Variable is Good @Hotels

Hotels continue to reduce fixed costs and make it variable which is great as it gets linked to Sale!

Similarly, we as an industry need to look at making all our price offering into a dynamic variable model if we really must reap the benefits of demand / supply. Across industries including in the airline business no one commits to static rates.

 We in the hotel industry still sign long term contracts based on volume business on static rates for majority of our segments in business locations (Corporate, LNR, Wholesale etc.) while all our costs are linked to CPI / Wholesale inflation including the debt that we carry is linked to interest rates that keep moving!

While we have been successful in getting the Retail business on Demand / Supply we have not been able to win this argument for majority of the segments which is critical as the revenue contribution from majority segments is what will make the difference. Linking of Corporate, Wholesale, MICE rates as a % Off the BAR is what is required!

 Even today negotiated static corporate rate agreements can be easily managed to the benefit of the clients in case the BAR is cheaper book the BAR or book the negotiated rate, it’s a win-win model for the Customer but not for the hotels.

 It’s important that the Customer and Hotels work on a win-win model as a win-lose model has never benefited anyone in the long term. As an industry we need to work with the Customers to change the practice making them understand the benefits of a dynamic model; gain when the demand is low and pay higher as demand is high, however they still get the benefit of a % off on BAR based on the volume commitments and off-course the value additions each hotel decides to offer.

 Should we be moving in this direction?