Dynamic Environment For Pricing Change

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Big hoteliers want to move away from contracted rates

GOOD luck to InterContinental Hotels Group on its push to shift corporate accounts away from fixed rate contracts – which is what a majority still prefer – to dynamic pricing. The timing is certainly better than when Accor Asia Pacific launched a similar campaign a couple of years ago.

At that time hotel rates were rising and major companies believed (with some justification) they’d be better off negotiating a set rate for the year rather than getting a discount off rate of the day. So some switched but many preferred to stick with contracts.

Now prices are falling – in some cases sharply – and the equation has changed. Why lock in a rate when it’s likely to be under cut? In theory this sets the scene for the mass migration of corporate accounts to dynamic pricing. However, life isn’t that simple, though accountants are. More than anything, they like certainty, which is what a fixed rate structure offers.

They may also be thinking that this a great time to be negotiating extra low rates for the year ahead that will look good when the market rebounds.

Another question the bean counters may have is – what is the motivation of the major hotel groups for the switch?

One thing is for sure, they certainly don't push plans that make them less money.

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