Hotels in price wars

The global survey of 300 hotel revenue-managers was conducted recently in Singapore by Sheryl E Kimes PhD, Singapore Tourism Board Distinguished Professor of Asian Hospitality Management at the Cornell Nanyang Institute of Hospitality Management. The survey found that the current top four issues hotels are facing are customer-rate resistance, contract renegotiations, competition and price wars.

"With the recent economic downturn, many hotel revenue-managers have been struggling with how best to manage declining demand and the pressures to reduce rate," the survey says.

Revenue-managers said customers were now booking much closer to their arrival date. Respondents also said hotel occupancy was significantly lower than last year.

One representative comment was: "Hotels still haven't learned that dropping rates will not recover enough revenues to cover the discounting. These just cause price wars in the long run."

Kimes said the survey showed that price wars were the most frequently mentioned issue. Respondents commented on the pressure they felt to reduce prices to maintain market share and stay competitive. Many also talked about how price wars could ultimately affect the brand image of a hotel.

Respondents said that a lot depended on their "ability to convince owners and GMs to hold rates to protect current and future integrity."

Marketing concerns were represented by the comment: "Given the current and expected economic situation, a major issue will be how to maximise revenues in situations where properties are not always full. Of course looking for new channels will be important, and perhaps introducing new, very low rates. Just as important at least will be the ability to determine what price or prices to charge to maximise revenue on any given night whether or not this price is one that fills the property."