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Expect Hotels to Pare Back On Perks In 2011 While Implementing Modest Increases In Room Rates

David Brudney & Associates- Hospitality Marketing Consultants
David M. Brudney, ISHC, a nationally recognized spokesman for hotels and a veteran with four decades of experience, is the principal of David Brudney & Assoc. of Carlsbad, CA

David M. Brudney, ISHC, September 2010

STR's Mark Lomanno asked a most interesting question during the recent Hotel Data Conference: With recent signs indicating a return of demand, how will meeting planners take to the likelihood of hotels scaling back or eliminating altogether those attractive promos and value add-ons?

For starters, I believe that a sure recipe for disaster would be for those hotels that overnight attempt to raise room rates aggressively at the same time cutting promos and value adds so prevalent these past two years.

Those that choose to follow that path risk losing whatever customers they have for life.

I see 2011 shaping up now as a "bridge" year for hotels to begin the process of building room rates.

According to my hotel sales and marketing leadership sources, the most prudent strategy going forward appears to be one of adopting a modest increase in room rates while gradually cutting back on - - or modifying - - many of those customer perks.

One of the keys will be how effective hotels are at "paring back" perks while attempting to drive rate.

A critical question will be whether owners will have the required patience in slowly bringing rates back to pre-2008 levels - - many industry analysts are predicting that could take as long as five to seven years.

For starters, group, leisure, and business travel guests should expect a 5% increase in room rates across the board in 2011, based again on conversations with my sources - - U.S.A. resorts, urban hotels, and conference centers, east to west.

The good news for meeting planners, however, is smarter hotels will retain or introduce new "softer", less costly perks, to offset those scaled down or discontinued altogether:

  • US$50 F&B and retail credits
  • 25% off conference center CMP packages
  • Room type upgrades
  • Additional comp rooms
  • Special room rates for client's staff
  • Waivers on standard resort fees
  • Waivers on standard parking fees

As preferred dates become less available, look for hotels to abandon the "whatever it takes to book" mentality and return to more rigid group contracts in 2011:

  • More enforceable attrition clauses - - room blocks and catered events
  • Tighter deposit demands
  • Tighter cut-off dates on room blocks
  • Meanwhile, as a replacement for those offered so freely in 2009 and 2010, the brands are set to launch some new creative perks through airline partnerships. I'm led to believe Marriott Rewards is forming a new alliance with American Express and Jet Blue; Starwood Preferred Guest with Delta and Southwest.

    My understanding is these new programs will enable meeting planners - - and individual hotel guests - - to leverage hotel bookings into airline upgrades, seat assignments, first off, extra leg room, luggage fee waivers, and free meals.

    One of my sources had a most profound commentary to make on the prospects of the pendulum swinging back to a more favorable seller's market. "That pendulum should not be swinging so dramatically from hotel to planners, and planners back to hotels", said Chris Kenney, regional director of sales and marketing, Tempe Mission Palms (www.missionpalms.com) and Destination Hotels & Resorts (www.destinationhotels.com).

    "We need more common ground where we can foster less 'win or lose' and more 'win/win' conditions", Kenney said. "The ball shouldn't be in either the planner's or the hotel's court. What we should have learned from the past two years is that we don't have to have these extreme sways. What we should have is 'partnerships' between meeting planners and hotels . . . then together we can focus on solutions."

    "End of day," added Kenney, "the only important question asked should be are planners' needs being met or exceeded by our hotels?"

    Throughout my four-plus decade career in hotel sales and marketing, the hotels that have responded best - - coming out of buyer's market - - have been those hotels that had built and maintained previous solid relationships with planners; those hotels that practiced consultative selling, working with planners collaboratively, focusing on planners' real needs; and seeking solutions to mutual satisfactions.

    So, to answer Mark's original question, it would be foolhardy for hotels to simultaneously eliminate those special promos, heavy discounts, and value adds while bumping rates 10% or more. The wise thing to do would be to continue to offer softer, more creative perks while gradually implementing modest rate increases; 5% percent in 2011. All of this, of course, becomes academic, should that anticipated demand disappear.

    I will be addressing the collaborative relationships between planner and hotel in my articles to follow. Meanwhile, your feedback will be particularly welcome.


    About David Brudney & Associates

    David M. Brudney has become a charter member of Laguna Strategic Advisors and was a founding member of the International Society of Hospitality Consultants. Brudney is a veteran sales-and-marketing professional concluding his fifth decade of service to the hospitality industry. Brudney advises lodging owners, lenders, asset managers and operators about hotel sales and marketing best practices and standards of care, and conducts reviews of sales-and-marketing operations throughout the world. Brudney is a professional speaker, teacher, mentor and sales trainer. Previously, Brudney held sales and marketing positions with Hyatt, Westin and Marriott.

    Contact:  David M. Brudney, Principal
    David Brudney & Associates
    Carlsbad, CA 92009
    Phone:  760-994-9266
    Email David Brudney
    Web Site:   www.DavidBrudney.com

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