For more than a decade hotels have invested heavily in the technology and systems needed for effective revenue management. As a result, we as an industry are better than ever before at forecasting demand, tracking booking pace trends and adjusting rate availability upward or downward accordingly.
Now, in order to further optimize the profit potential of each distribution channel, revenue-management professionals are looking at all possible solutions for stratifying their rate structures to ascertain more control of how inventory is priced and distributed. This is not a completely new concept. Resorts and upscale hotels traditionally have differentiated the price of their product based on room type (i.e. standard, superior, deluxe, suite) and company/consortia/group affiliation.
Likewise, the concepts of varying rate based on day of the week, season, and even length of stay have been around seemingly forever. So it has always been necessary for front-desk associates to explain rate differentials and justify them to guests; it's just that there's a whole lot more of explaining to do these days.
In today's highly-competitive environment wherein customers can so easily price-shop a large number of hotels at once and can even shop their targeted hotel by more than one of its own distribution channels, revenue-management professionals increasingly are innovative at establishing rate differentials or "fences" based on the unique opportunities presented by their inventory and market conditions.
For example, the industry is seeing the comeback of the "advance purchase/nonrefundable" reservation, which first was established on a wide scale by companies like Marriott International and Hilton Hotels Corp. in the early 1990's. This option offers consumers a lower-tiered rate in exchange for booking restrictions that exclude the less price-sensitive business travelers who book late and need the flexibility to change dates.
It is true these rate-option-based pricing plans represent creative ways for hotels to market just the right rate to just the right market segment. But explaining all the rules/restrictions surrounding these accommodation types and rate-options can create significant challenges for reservations and front-desk agents who have not been property prepared via training. What's even more challenging is trying to uphold these fences when customers try later to circumvent them by cajoling or complaining.
Besides advance purchase restrictions, here is a list of other examples of rate fences that today's front-desk associates might potentially need to uphold:
Guests who want room types that are tied to higher rates than they are willing to pay, for example, view vs. nonview, standard vs. deluxe, and/or room vs. suite.
Day-of-week, length-of-stay restrictions. For example, early departure rates charged by convention hotels during citywide conferences.
Advance purchase rates that are nonrefundable and cannot be cancelled.
Rates extended to specific membership affiliation groups such as AARP, AAA, entertainment card and military/government.
Negotiated corporate volume discount programs. For example, those offering last-room availability in exchange for a higher rate.
Special group rates that are of limited and restricted availability.
Additional guest occupancy fees.
Rate-option packages that include parking, phone, health club and/or gratuities.
Unfortunately, too many front-desk and reservations agents have not been properly prepared to deal with these challenges. When confronted by either a sweet-talking caller on the phone who pleads his or her case as to why he or she should get a lower rate, or in person by the red-faced, fist-pounding corporate traveler demanding the same rate he or she paid last time, it's challenging to come up with the right answers on your own.
Instead, when faced with a question about a lower-rate or better rate-option, most of this industry's associates simply say "that's not available," making it sound like we are holding back the "good deals" and further inciting a negative response. Or worse yet, having been trained to "be nice to the guests; they pay our salaries," they voluntarily extend discounts when it's not necessary to do so.
Depending on factors such as your hotel's inventory of accommodations, distribution channels, market mixes and property type, here are some strategies and tactics to review with your front desk and reservations agents.
It's the customer's job to ask for the discount. Never voluntarily mention discounts when the customer hasn't objected to the initial offer. Perhaps it's because they themselves aren't convinced of the price/value proposition, but too many front-desk and reservations agents voluntarily offer discount rates/options before it is necessary or appropriate to do so.
Reference rates charged during peak demand as being the "normal" price. When quoting rates during moderate or low demand, mention rates applicable during peak demand (i.e. rack rates) to present lower rates as already being a good value. "This room normally runs $200 a night, but since you are with the XYZ Company we can extend the $175 group rate."
When necessary, explain that rates are "sold out" vs. "not available." "Not available" tells the prospect that we have it but they can't get it; "sold out" simply says the supply has been exhausted.
Research before you react. When callers who have already booked ask about lower rates that have since become available, research before you react. If you can't identify a justifiable reason, offer a room upgrade at the rate already confirmed vs. just lowering their rate. (Note: depending on the terms under which their original reservation was booked, it might sometimes be necessary to simply lower their rate instead of subjecting them to the hassle of having them cancel and rebook at the lower rate anyway.)
Patiently reiterate the rules of the fences in a positive way.
"We had confirmed you at our super savers rate, which allows us to offer significant discounts to those that are able to confirm plans in advance and agree to the terms, but unfortunately it was offered as a nonrefundable rate. You were confirmed under the special rate plan at Acme Corp., which guarantees you and your colleagues will have a special rate available anytime we have rooms.
"At times like this during our slower season, it is a bit higher than what you saw online at our Web site, so it works both ways a little bit. I do have a room on our concierge level available for you tonight, Mr. Johnson, and the rate on that is just $20 more than the ABC corporate rate. Please note that your advance deposit for the conference has been credited to the last night, reflecting that there is an early departure penalty of one night's room and tax. So if your plans change, please let us know 21 days in advance so we can help you avoid this fee, okay?"
"Just to let you know, Mrs. Perez, we do actually need to see the membership card itself up on check-in, or otherwise the rate would be $(i.e. rate otherwise showing at the time)."
Remind them of the special value received. "Yes, your group's rate is a little higher, but it does include parking, which alone is $12 a day, plus health club admission, and the $1 per call phone charge is also waived."
Finally, remind your team that more often than not the consumer is asking for the discounted rate or better terms for one reason and one reason only; to check their reaction. Smart consumers know there's no harm in asking, and in many cases they get what they ask for.
By covering this subject at your next reservations or front-desk meeting, you'll be giving your agents the tools they need to maintain fences around the rate plans, allowing your hotel to optimize its revenue while minimizing the negative impact on hospitality and customer service. Doug Kennedy is the owner of The Douglas Kennedy Company. He delivers keynote addresses and conference presentations for lodging and tourism organizations, and provides sales and training consulting services.
For more information visit www.douglaskennedy.com