How to Get a Deal on Hotel Rooms in the Recession

It’s no secret: The recession has hit the travel market hard. Corporations struggling with lagging profits and decreasing budgets have cut their travel and conference spending, leaving airlines, car-rental companies and hotels with excess inventory. Hotels were hit particularly hard—and now, even amid what many are calling a cautious recovery, the lodging industry is still taking its lumps.

The occupancy rate for the first four months of 2010 was 53.6 percent, up 3 percent since the same time period in 2009, according to Smith Travel Research. But while this seems like good news for the travel industry, it has a downside: Prices are continuing to decline. The average daily rate during the same period was $96.73, down 3.4 percent from 2009. American Express Business Travel is seeing the same trend. In 2009, the Asia Pacific upper-tiers category for business travelers was $185. This year, American Express expects that rate to drop to $166, a decline of 11 percent. In North America, business travelers can expect rates to drop 9 percent this year, from $160 to $145. In Europe, the Middle East and Africa (EMEA), the drop is less significant—6 percent, from $236 to $221—but it’s still a drop.

These numbers tell an important story. It’s clear that demand has begun to rebound, but a full recovery is still off in the distance. This means the big trend for 2010 is simple: Expect more, spend less, explains Jeff Higley, VP of digital media and communications at Smith Travel. “We expect hotel rates to continue to decrease through the summer while occupancy climbs. Hotels have not raised their rates in accordance with some of the increased demand they have seen, so it should be a fairly good year for business travelers to get the most value for their travel budgets.”

This trend is likely to continue, according to Bill Carroll, senior lecturer at Cornell University’s School of Hotel Administration and Center for Hospitality Research. “At least for the next few years, the levels of occupancy will not achieve the levels they hit at the peak, in 2006 and 2007. That will continue to place pressure on pricing and, in part, on what business travelers are seeing. Every single upscale, high-end property has had to decrease prices because everyone is suffering.”

Lower Prices, More Value

For business travelers, these numbers mean big changes in the way they operate. Since every hotel has essentially migrated its pricing down a full tier—luxury hotel pricing now equals upper-upscale pricing from three or four years ago—corporate travel professionals can negotiate contracts with companies that may have been out of reach in the past. “The market definitely adjusted, and now companies are going to take that and try and get more trips out of their travel budgets,” explains Christa Degnan Manning, director of eXpert insights for American Express Business Travel.

Hotels, on the other hand, are working harder to make occasional visitors into frequent guests, which means an additional emphasis on loyalty programs. Hotels are expanding their frequent-stay programs, offering double points or free upgrades. They’re also looking into cutting-edge technology to make checking in and out a breeze.

“The best thing that business travelers can look for is a warm, red-carpet welcome, because they have been absent for a year and were missed,” says Vijay Dandapani, president and COO of New York–based Apple Core Hotels. “We’re rolling out that carpet and making it as easy as possible for business travelers to do business—everything from RFID tags on baggage to downloadable applications that let visitors use their iPhones and BlackBerry devices as keycards.”

Another aspect of the trend: customization. Hoteliers, looking to capitalize on the boutique-hotel model, have started adding unique guest experiences. Travelers can choose from pillow menus, and they often find upon check-in that they’ve been placed in their favorite room. Travelers who aren’t seeing such amenities should feel free to speak up about their needs, says Mike McCormick, executive director and COO of the National Business Travel Association. “There’s an old adage: Don’t ask, don’t get,” he explains. “If you’re checking in, you can ask for what you need—free Wi-Fi for a day, for example. Yes, 41 percent of corporate travel professionals are getting better discounts [for their clients] than they did a year ago, but that doesn’t mean there’s no room for negotiation.”

If anything, there’s even more wiggle room now, as well as accommodation of special requests by business travelers that had been reserved for frequent leisure travelers. Smart businesspeople ask for free upgrades, parking or continental breakfast, even if such perks are not typically offered to those with negotiated rates, says Smith Travel’s Higley. “It’s far more efficient for a hotel to retain an existing guest than to develop a new one, so if you’re a loyal guest, it can’t hurt to ask for what you want.”

Especially since business travelers—who may have stayed in less expensive hotels at the height of the recession—know that other, cheaper locales have been doing what the more expensive properties are just starting to do. Four-star (and, more commonly, three-star) hotels have been offering amenities such as free breakfasts, in-room bottled water and Wi-Fi for a while. Now that business travelers know this, they can put pressure on upscale hoteliers to do the same. They have also started to question whether they might feel just as comfortable at a less expensive hotel, says Degnan Manning.

“You’ve got people considering properties that in the past they may have never seen. Now that they have stayed there, they are saying, ‘Should I consider that midtier but beautiful hotel? Maybe it didn’t have a top-of-the-line mattress and duvet, but I got a free breakfast, free Wi-Fi, free water,’” she says. “Business travelers, especially at the executive level, are looking for value. Maybe it’s for morale reasons, but many are going back to their travel and procurement leaders and asking if it’s time to mix up their portfolio of suppliers.”

But one hotelier says that this trend may also be changing. “This month, we are operating at a record 87 percent occupancy rate. This is up substantially from February and March,” says Eric Bryant, e-commerce manager for the New Yorker Hotel, a Ramada Plaza hotel property. “In January and February, prices were low; our average daily rate was around $159. As a result, we had to get creative in coming up with specials, packages and discounts. It is true that during the fourth quarter of 2009 and the first quarter of 2010, we focused on value-added services and free offers to attract the business traveler. However, consumer confidence improved significantly in April, and now we are not having to give away the farm, so to speak, to fill rooms.

KAREN BANNAN, who writes abut business, technology, finance and green lifestyle issues, is constantly on the lookout for environmentally conscious—yet comfortable—properties to explore.