Hotel Sales Blog

Are Hotel Rooms in Danger of Becoming a Commodity?

June 15, 2010 at 3:05 pm | Posted in Uncategorized | 2 Comments
Tags: hotel blog, hotel industry, hotel revenue management, hotel sales

Does anyone remember when the legacy airlines, Delta, United, Continental, etc, began engaging in price wars? These were driven by mulitple bancruptcies, follwed by a recession and dictated by their own yield management systems. They then began dumping distressed seat inventories on the OTAs, both opaque and transparent.

Today there are virutally no points of differntiation bewteen them except routes and schedules and the cookies on Delta that no one is willing to pay extra for. In other words, airline seats on these carriers have basicly become a commodity, undifferentiated by fares or amenities whre they follow each to the bottom.

Interestingly enough, it is the discount airlines that now are clearly differentiated. Southwest with its no checked baggage fees and cattle call seating priroities, Frontier with its three tiered fare structure and don’t forget those cute tail animals as well as several others.

On the other end of the spectrum the luxury airlines, mostly overseas airlines like Singapore Air, Quantas, etc are differntiated by the level of service and amenities offered, albeit at a price.

Sound familiar? Could this be the reason that the luxury, independent and economy sectors are leading the hotel industry out of the recession? (STR, June 10, 2010)

Is it becuase these sements are differentiated by rates and amenities for the luxury and economy sectors, and by price pretty much for all three.

It is the mid market hotels, with or without Food and Beverage, that are still struggling. Most of these have pretty much the same amenities, Frequent Guest programs (most travelers belong to many) and are only differentiated by rates that become a diluted differentiator when so much inventory is ‘dumped’ on the OTAs.

It is the ‘race to the bottom’ that has exposed this threat but it isn’t too late!

Learn the lesson of the airlines and don’t follow the market in a race to the bottom. Now is the time to maximize the opportunities in the increasing demand that we are seeing!