Corporates welcome dynamic room rates

Written on the 7 October 2009

WHEN it comes to hotel pricing, corporate clients that bedded down a ‘dynamic rate’ are now reaping the rewards.

Dominant trends in hotel pricing show companies that have embraced a dynamic pricing model were generating significant savings on their hotel spend as properties slashed rates to combat falling occupancy levels.

Joe McCormack, from FCm Travel Solutions, says due to the current market conditions, corporates on dynamic pricing and those using best available rates and non-last room availability pricing were optimising hotel spend.

“During the past 12 months we have seen evidence of companies driving significant savings using the dynamic pricing model. This is where clients pay a rate which is a percentage off a hotel property’s best available rate (BAR) instead of locking in a fixed static rate. On this model, corporates will commit to an agreed volume target with the hotel, to obtain a percentage discount off the BAR rate,” says McCormack.

“In some cases hotel rates are a third of what they were when rates were quite high a few years ago, so companies that previously agreed to use a dynamic pricing structure are now paying a discounted rate, negotiated from an already heavily reduced rate.”

McCormack says it wasn’t that long ago when dynamic pricing was considered a gamble.

“Dynamic pricing used to be a dirty word because when hotel rates were on the rise a few years ago, companies were paying more almost on a weekly basis because their corporate negotiated rates fluctuated according to demand,” he says.

“Because of this, a lot of corporates weren’t comfortable with dynamic rates and were prepared to pay a little more to have a fixed rate throughout the year.”

Current industry trends reveal corporates have gained the upper hand in negotiating hotel rates and were likely to maintain that hold for some time yet.

According to FCm, it’s unlikely that major hotel chains will increase rates in the immediate future. Across most markets economic recovery is expected to be gradual and it may take some time for hotel companies to regain the heady corporate rates of 2007.

 

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