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Hotels Can Afford to Be Greedy as 2021 Enters its Final Quarter



Carolyn Corda


“A bird in the hand is worth two in the bush.” This wise saying has stood the test of time for a good reason, it cautions the greedy among us to value what they already have rather than chase after something with higher value but more risk.

The cautious and even not-so-cautious among hotel marketers have likely heeded this statement throughout the last year and a half as demand for hotel rooms has ebbed and flowed in a confounding pattern.

The predictable travel behaviors of the past are no longer, and hotel marketers have formed a habit of attracting the bookings that they can in the short term in case something changes in the future for the worse. As a result, traditional revenue management strategies have fallen by the wayside.

The new pattern of last-minute booking

While the old patterns of travel planning are gone, we are seeing some new ones emerge. One such pattern that has been constant throughout most of the pandemic is the trend towards last-minute booking. Last holiday season, spring break, this summer, all showed a healthy last-minute market.

While I’m not a betting sort of person, I’m confident that we’ll see a lot of last-minute bookers this coming holiday season. There are a few reasons why:

  • People are taking longer to decide what to do this holiday. Older folks may want to be cautious again and stay away from unvaccinated younger folks. Families may want to plan something big, but want to see if rules and restrictions open up. And other travelers fit just about every other scenario in between.
  • Children may be vaccinated by December. There are some rumors swirling that children as young as five by October and even younger in November or December. This could drive a surge in bookings from families that were otherwise hesitant to travel.
  • People are getting used to last-minute deals. Without the typical revenue management practices in place, people are able to find good hotel deals weeks or even days before they plan to travel.

There are many factors out of marketers’ control, as we are all in a “wait and see” game yet again. But, the last point in particular shows how important it is for hotel marketers to stay on their game and make some pricing bets this holiday season.

If they don’t, hotels will inadvertently train travelers to book later, disrupting old patterns that worked well during healthy travel periods.

Time to be a little greedy

We’re starting to see hotel bookings increase among leisure travelers, even in hard-hit U.S. cities like New York, Los Angeles and Chicago. This is good news for hotels, of course, but it’s important not to focus too much on the short-term opportunity.

If hotel marketers keep prices low now, they risk filling up their rooms with low-value bookers before the last-minute surge kicks in. However, marketers that are a little bit greedy, and up their prices as they start to see bookings increase, are likely to reap the reward in November and December as that last-minute wave takes hold.

Take a luxury hotel in New York City. After a tough 18 months, it will be exciting for just about everyone on staff to start seeing occupancy edge up from 50% to 60% and more. It is tempting to keep prices low to grab those early bookers. But it ignores the ultimate goal which is to maximize revenue per available room (RevPAR).

By contrast, imagine the hotel across the street is more focused on RevPAR. They would raise prices more aggressively as it gets closer to the arrival date in order to take advantage of demand and see a much higher return because they waited for the last-minute bookers who were willing to pay more.

Travelers have money to spend

In addition to the last-minute pattern we’ve seen throughout the pandemic, there is another reason to feel comfortable rolling the dice a little bit this holiday season. People have money to play with, and they are spending it on higher priced hotels. We’ve seen that Novice Travelers, for example (those who travel four times a year or less) are much more likely to spend upwards of $400 per night on hotel rooms and with luxury brands than in the past.

This group is not bargain hunting either. They’re spending to travel where they want to go, when they want to go there. And while those destinations trended towards Hawaii, Las Vegas, Orlando and Miami earlier in the pandemic, big cities and other more common destinations are creeping back up the list.

A not-so-risky bet

After waiting so long for bookings to go back up, it can feel foolish to implement a revenue management strategy that ups the price and turns early planners away. However, the patterns that have emerged and the real spending happening in 2021 show that waiting and raising prices is a smart bet.

Hotel brands also need to be careful to remember that we are nearing the light at the end of the tunnel, and travel will have a resurgence in 2022. If people are too used to low prices, it could disrupt the entire market negatively.

Creating some barrier to entry this holiday could be a good bridge to more normal travel marketing strategies being reinstated next year.

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