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Hotel Pricing: Obtaining the Right Rate

When it comes to getting the best price on a hotel room, Smokey Robinson's mama was right--you better shop around. We compared various ways of finding a good rate-booking via the Internet or through a consolidator, calling a hotel-chain 800 number, or dealing directly with the hotel-and discovered that no single method is uniformly the best.

"Airlines are a model that the hospitality industry copies," says one hotel manager when asked about pricing. "We're not as sophisticated, but we're getting there."

If the thought of another business adopting the insane methods of the airlines makes you want to tear your hair out, there is at least some relief for now. "Airlines have all these rules, but hotels haven't quite come up with a reason why people should get different rates," says Sherry Kimes, a professor of operations management at Cornell University's School of Hotel Administration. "Hotels are hoping you'll accept the first price they quote over the phone."

That first price is the highest published rate, or "rack rate" (that is, the rate listed in brochures you find on the rack at the tourist bureau). But hotels usually have a "fallback rate," the minimum they're willing to accept, and it's often significantly lower than the rack rate. Sometimes a hotel might call it a corporate rate, but you don't have to work for a corporation to get it (although hotels often do have discounts they've negotiated with certain companies).

What's the best strategy for getting the lowest rate?The cardinal rule: Ask for it. "Saying 'That's a little high for me. Do you have something lower?' works like a charm," says Kimes. "You'd think it'd be more complicated than that, but it's not."

We confirmed this rule of thumb ourselves when we inquired about rooms at the Peninsula in Hong Kong. The overeager reservationist asked whether we wanted to book the room as soon as he mentioned the price, and it was only when we didn't take the bait that he got around to telling us about cheaper promotional rates. Some chains, such as Marriott, are tired of playing this game; they've introduced something called rate integrity, where the first rate quoted is the lowest one unless you qualify for a special discount, say by being a member of the American Automobile Association or being willing to make a nonrefundable advance reservation. The industry's term for these conditions is fences; they are hurdles you have to jump over to get a better deal. A minimum-stay requirement is a typical fence. You may be able to get a discount without taking a risk: hotels also often give discounts to government employees, senior citizens, and other groups. If you might qualify for one of those rates, inquire-you could save 10 to 50 percent off the rack rate.

It's universally believed that calling a chain hotel directly allows you to negotiate a better rate than calling the chain's 800 number. But if you want to get the best price, you should try both the 800 number and the hotel itself. In some cases the toll-free operator offered us promotions the hotel reservations manager didn't know about: the St. Regis in New York and the Sydney Inter-Continental had never heard of the weekend promotional rates we were able to book through the 800 numbers. The Peninsula, however, after much haggling, came up with a figure never offered by Leading Hotels of the World, which handles the hotel's U.S. reservations. When we balked at the price quoted by the helpful manager at the Ritz-Carlton, San Francisco, he finally said we could get a better one through a travel agency that had negotiated a special deal with the property. Hotel managers, who usually know more about their occupancy levels than someone far away in the corporate offices, might be more willing to give you a break if bookings are slow. Offering to make a non-cancelable reservation or to stay an extra night may also move a manager to cut a deal.

Another common myth is that consolidators always have the best prices. While they often do provide lower rates on chain hotels, you can't count on it, and you might end up with the rack rate. Generally, you'll fare best with consolidators who concentrate on a specific location (ask the local visitors' bureau for recommendations).

Look to the Web, you say. But the truth is, hotels haven't yet mastered the technology. "Hotels are just getting the feel of the Internet," says Cornell's Kimes. "I wouldn't rely on it alone, because often a hotel will just list the top rate and hope someone takes it."

Many Web sites use the same database as their competitors. TravelWeb and Preview Travel both use the one maintained by Pegasus Systems (which owns TravelWeb). Travelocity uses Sabre, a database commonly plugged into by travel agents. Microsoft Expedia relies on Worldspan. Even many of the discount sites utilize the same database. Best Fares, All the Hotels on the Web, WebFlyer, and Trip.com each take you to the database maintained by the consolidator Hotel Reservations Network. You can save time by just using one of these sites or by going straight to the database.

Searching a site may be a lot more convenient than calling around, the prices are usually no better than those you get by phoning the hotel. Shopping for a room at the Four Seasons in London, for example, we found there could be a wide differential in the rates offered as the "best available." Although the dates we asked for fell on a weekend, Preview Travel and TravelWeb offered us the higher standard weekday rate. At Travelocity we did better, coming up with a non-weekend spring promotional rate. Expedia had the best deal, the weekend promotional rate. But when it came to the Peninsula in Hong Kong, Expedia produced the higher amount. No site consistently gave us the lowest rate.

Web sites geared to discounts sometimes have deals that the bigger sites don't. Hotel Wiz, owned by 1Travel.com, had negotiated a special rate with the Windsor Court Hotel in New Orleans that wasn't available anywhere else; Travelscape offered the best deal at Chicago's Palmer House Hilton. But neither can match the selection of the major sites, especially when it comes to luxury accommodations. Sometimes they even list higher prices.

One of the Net's best features is the access it affords to last-minute specials, such as TravelWeb's Click-It Weekends, Hotel Reservations Network's Hot Deals, and notification of reduced rates for the upcoming weekend offered by Hilton, Radisson, Hyatt, and Inter-Continental. (Travel & Leisure also has a "Hot Deals" E-mail newsletter of mostly last-minute specials.) You can find e rates either by going to their Web sites or, more conveniently, signing up for an E-mail notice. The week we called the Sydney Inter-Continental, the chain's Web site was selling a 25-percent-off Weekend Savers special.

An Internet company that will have "a big impact on the hotel industry," according to Cornell's Kimes, is Priceline.com. "If you really want to get a low rate, Priceline is probably a good avenue." First used for selling airline tickets, Priceline lets customers bid for rooms at prices significantly below those posted elsewhere.

So what should you do?To see what's out there, start at one of the major Internet sites. Then cruise for bargains at a discount site such as Travelscape or Hotel Wiz. When you have a few hotels in mind, call them directly and their 800 numbers for rates--don't forget to ask whether you qualify for one of the special discounts. If you have time, check with consolidators, beginning with those that concentrate on your destination. At the last minute, you can look for special Web deals. And if you don't mind which hotel you get, go with Priceline.

It may all seem confusing now, but just wait. If airlines really are the model for the hotel industry, it'll only get worse.

Who's got the deals?
It's not that simple. The best way to find the lowest rate is to look and look and look. We tried to reserve rooms at hotels around the world through a variety of providers; here's what we found. (All prices are per night for May 14-17; for the Windsor Court, which was sold out that weekend, we used May 7-10.)

On-line Travel Agencies Discount Web Sites Calling the Hotel Company's 800 Number Calling the Hotel Directly Consolidator
Ritz-Carlton, San Francisco Low: $329 (Travelocity, Preview Travel/ TravelWeb)
High: $365 (Expedia)
$315 (Travelscape) $329 $329 $329 (California Reservations)
Four Seasons, London Low: $415 (Expedia)
High: $507 (preview Travel/ TravelWeb)
$473 (Hotel Wiz) $415 $415 $415 (Hotel$avers)
Peninsula, Hong Kong Low: $317 (Preview Travel/ TravelWeb)
High: $374 (Expedia)
Not offered $361 $317 $399 (Travel Interlink)
Windsor Court, New Orleans Low: $245 (Preview Travel/ TravelWeb)
High: $295 (Expedia, Travelocity)
$265 (Hotel Wiz) 800 number is a direct hotel line $295 $298 (Room Finders)
Inter- Continental, Sydney Low: $175 (Travelocity)
High: $187 (Preview Travel/TravelWeb)
$155 (Hotel Wiz) $142 $187 Not offered
St. Regis, New York Low: $425 (Expedia, Travelocity; dates not available on Preview Travel/ TravelWeb) $425 (Hotel Wiz) $425 $495 $495 (Hotel$avers)
Hotel Monaco, Seattle Not offered $170 (Hotel Wiz) 800 number is a direct hotel line $180 $175 (California Reservations)
Palmer House Hilton, Chicago Low: $224 (Expedia, Travelocity; dates not available on Preview Travel/ TravelWeb) $109 (Travelscape) $224 $224 $176 (Hotel$avers)

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