Hotels in America, notably Hilton, Marriott and InterContinental, have been bullishly promoting their concept of dynamic pricing to would be customers.

Under this model, rates can differ from night to night according to demand. It is based partly on how airlines can operate their pricing policies and stems from the hotels’ understandable aim to reclaim pricing control of product and increase revenues.

One senior Hilton Hotels executive in America is on record saying this system is here to stay.

But there is evidence in Europe that the model is not catching on. One leading hotel market analyst, Mike Mannix of Carlson Wagonlit Travel said hotels were enjoying no success with it this side of the Atlantic.

“I don’t know of any customers who have accepted any form of dynamic pricing from hotels,” Mr Mannix, director of CWT hotel solutions group, said. “I think hotels are coming to the realisation that it is not here to stay in fact.

“Dynamic pricing may have a role in how to construct their deals for their customers but when it comes down to volume/destination where there is leverageable spend, the corporates still want differentiation. They want to see differentiation in their rates.”

He said that none of the hotels he had asked had been able to say what impact the variable pricing model would have on a corporate’s costs.

“Is it a plus or is it a minus and if so by how much? They try to sell this dynamic pricing model or variable pricing model without having some of the fundamental sales arguments which are ‘What does it mean for me?’

“The corporates don’t know what it means to them which is why the hotels are having problems getting this accepted by customers and why consulting companies like ourselves are saying to their customers ‘Beware.’

“They need to really lay out what it means for corporates in terms of their costs and none of them has been able to do it or is willing to do it - maybe not able. I know what this dynamic pricing model is meant to do, it is meant to drive increased revenues for the hotels.

“That would suggest that it is good for the hotels and not so good for the corporates.”

Mr Mannix also attacked the idea that hotels were now in a seller’s market. “All of the texts and articles you read would suggest that the tables have turned. I wanted to destroy that myth with this White Paper (Hotel Optimization, released by CWT at the ACTE conference).

“Yes, we recognise that there are some strong performing market places - no doubt about it. But if you go below the surface and blow away the smoke, what you actually see in reality is that we are in a plus market but it is a mild plus. It is not a really strong, bullish, re-bounded market.”

He said that if the market were really strong he would have expected hotels to have asked for more than a 6% increase at the start of negotiations

Apart from gateway cities, mainly in America and Asia, the market in 2006 would not be in a “continued growth cycle.” With occupancy “starting to plateau,” he said it was average daily rate which was driving the market.

He said CWT looked at the future pricing of a “decent sample size of hotels” to see how sustainable the trend was. “We were only looking at a plus 6% on average. In Europe, we are looking at plus 2% and in the States at plus 7% before negotiation.

“So when you look at it, it is very much a market by market discussion and that there is no golden rule for the market generally. It is still a city by city by city by category and by discussion,” he said.

There was, he said, still plenty of scope for negotiations although he advised corporates that insisting on a last room availability clause which some hotel were trying to eliminate was a pre-requisite.    

But he rejected the idea that the current situation pointed to a weakening of the value of corporate hotel deals. “Hotels are prepared to deal as long as corporates are prepared to commit volume,” he said.

“They are looking for customers to commit volume and to be directive on their travel policy - not mandate it necessarily. I think that is the important part from the hotel side.”

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