Cornell Bears go Bullish: Advising No Hotel Rate Cuts

[originally posted Feb. 7, 2008 on www.loyatytraveler.net/wordpress]


Yesterday’s post made reference to a report from the Cornell University Center for Hospitality Research regarding hotels not cutting rates to lure travelers to hotels because the practice does not increase hotel profits. I was recalling an article I had read a couple years back regarding post 9-11 hotel rate studies in the US.

I received an email from the Cornell Center for Hospitality Research today that features a new research report from the same team of Linda Canina Ph.D. and Cathy A. Enz Ph.D.

The US hotels study I referenced is “Revenue Management in U.S. Hotels: 2001 - 2005″ and it can be linked to here: http://www.hotelschool.cornell.edu/research/chr/pubs/reports/abstract-14021.html

Well, today the news from the Center for Hospitality Research reconfirms this marketing practice of not discounting rooms in a just published study of 135 upscale hotels in Asia.

http://www.hotelschool.cornell.edu/research/chr/pubs/reports/2008.html

The gist of the paper, as far as hotel frequent guests are concerned, is hotels are advised not to reduce their room rates to attract more guests and raise revenue. Research shows that a slight room rate cut below the rates of comparable hotel competitors does not increase revenue. Now, we will need to see how the US hotels integrate this idea in their pricing structures.

For this area of northern California, since 2005, hotels have tended to stay away from the low rates more commonly seen between 2002 and 2004. The days of $69 rooms every weekend for the W Hotel-Newark disappeared soon after the 2005 report came out. The rates at the W Hotel-Newark are typically $109 as a low these days, with the possibility of a $99 AAA rate. Even though the really low rates were not that common in the airport and suburb hotels regionally, 2007 had some of the best deals for San Francisco city hotels for brief periods of time when business travel was low. Otherwise rates were sky high.

2008 is a wait and see for hotel rates. As far as the Cornell Red Bears strategy goes–Hotels need to remain bullish.

Unlike the Fed, don’t expect hotel rate cuts to come deep and fast in 2008.