’s not just what you see that defines the marketability of your site. 

The most common errors:

  • Too much “flash”. Flash is pretty but it can inhibit the search ability of your site. 

  • Design which is not based upon standard hotel marketing principles. “Location” is the most important element of hotel marketing, yet many web designers don’t understand this basic hotel requirement.

  • Poorly chosen tags. There is no excuse for this.

  • Text which is poorly written. Your site should be a “selling” piece not simply an online brochure. 

  • Lack of an effective booking engine on the site. 

The best way to check the effectiveness of your web site is to have a hotel marketing expert review your site. The review should identify site design improvements; what you can see and what you can’t see. It could be the best small investment you will make.

Your Sales Team

If you are lucky enough to afford an identified sales team or take on the job yourself, it’s time to review sales activities and how you are selling your hotel. The majority of new business will result from your direct sales effort. Don’t judge your sales effectiveness from the number of contacts that are being made; new bookings and reservations are the keys to success. 

There are many good hotel sales consultants who can put effectiveness back in your sales program. Good sales programs result from sound and consistent sales habits. Get an objective view of your sales practices. You might be surprised.

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