It is quite the common theme these days to pick up a paper or read an Internet Travel column and the article writer boldly predicts lots of sales everywhere and anywhere you want to go. Forget the fact that over the last year airlines have slashed capacity so much and laid off so many workers that fares are more likely to firm up than drop any more. They brazenly say that hotel rooms are going vacant in this recession/depression and that hotel operators would do anything to fill rooms, even by discounting them severely.
While this may well be true for some, it is a limited some in my opinion. Hotels would actually rather chance vacant rooms than to lose the hard earned gains they made since 2001 nearly destroyed the travel industry. Why?
Glad you asked. It's called playing the rate game and it goes like this.
Most hotels try to retain guests for future stays by offering out of sight service. And it works, along with hotel rewards programs - it keeps the same people coming back to a familiar place time after time. In 2006-7 and 8, hotel rates rose consistently and almost wiped out the memory of having mostly vacant rooms in 2001 and 2. So if you had a guest who paid (and expected to pay) $90 for a room, the last thing a hotel wants them to do is find the same room for $60 when times are bad. Why?
It is too hard to get them to pay $90 again when the economy picks up. They either whine and cry about how they 'used to pay only XXX' as is that was the most they EVER paid previously. Or they start to look for a lesser hotel that will charge $60-70 per night and switch their allegiance. Consider this - if you went to a lower scale economy hotel like a Days Inn or a Motel 6 and they charged $159 for a night, would you think it was worth it? Especially when you could get a Marriott or Hilton at that price usually? Think of the reverse - if you paid $149 regularly at a Hyatt, would you wonder if something was amiss if they now charged $59?
Hotels (or motels) that overcharge for rooms usually get caustic comments from the guests and bad reviews in writing. Hotels in the upper tiers (Hilton, Hyatt, etc) get the opposite. Rave reviews that makes everyone think they should only pay $59 too! This is one of the reasons many upper tier hotels will not participate with Priceline or other 'opaque' sites - they would rather have rooms go dark than rent them for a pittance and get the public 'trained' to expect to always pay that amount.
I see Priceline status reports monthly, where they tell you what 'bids' you missed out on and how many hotels accepted the bids. By and large, in the San Francisco Airport area, I see people bidding $25 and $29 for a hotel room (in mid summer no less!) and NO ONE accepts the bid. When they up it to $38, someone grabs it - but it almost always is a hotel that sells rooms on Expedia for $34 anyway, so to them - they are MAKING money. But these aren't classy properties to begin with and the question remains that if so many rooms are vacant, why didn't anyone pick up the $29 bid?
Because it sets an expectation for the guest for the next time they come to the area and hotels cannot operate at a decent profit trying to get $89 but people respond "I only paid $55 last time I was here". When you ask them when that was, the answer is usually "3 years ago". Which in hotel years might equal dog years because 3 years ago ANY YEAR is a world away from where the economy is at present.
The thinking goes, once you drastically lower prices, don't expect to raise them again suffiiiiiiently. The resistance is fierce.
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