HOTELMARKETING.COM

Buyers redefining dynamic hotel pricing

August 19, 2009 | Hospitality Industry

Travel buyers and hoteliers, fatigued with repeated renegotiations to keep up with constantly falling hotel rates, are exploring dynamic pricing in hotel program negotiations this year, but largely coming to the table with disparate views of what such pricing would entail.

During the seller’s market of the past few years, the push for dynamic pricing—negotiating a percentage off the best available rate rather than using a flat rate—came largely from hoteliers, while most buyers saw it as a budgeting nightmare (BTNonline, July 31, 2006).

This year, however, buyers have had to return to the negotiating table several times to revisit rates set before either side knew the severity of the economic downturn. Hotel rates since have plummeted by double-digit percentages in many key business travel markets. Smith Travel Research’s latest projections are that U.S. rates on average will be down 9.7 percent year over year in 2009.

Some buyers already have adopted de facto dynamic pricing arrangements for travel this year. For example, Claudia Hurtado, global travel manager for AllianceBernstein, said her travelers are instructed to grab the lowest rate possible, so long it is at a preferred property.

“If I’m using my corporate rate as my cap within that property, and I’m telling the agency to book the lowest rate available within that property, we’re really not using our corporate rate,” Hurtado said at a recent hotel program discussion hosted by the New York City chapter of the National Business Travel Association. “I’m now using the dynamic pricing model.”

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