Post-lockdown hotel pricing to hit planners in pocket?

A combination of high demand and limited hotel capacity due to social distancing measures means that hotels are able to charge higher prices, according to new data from Profitroom.

The shift in power back to hoteliers in the wake of heightened demand post-lockdown could potentially hit event planners in the pocket during the Covid-19 recovery.

As well as a huge spike in demand post-lockdown, the data has also indicated a shift in pricing strategies, a trend which suggests that this heightened demand is enabling hotels to revert to a fixed pricing strategy – being able to price using the rack rate to improve margins and profitability.

Samantha Williams of Profitroom said: “In recent years, hotel rates have been determined by consumer demand. With hotels having to price attractively to beat the competition and entice guests, room rates were set based on a number of contributing factors, with the hotel needing to tempt prospective guests in order to drive demand. Now though, in the wake of Covid-19, we’re starting to see a shift in the power balance. With social distancing measures limiting hotel capacity, combined with high domestic demand due to travel restrictions, our data suggests that hotels are increasingly able to charge higher rates – with guests still willing to pay.”

Citing one of its clients Port Lympne, a hotel and wild animal reserve in Kent, as a specific example, Profitroom’s data shows a 387 per cent increase in bookings following the prime minister’s reopening announcement when compared to the same timeframe last year. And while the number of bookings is up, the value of them has jumped even more, increasing by 469 per cent – with much of this attributed to pricing differences.

Williams continued: “Rack rates may be a somewhat unfamiliar term to the modern day revenue manager, but it’s a term that, for the time being at least, could be coming back in vogue. Usually rack rates are set artificially high ahead of applying attractive discounts. Now, however, we’re seeing guests are willing to pay top rate, provided the hotel or wider brand is able to demonstrate sufficient safety measures and anti-Covid precautions.”

“In recent years, Profitroom’s data has seen ADR (average daily rate) increasing year-on-year – particularly in the luxury market – yet, post lockdown, this increase has accelerated. Across our full data spectrum, we’re seeing that ADR is improving considerably, with a 56 per cent increase on this time last year. This is something that, given the turbulence over the last few months, will be a welcome boost to hoteliers.”

Williams added that the power shift is likely only to be temporary.

She said: “Guests are looking for safety, mixed with an experience that’s both enjoyable and worth paying for. Provided that’s the case, we’re seeing that they’re willing to pay even more than they usually would. As the market continues to reopen and as the risks associated with Covid diminish over time though, hoteliers will almost certainly have to revert to pricing more attractively.”

Profitroom, a provider of hospitality booking solutions and direct strategies, has analysed the booking data of more than 3,500 hotels using its live dashboard analysis tool.