Hotel Pricing: Obtaining the Right Rate

Hotel Pricing: Obtaining the Right Rate

How to pay less for the same hotel room

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)


Who gets a discount?
You may qualify for special rates at selected hotels (subject to availability). Here are some of the most common.

  • AARP/Senior-citizen Members of the American Association of Retired Persons (you must be 50 or older) at some hotels; any senior at others, with minimum qualifying ages ranging from 60 to 65.
  • Military/Government Active-duty military personnel and employees of federal, state, and local governments with ID; government contractors qualify at some hotels.
  • Teacher/Student Full-time teachers or students.
  • Travel-industry Travel agents, airline employees, and other industry employees.
  • AAA Members of the American Automobile Association.
  • Shareholder Those who own stock in the hotel's parent company.
  • Corporate Some companies arrange for reduced hotel rates (there are unscrupulous people who claim to work for or to do business with a local company, since hotels rarely ask for ID).
  • Family-plan Usually depends on the age of the children -- under 12 for some, 18 for others.
  • Frequent-guest Many chains offer the chance to accrue points for free nights.
  • Credit card Some credit card companies run promotions providing a discount if you pay with their card.

Testing a popular travel club
For $59.95 a year, Travelers Advantage promises discounts of up to 50 percent at member hotels. Although the company claims to work with 4,000 properties, the selection is less than overwhelming (for example, there is only one in Seattle -- Executive Inn Express, a budget hotel). Other problems: There are numerous blackout periods, and hotels can refuse you if they're more than 80 percent full.

We decided to give it a try anyway. First we called the Beverly Hills Plaza and learned we could get a $160 room for $80, already saving more than the price of joining. Sounds good. When Le Meridien in New Orleans offered a deluxe room at half off the $300 rack rate, we thought the club might be worth the trouble. Then Le Meridien told us we'd have to wait four months. In the meantime, the hotel was offering the same room for $189 and a smaller one for $169. In New York, Travelers Advantage advertised a discount of up to 30 percent at the Waldorf-Astoria. "The hotel does not participate in the program," asserted the Waldorf. We tried the Millennium Hilton and heard the same thing. Travelers Advantage said that individual hotel managers don't know about the deal they've cut with Hilton. Anyway, the rates Travelers Advantage said it had negotiated were virtually the same as the hotels': $199 versus the Waldorf's $209; $135 versus Hilton's $149. It sounds like a club we'd rather not join.

Priceline: at what cost?
Priceline.com's choose-your-own-rate system works like this: You pick the city, dates of travel, and quality of hotel, from one to five stars (the ratings are set by Priceline). Then you type in how much you want to pay. After entering your credit card information, you wait for a reply by E-mail, which usually comes within the hour, telling you if your bid has been accepted. Bids can also be made via an 800 number.

The main drawback is that you have no idea which hotel you'll end up with. And once a bid has been accepted, you can't back out -- if you don't like the hotel, or if something comes up and you can't make it, too bad. Also annoying: If Priceline doesn't accept your bid, you can't go back and make a higher one. You have to change another criterion besides the price (the dates, the city, or the quality of the hotel).

That said, we bid $120 for a three-star hotel in New York City and landed a night at the Sheraton Manhattan. The best we could get by calling the hotel directly was $259.

How does Priceline do it?"Hotels specify the rates they'll accept," says spokesperson Brian Ek. "While the prices are low compared to the rack rates, they're significantly above the hotel's cost. When you put in a bid, we try to find a hotel for less than you offered and make the spread. If you put in $120, we try to find a hotel that put in $110."

A sales manager at a major hotel who asked not to be identified had another explanation: "People tend to type in $90 to $120 when they're asked what they want to pay, but hotels sell rooms to Priceline for $140 to $160," she said. "Priceline has been subsidizing the difference, because the more bookings it gets, the more the stock price goes up."

Priceline would not confirm this. But if it's true that the company is paying more attention to the stock price than the bottom line, the bargains may dry up some day. Until then it's one of the best deals around.


CONSOLIDATORS
Like their airline counterparts, hotel consolidators acquire blocks of rooms from hotels and resell them, usually -- but not always -- at reduced rates (hotels sometimes offer promotions that are better deals). Even when a hotel is sold out, consolidators may still have rooms, though at the rack rate.
Accommodations Express 800/444-7666; www.accommodationsxpress.com; 1,500 hotels in 20 U.S. cities.
California Reservations 800/576-0003; www.cal-res.com; 1,500 hotels in California and along the Pacific coast.
Central Reservations Service 800/950-0232; www.roomconnection.com; 330 hotels in nine cities.
Express Reservations 800/356-1123; www.express-res.com; 30 hotels in New York, 12 in Los Angeles.
Hotel Reservations Network 800/964-6835; www.hoteldiscount.com or www.180096hotel.com; 1,200 hotels in 33 cities in the United States, Canada, and Europe.
Hotel$avers Worldwide 888/637-2837 or 407/726-0330; www.hotelsavers.com; 25,000 hotels in 5,000 cities.
International Marketing & Travel Concepts 800/790-4682; 600 hotels in 21 European cities.
Quikbook 800/789-9887; www.quikbook.com; 120 hotels in Atlanta, Boston, Chicago, Los Angeles, New York, San Francisco, and Washington, D.C.
RMC Travel Center 800/245-5738; www.rmcwebtravel.com; 3,000 hotels in 200 U.S. cities.
Room Finders USA 800/473-7829; www.roomfinders.com; 626 hotels in 212 cities worldwide.
Travel Interlink 800/477-7172; 8,000 hotels in Asia, Europe, and the United States.

ON-LINE TRAVEL AGENCIES
Up-and-comer TravelWeb is probably the easiest to use, and it's the official reservation system for a number of chains. Preview Travel, Expedia, Travelocity, and ITN require you to register.
Expedia (www.expedia.msn.com)
Internet Travel Network (www.itn.com)
Preview Travel (www.previewtravel.com)
Travelocity (www.travelocity.com)
TravelWeb (www.travelweb.com)

DISCOUNT SITES
All the Hotels on the Web (www.all-hotels.com)
Best Fares (www.bestfares.com)
Hotel Reservations Network (www.hoteldiscount.com or www.180096hotel.com)
Hotel Wiz (www.hotelwiz.com)
Travelscape (www.travelscape.com)
Trip.com (www.trip.com)
WebFlyer (www.webflyer.com)

HOTEL WEB SITES
Many chains and independent hotels let you book on-line; others just allow E-mail inquiries. Chains such as Hilton, Radisson, Hyatt, and Inter-Continental, and reservation services like SRS-Worldwide and Utell International's Hotel Book, post special offers.
Hilton Value Rates (www.hilton.com)
Radisson Hot Deals (www.radisson.com)
Hyatt Getaway Weekends (www.hyatt.com)
Inter-Continental Weekend Savers (www.interconti.com)
SRS-Worldwide (www.srs-worldhotels.com)
Utell International's Hotel Book (www.hotelbook.com)

LAST-MINUTE DEALS
TravelWeb's Click-It Weekends and the Hotel Reservations Network's Hot Deals have the most extensive lists of last-minute weekend specials. You can sign up for Travel & Leisure's Hot Deals E-mail newsletter at www.travelandleisure.com. Individual hotel chains like Hilton (www.hilton.com), Radisson (www.radisson.com), Hyatt (www.hyatt.com), and Inter-Continental (www.interconti.com) offer their own last-minute deals, usually available only if you book on-line.

Did you enjoy this article?

Share it.

Explore More