Hoteliers struggle to capitalize on pricing power

by Jason Q. Freed, Managing Editor | November 30, 2015

Here’s a look back at last week’s top hotel technology headlines and how they will impact your revenue strategy.

1. 2015-16 forecasts pinpoint struggles with pricing power
There is nagging concern that high occupancies and a highly favorable balance in supply and demand increases aren't translating into more robust pricing power. STR and Tourism Economics released their updated industry forecast for the rest of 2015 and 2016, and it shows that, for whatever reasons, hoteliers haven't been able to turn unprecedented demand into higher ADRs. Where is the disconnect, and what can Directors of Revenue Strategy and revenue managers do about it? Full story at Hotel News Now.

With occupancies for U.S. hotels at record highs, a recent blog from Ed Watkins suggests ways revenue strategists can shift from focusing solely on top-line revenue generation to maximizing profitability.

2. Business travel stays strong
Scan your reservations activity and you probably know business travel is back as strong as ever. To quantify that idea, the Global Business Travel Association says business travelers will spend a record $1.25 trillion this year on work trips. Another study from Morgan Stanley shows 63% of American companies increased their travel budgets for 2015, and that similar numbers are expected from businesses over the next year. Full story at Travel Pulse.

As a result, hotel marketers and revenue managers need multiple strategies to connect with business travelers on the distribution platforms they want to use, according to a recent post on the Duetto blog.

3. Most travelers are expecting higher rates
Higher demand in North America from both group and transient travelers in 2016 will result in 6% increases in hotel prices for mid-priced and upscale hotels, according to American Express' annual business travel forecast. With a healthy pipeline of new construction on the horizon, how long will you be able to hold off the impact from added inventory? And if travelers expect increasing prices, why are hotels struggling to push rates higher? Full story at Business Wire.

4. Mobile is changing the traveler’s journey
Increasingly people are turning to their smartphones for immediate answers to their travel questions. According to Google, in the past year, conversion rates have grown 88% on mobile travel sites. Google’s VP of Marketing Lisa Gevelber suggests ways travel marketers can keep up with these new mobile behaviors. Full story at Think With Google.

5. Longer trips forecast for holiday season
Terrorism threats aside, it should be a good holiday travel season in North America, according to a study from Sojern. This holiday season, defined as the period starting on December 15 and ending on New Year’s Day, North American travelers are looking to take slightly more long trips than last year: 38% are searching for trips of eight days or more compared to 34% last year. How will you capitalize? Full story at Sojern.

A recent post to the Duetto Blog suggests that if you’re forecasting to be full but you’re pacing behind, don’t panic. It’s a good time to dig into your data.

6. Time to develop contingency rate plan for the downturn
After years of prosperity, the hotel industry is destined for a downturn—maybe not next year or the next but eventually. With that in mind, revenue strategists should begin developing contingency plans to succeed in periods of decreasing demand. Full story at Hospitality Net.

7. Sour grapes? Priceline CEO says he didn't want HomeAway
According to an interview with Priceline CEO Darren Huston, Priceline wasn't interested in buying HomeAway, which Expedia eventually purchased for nearly $4 billion. Instead, Priceline hopes to boost its unit as a competitor to HomeAway by allowing instantly confirmable bookings with no customer service fees. It will pay to keep your eye on Priceline’s moves. Full story at Skift.

8. Airbnb bookings jump 110% in third quarter
Airbnb booked 23.8 million room nights in the third quarter, up 111% over the same period last year, and the site’s quarterly revenues were higher than Choice Hotels generated during the period. The writing seems to be on the wall: Airbnb has already become a formidable competitor to traditional hotels. If you don't have a strategy to compete with and beat Airbnb, you'd better get one quickly. Here are some suggestions. Full story at Skift.

9. Study says Airbnb poses bigger threat to OTAs
Hotels aren’t the only ones who should be worried about Airbnb. A new study from Morgan Stanley purports that while there's a limit to business travel usage of Airbnb, it will continue to increase for leisure travelers. However, the analysts say the threat is greater for OTAs than hotel suppliers. According to the data, 12% of travelers have used Airbnb with penetration reaching 16%-18% within a year or so. Less than half of Airbnb users said they would otherwise use a hotel for accommodations. Full story at Value Walk.

10. Is Google inching closer to becoming full-fledged OTA?
Google executives say no, but recent actions by the search giant seem to indicate it might want to become a full-fledged OTA. In April, Google launched a destination mobile interface that provides enhanced destination information to help consumers plan richer travel experiences. The interface, which is currently available only in English, provides suggestions on the best time to visit a destination, a popularity index and offers alternative destinations. Full story at Travolution.

During the recent Phocuswright conference, one Google exec said the company is not becoming an OTA, while Stephen Hafner, CEO of Kayak, said Google has got the technical resources and the chops to disrupt anyone in the business.

Stay up on revenue strategy news and discuss industry tech trends in the Hotel Revenue Strategy Leaders Group on LinkedIn.


Jason Q. Freed, Managing Editor

Jason joined Duetto as Managing Editor in June 2015 after reporting, writing and editing hotel industry news for a decade at both print and online publications. He’s passionate about content marketing and hotel technology, which leads to unique perspectives on hotel distribution and revenue management best practices.

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