A hotel operations conference at the close of 2010 saw revenue managers point to dynamic pricing as the next step for
our increasingly mature industry. But how far down that road is the industry in mid-2011? Egencia’s 2011 Global
Supply Benchmarking Research and Analysis released earlier this month says that companies have begun to reinvest in
corporate travel with a continuing focus on cost control.
The research pointed to rapidly increasing air-ticket prices and also indicated that these could have an impact on
discretionary budgets (allotted to rooms and other components of corporate travel). With airline prices spiralling
out of control again will hoteliers have to deal with downgrading preferences among their guests? Will loyalty shift
to the next star category? Is the growing demand for weekend breaks and monsoon holidays reason enough to push rates up during these shoulder periods or would it send demand crashing down again? How are corporate buyers working their
contracts?
“With corporate demand rebounding, higher air capacity than the year before and improved occupancy in almost every
top business market worldwide, average daily rates have increased in the majority of business destinations… In
addition, the occupancy rate has strongly increased in certain markets, which has resulted in the reduction of last
room availability,” the research says.
There’s going to be lots of new business for hotels to tap into – the question is whether to go the contracted way or
push forth the case of dynamic pricing. With growing optimism, revenue managers are now looking at introducing best
practices for the long term.
Najmul Khan, revenue manager, Accor India, one of the early adopters of dynamic pricing, points out that dynamic
pricing exists in many contexts around us. “Parking in the mall is more expensive on weekends and holidays. So are
movie tickets. I saw a sugarcane juice vendor in Mumbai advertising happy hours between 2pm and 4pm, and discounts
for senior citizens – dynamic pricing and market segmentation at its best!” he says, indicating that as a concept it
isn’t new to people. Everyone is used to fluctuating air fares so why must hotels be any different? Accor has had dynamic pricing in India from the day they entered the market with the first hotel in Hyderabad.
“Hotels today have the confidence to adopt dynamic pricing and push these on corporate clients. Hotel groups like the
InterContinental have been frontrunners in adopting the dynamic pricing model, first in their secondary and tertiary
markets, mostly in the Asia Pacific region, and now for all their global corporate accounts. The awareness and confidence about channel management technologies amongst hoteliers has helped them optimise revenue and position on each channel,” says Keith Watson, division president, RT Corp, Rate Tiger.
Sahara Star says that dynamic pricing has allowed them a very good RevPAR. “We have tactically chosen to move away
from contracted rates and accepted the new dynamic pricing model. This change in action has lead to high RevPAR,”
Harmit Kaur, revenue manager, Sahara Star tells us.
The newly opened Oberoi Gurgaon which is said to be commanding amongst the best rates in the NCR is also doing so
through dynamic pricing. Amarinder Sadana, director of revenue management at the Westin Hyderabad Mindspace says, “While the trend is still towards contracted revenue, I see it moving to dynamic pricing with a percentage discount on the best available rate (BAR).”
Sell dynamic
Watson indicates that hotels could do with convincing their corporate clients of the benefits of dynamic pricing.
“Corporate travel managers are opening up to the idea, as it gives them the opportunity to get best rates in the form
of guaranteed lower rate than the BAR and possibly even lower than negotiated flat rates on distressed days,” he
says. Other positives that sales people could push to corporates include increased availability and choice of room types as black-out dates wouldn’t apply and agreed-upon percentage discount will be applied to all room types.
Gaurav Issar, front office manager at The Oberoi Gurgaon says that it is the awareness of competition and the fact
that they might get a better rate that is driving corporate acceptance of the dynamic pricing model.
“Global companies that are already contracted prefer the dynamic pricing model as they realise that volumes don’t
come into play with this model – they can get a good deal even on small volumes,” says Sadana, underlining that as
this model catches on, revenue managers will gather additional responsibility.
Channel management
Suppliers say that dynamic pricing is becoming a reality because revenue managers have technology to help them price
right. Watson says “Revenue managers now understand the capabilities of immediate updates and the revenue benefits
this brings to the hotel. As per our global hotel channel management trends, there were 51 million online rate
updates last year, a jump of over 88% from 2009. Clearly, hoteliers are getting more sophisticated in how they use
the internet to optimise price – a shift towards dynamic pricing.”
Too slow for comfort
So while pricing strategies have come a long way as compared to a few years ago, hotels want to hit the accelerator,
especially when it comes to the corporate market. For instance, while Accor represents the few hotel chains in India
experimenting with dynamic pricing, their corporate rates remain largely static.
“Dynamic pricing still represents only a very small percentage of total corporate rates today in India and Asia,”
says Khan. He estimates that dynamic pricing represents less than 5% of total corporate rates.
“It’s better than what we used to get five years to a decade ago. And with all chains trying to educate clients on
dynamic pricing, the numbers are getting better slowly, but not at a pace we would like,” says Khan. Supplier
Travelclick says the trend has not caught on. “It has not caught on it most parts of the world and especially not in
Asia,” says Joy Ghosh, director of sales – India & Subcontinent, Travelclick.
“As a strategy we’re packaging deals such as a Wednesday-to-Monday one where the average rate for the entire booking
comes down due to the weekend discount,” says Sadana.
Brij Bhushan Chachra, director of revenue account management for Preferred Hotels says that MICE is the only way for
hotels to go on the weekend: “I don’t think a weekend rate or package actually influences demand for city hotels.”
Nonetheless – just like revenue managers are growing in significance today, even raising questions about whether they
should still be reporting to their sales counterparts, corporate travel managerial positions too are getting some of
the brightest (read best bargainers) minds. “Corporate houses have specialists, specialised department, or through
consolidators who handle the contracting of hotels. Negotiations are therefore comprehensive and highly competitive.
Sound advice is to throw in the works – last room rate, free WiFi, breakfast, late check-out…anything that will
command a higher rate, rather than drop rates.
