Monday, March 14, 2011

Higher Rates Ahead

Michael Dominguez, vice president of Global Sales at Loews Hotels, warns that 2011 will bring higher room rates, especially for group business. A recovering economy and rising cost pressures on hotels are to blame. But groups that know the value of their business can find ways to negotiate better deals.

Average daily rates jumped 5% in 2010. Rates are expected to increase another 4% in 2011 and even higher in 2012, based on data from PKF Hospitality Research. As food prices go up and mortgage debts come due, hotels are under more and more pressure to hike their prices in order to turn profits.

Groups who come to the table knowing the value of their business will get what’s most important to them, including better rates. Since labor is typically the number one cost at a hotel, groups can get better deals by knowing what concessions reduce the hotel’s labor (i.e. holding receptions and dinners in the same area.) When considering revenue per occupied room, hotels value each booked room based on how much the guest spends at the hotel- on the room, food and beverage in outlets, retail, spas, golfing, room service and whatever other assets the hotel owns. But revenue per occupied group room also includes all of the meeting costs added by each attendee.

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