Room Rates in the Spotlight
19 May 2009
The first quarter of 2009 has seen a significant reduction on average room rates and meetings room rates, as supply and demand aligns itself across the globe.
Trevor Elswood, BSI’s Groups Managing Director, reviews this trend and some of the market dynamics at play, and comments on what he believes the corporate market can expect for the remainder of 2009 and into 2010.
• “Market rates will be better controlled over the next six months with far greater ‘fencing’ of promotional rates to include pre-pay, minimum stay or minimum lead times, as hotel groups seek to stabilise the balance between volume and achieved rate.
• The discount off ‘market rate’ will become a key discussion point between hoteliers and accommodation buyers. This is an attractive proposition in a declining market but not the answer to really controlling spend in the mid to long term, with price uncertainty leading to customers confusion and micro level decision making processes, which may not support policy built upon ‘named’ hotels on a client preferred programme.
• There is a wider disparity between best rate being achieved on the Global Distribution System (GDS) and other channels. BSI’s technology displays rates from multiple channels including GDS, Internet, direct connectivity with properties, allocation and voice only reservation rates, and it is clear that GDS is shrinking as a channel that holds the lowest rate. This indicates hotels’ eagerness to attract new business on price, whilst yielding higher rates from the traditional corporate TMC GDS channel”
Clearly there are many indicators and economic commentaries that suggest the ‘bottom’ is close or has been reached and Elswood advises: “Quarter three and four in 2009 will be about underpinning the longer term contracted volume terms to ensure cost control sustainability.
“A special project team at BSI has highlighted the opportunity for effective cost management with our innovative aggregated rate programme, negotiated quarterly to ensure the rates are market relevant. Many corporate programmes we observe run on annual cycles. For example, yearly hotel rate programmes that were contracted last autumn have now become market irrelevant when compared to current market rates achieved through BSI’s specialist booking platforms.”