Some hotel companies are pushing toward a dynamic pricing model for 2007 negotiations, leaving many corporate travel buyers perplexed and angered at the prospect of revamping hotel programs to account for fluctuating rates that may be higher than fixed, negotiated prices and tougher to estimate and budget.

With average daily rates steadily increasing year over year, according to PricewaterhouseCoopers, hoteliers are favoring a market-driven, fluctuating rate structure. PwC forecasted ADR would rise 5.3 percent in 2007 over 2006, which bodes well for thriving hotel companies.

Brian Nichols, speaking as chair of the National Business Travel Association hotel committee but whose day job is as a buyer for Deloitte, is inclined to look at dynamic pricing as a new strategy for hotel room procurement, but he too is still concerned that there is not enough information presently available to persuade him. "As a buyer, I'm open to any new pricing models, but I would like to see a data-driven model that shows how it would positively impact my hotel program and benefit our travelers. That's really the key point—measurable benefits that you can weigh against the change management and potential risk. Until that happens, most buyers are not going to make the leap."

Several buyers from companies with substantial travel spending are not at all optimistic about dynamic pricing. One, who preferred to go unnamed, said that dynamic pricing would be ruinous. "Most of my peers will say the same thing: It's a disaster. Hotel companies are not thinking through the full picture. They're not going to have designated companies directing business to them. If I have five hotels in New York and all of a sudden we don't have preferred rates, we tell our agency to go pick best available rates wherever you can. We all kind of roll our eyes when the hotel companies talk about this. If you could get your rates loaded properly and your Sabre codes—just get the basics on the NBTA format done, I'd be happy. Forget about dynamic pricing, do a better sales effort."

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