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Our opinion on... hotel pricing in times of crisis According to the basic principles of marketing, there are four “Ps” – product, promotion, place (which for hotels really refers to distribution – where customers can buy your product) and price. But somehow, in the rush to build the most boutiquey boutique, most luxurious luxury, most convenient convenient and most no-frills no-frills, these principles seem to have been forgotten. Specifically, “price” as a component of the marketing mix has wandered off like a lost sheep, gently meandering at will with no specific purpose in mind, and unaware of the harm it’s causing to the flock left behind (okay, lousy metaphor, but you probably get the point). Hotel guests are and would-be guests are constantly being exposed to pricing absurdities that confirm over and over again that there is no intrinsic value to a hotel stay – prices are random, unrelated and mean nothing. Therefore, price shopping is the only logical way of choosing hotels. On a recent trip to Mexico, staying in a hotel with an occupancy of around 10%, we asked to stay an extra two nights. The Expedia rate for the extra nights was approximately $320/night. The hotel quoted $450 per night. When we pointed out that we could save $200/night by walking across the lobby to the business centre computer and booking through Expedia they said (and I am not making this up) that they would not be able to match the Expedia price so we should book online. Which we did. We suspected (hoped) that his kind of silliness was the result of the economic trauma that Mexico was suffering, and that hotels in less volatile markets would be more rational. So, we checked rates in three hotels in Toronto (two of the properties were part of major brands and one was part of a small Canadian brand) at the same time for the same dates (two of the properties were part of major brands and one was part of a small Canadian brand). Here’s what we found:

416.967.3337 www.proteanstrategies.com

Protean Strategies is a Toronto based management consulting firm. Since 1997 we have been helping large and small companies convert brand value into higher margins and bottom line profits by understanding their stakeholders needs; building powerful strategies; and aligning business practices with marketing and sale to a common goal.


Hotel A

Hotels.ca Expedia PriceLine

Hotel B

Hotel Site (Best available Rate) Hotel Reservation Negotiated down to* Hotels.ca Expedia PriceLine

Hotel C

Hotel Site (Best available Rate) Hotel Reservation If booked separately* Hotels.ca Expedia PriceLine Hotel Site (Best available Rate) Hotel Reservation If booked separately* Negotiated down to***

Wedneday

Thursday

Friday

Saturday

130

121

104

104

130

121

104

104

129

129

129

129

149

149

149

149

159

159

159

159

139

139

139

139

128

128

144

144

128

128

144

144

n/a

n/a

n/a

n/a

152

152

152

152

153

153

153

153

135

135

135

135

195

195

181

181

195

195

181

181

214

214

214

214

249

249

249

249

199

199

199

199

159

159

151

151

159

159

159

159

*Negotiated down to: we asked the reservation associate if that was the best rate and were given the lower rate **We asked how much it would cost just to stay on the Wednesday and Thursday or on the Friday and Saturday ***We pointed out the weirdness to the reservations associate and, after eight minutes of conferring with her manager, she offered us the $159 rate, commenting that there must have been a computer error.

What’s wrong with this picture? Mostly,

might appear to the naive eye that they

the picture is one of unorganized market

are trying to undercut the Brand Web-

chaos. None of the three properties

site). In all cases the pricing conspires to

shows any sign of strategy or thought,

keep customers away from Brand sites.

with the possible exception of Hotel A,

In two cases guests are penalized by as

but that totally falls apart when we learn

much as 20% for booking 4 nights at

the rates are, in fact, negotiable (it

once rather than in blocks of two nights Page 2


( (it were one it would be an anomaly,

It seems that hotels have become so fo-

but as it is in two cases it is clearly ei-

cused on the technical aspects of pricing,

ther carelessness or larceny). And so on.

that the human aspect has gone away.

To be honest, we were surprised that the Hotels.ca and Expedia prices were the same in all cases – a consistency that is not necessarily evident across the board. Other than that what we are witnessing is pure carelessness – somebody isn’t thinking this stuff through and as a result money is being left on the table, rates are being suppressed not by falling demand, but by careless management – guests are getting great deals, but rather than feeling rewarded, they walk away from the booking exercise feeling

When people shop for hotels it is the same as any other shopping experience, and the way to turn shoppers into buyers is by wooing them. Hotel marketers should think of all the booking channels as shops (travel agencies on the high street, perhaps), and try to envision how people would like to be treated in these shops. Bear in mind that not only will this impact whether or not the customer buys your room, but also how the customer feels about the entire experience: booking the hotel is as much part of the brand experience as sleeping in the su-

vaguely slimed.

perior bed or using the automated check -out machine.

Call or email us today for more information on our suite of brand and business consulting services

Laurence Bernstein is the founder and managing partner of Protean Strategies/The Bay Charles Consulting

Protean Strategies 80 Cumberland Street, Suite 1503 Toronto M5R 3V1 Canada 416.967.3337

Group Limited. He has been a leading proponent of the “new order of differentiation” and has written and lectured on the subject of experiential branding

Bernstein@proteanstrategies.com www.proteanstrategies.com

and intrinsic/extrinsic research methodologies in Canada, the US , Europe and China. In addition to a highly successful 20 year career in advertising and marketing he held senior positions client side in hotel and hospitality companies. Laurence attended the University of the Witwatersrand in Johannesburg and Cornell University in Ithaca , New York

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Opinion -- Hotel pricing in crisis  

When the economy turns South, hotels react in strange, illogical ways.

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