New tactics semi-successful for hotels’ incremental revenue
Regional spotlight: EMEA
As returning demand and limited supply combine to increase the bargaining power of hoteliers around
the world, the hotel industry in Europe, the Middle East, and Africa (EMEA) has been experimenting
with several new approaches to working with corporations. In EMEA, hoteliers experienced limited
success in gaining buyer acceptance for the approach in 2011 as buyers balked at price fluctuations
and the related budgeting challenges.
Dynamic pricing tops hoteliers’ agendas
During the negotiation cycle for 2011 hotel programs, some EMEA hoteliers for the first time began advocating for European travel buyers to accept dynamic pricing agreements. Dynamic pricing, whereby hoteliers offer corporations a fixed percentage discount off the available daily rate rather than a flat negotiated rate, has been attempted by suppliers in other regions as well, with varying degrees of success based on buyer vs. supplier negotiating leverage at the time. Still, the higher prices hotels can command via dynamic pricing makes this a topic they will likely raise again in 2012 negotiations to broaden industry acceptance and adoption.
While CWT continues to recommend buyers negotiate flat, discounted hotel rates for the best pricing, dynamic pricing can play a supporting role to that strategy in markets where the organization does not have enough volume to qualify for a discount. In cities with 50-100 room nights a year, dynamic pricing is ideal because it offers some level of discount over the full published rates that would otherwise be incurred – typically between 5-25% depending on volume. Dynamic pricing can also be useful in new markets where a company is just beginning to travel because it provides an opportunity to test out a property and establish a relationship, or in cities where an organization has only a short-term need for room nights based on a temporary initiative.