September 01, 2009

Pricing to profit


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The perpetrators of the market share through discount philosophy have trained the customer never to accept published pricing again. Now customers believe there must be a better room rate somewhere, so this has become their obsessive pursuit, thus undermining corporate rate agreements, convention room blocks and profitable rate positioning everywhere.

Owners of hotel real estate, although clearly bought into the pricing concepts, should be irate with brands and operators who have promoted these practices. For many hotel owners, however, an attitude change would be too little too late because the forecasted 2009 year-end record-breaking decline of national RevPAR performance of -17 percent to -20 percent will result in 35-percent to 40-percent losses in net operating income/EBITDA and at least that in property valuations. Hotel owners already have been ruined by ill-advised and out-of-control pricing practices. The question for the future is what to do about regaining pricing control and profitability.

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