It is difficult to maintain rates because you’ve got a manager who says, “Oh my gosh, I need to cut my rate because
I’m going to lose business.” Cutting rates may not be necessary because doing so might not induce demand if that
demand just isn’t there. Perhaps it might work on weekends
for leisure travelers, but if somebody needs to travel for business, they’re going to do so. Cutting the rate may not make
them travel more.
“If you are an owner, your
asset is probably substantially less valuable than a
year ago because of changes
in the capital markets.”
ROBERT W. BAIRD & CO. INC.
HAMILTON: We work so hard to get those rates up. And if we
give it up now, it will take a long time to bring it back to current
levels. Our philosophy is to deploy more salespeople and get a
bigger share of the business that’s out there.
JOHNSON: You can be smarter by adding value and giving
guests a little more to get the occupancy, rather than cutting
rates. We’ve learned a lot from earlier in the decade, and we
play with third-party sites a lot differently than before. The
brands have set up regulations that the lowest rates are available
on their own sites. I’m not saying that as we get further into the
cycle we won’t have to discount rates, but we’re a lot smarter
about revenue management than we were 10 years ago.
GORDON: The Internet booking craze began early in this
decade, and a lot of the hotel companies and managers really
didn’t have their Internet strategy down. We then had an
“You can be smarter by
adding value and giving
guests a little more to get
the occupancy, rather than
CARLSON HOTELS WORLDWIDE
unexpected economic downturn and, as a result, a lot of people were caught without a game plan. That exacerbated rate
dumping. People are now better equipped to manage that
TRESS: If you know your soft spots, you can use the Internet
effectively, and target customer groups to bring them back to
the hotel. You can play with the segmentation and not discount
MENDELL: There are different rates. You have retail rates, negotiated contract rates and group rates. In the last two or three
weeks, we’ve really started to see retail rates drop, so we’ll watch
that to see what the industry does. But negotiated rates aren’t
going to change until the fall, when it’s bidding season for the
JOHNSON: Corporations are in the same position as we are
and they’re going to be tough negotiators. Over the last few
years, hotel companies have been able to negotiate floating
rates with corporate accounts. When demand is high, companies would have to pay higher rates. In a slow economic environment, it’s a buyers’ market, and corporations can dictate
the terms and be more aggressive on the discounts they ask
for from a hotel.
MENDELL: We’re also starting to see, in some markets, a full-service hotel losing business to a select-service hotel of the same
brand. It may be a Hilton customer going to a Hilton Garden
Inn or a Marriott customer going to a Courtyard or a Sheraton
customer going to an Aloft to save $20 or $30. Does that happen
across the board? It’s too early to tell.
JOHNSON: It’s all about consumer confidence. As that confidence erodes, they will trade down, and we have seen them
LOEB: Corporate profits are going to enter into that equation as
well. They’ll be trading down across the board.
WOOD: How long will the recession last?
LOEB: That’s a really tough one to answer. The economy will
“It’s a question of when
will debt become available
again, and I don’t think
any of us knows the answer
HEI HOTELS & RESORTS
get worse and so will the psychological impact. It’s unusual to
have a recession this late in a Presidential term, but we’ve got it
and it’s going to be here for a while. And I’m not overly optimistic about next year. Unfortunately, we had easy money until
the end of last year. There’s a lot of supply in the pipeline.
Limited-service projects continue to find financing. As a result,
we may have slow demand and greater supply.
GOLDMAN: I agree with you, particularly for the back half of
this year and ’09. The bigger hotels that were financed before the
capital markets closed down are due to come on line at the end
of this year and early into the next.
MENDELL: This is really a two-part question. It’s the fundamentals of the economy combined with the supply and demand for
hotels. Then there’s the capital flow situation.
GDP and room demand growth goes with the economy.
Supply is fairly predictable and not an issue right now. Certainly
demand is related to the health of the economy, while pricing is
related to how well operating companies can manage rate
The other aspect is the capital markets. There is plenty of
equity. It’s a question of when will debt become available again,
and I don’t think any of us knows the answer to that. It’s not
something I deal with every day, but I’m hearing it’s going to be
in the two-year range before anything starts to move in the right
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