Pricing up the big hotel industry divide

The hotel industry has always been divided between those properties boasting a chain name and the independent owner/operators. The latest mystery survey from Hotelier's sister publication, Arabian Travel News, has revealed that this divide could also be affecting hotel rates and revenues.

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By  Gemma Greenwood Published  October 1, 2006

|~|gemma-B.jpg|~|Gemma Greenwood Editor — Arabian Travel News gemma.greenwood@itp.com|~|The hotel industry has always been divided between those properties boasting a chain name and the independent owner/operators. The latest mystery survey from Hotelier's sister publication, Arabian Travel News, has revealed that this divide could also be affecting hotel rates and revenues. The survey reveals that Dubai's independent hotels appear to be cutting out the middle man — the travel agent — by offering cheaper room rates for customers who book direct. ATN compared the room rates of five Dubai hotels; the independently operated Arabian Courtyard Hotel and the new five-star Dhow Palace Hotel in Bur Dubai, as well as three hotels operated by large international hotel chains; Le Royal Meridien in Jumeirah, (Starwood), the Grand Hyatt in Oud Metha (Hyatt) and Madinat Jumeirah Al Qasr in Jumeirah (Jumeirah Group). The mystery shopper called the hotels direct, checked out prices on each hotel's web site and also gained at least two quotes from some of Dubai's most prominent travel agents including Al Naboodah Travel and Tourism, Al Rais Travel and Belhasa Tourism. The mystery shopper found that while the bigger hotel chains offered the same rates as travel agents and, in some cases, were more expensive, independent hotels offered cheaper prices for customers who rang the hotel direct or booked online. As the hotel industry calls for greater pricing transparency, this survey revealed that prices from the region's independent hotels were inconsistent and confusing. At one independent hotel the price quoted for a standard room by the hotel's reservations department was US $131, including service charges, taxes and breakfast. This compared to three different web site quotes; $95 (promotional rate), $102 (corporate rate) and $327 (rack rate), all excluding taxes and breakfast. Travel agent quotes ranged from $177 to $182, both including services charges, taxes and breakfast. Certainly, independent hotels have more room to manoeuvre when it comes to prices. They don't have to pay for international marketing or reservations services delivered by a parent company. Neither do they have the stringent service and hardware standards of a larger chain. One independent hotel does not have to look and feel just like another, so there are options in terms of in-room amenities, the thread count of the linen, and the level of staff-to-room ratio. While Dubai is an unusual market in which to operate at the moment — with high occupancies and high room rates — does this price undercutting from the independents mean that soon the city will be at the mercy of market fluctuations, with hotels battling it out in the revenue stakes to win over guests in the years to come? Or should Dubai look at implementing a pricing cartel, such as those found in countries like Kuwait or Bahrain, to level the playing field? One thing is for certain — as more hotel inventory continues to come online, Dubai is going to become just as competitive a market as London, New York or Hong Kong, and it will be down to the revenue managers to steer their hotel towards success. Let me know your comments.||**||

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