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When to Negotiate for a Lower Hotel Room Rate

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<i> Greenberg is a Los Angeles free-lance writer</i>

I recently witnessed this scene at a major hotel in Manhattan: It was 9 p.m. A man with a suitcase walked up to the front desk and asked if a room was available. He had no reservation.

The clerk flipped through some papers and checked his computer terminal. “Yes,” he said. “We have a room.”

“The rate?”

The clerk did some more checking. “That will be $185,” he said.

“Too much,” said the prospective guest, and started walking away.

Negotiated Price

The front desk clerk did everything short of challenging the world high-hurdles record to catch him.

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“Sir,” he said. “Excuse me, but . . . uh . . . what would you be willing to pay?”

The two returned to the front desk, negotiating all the way. By the time they returned to the counter they had reached an agreement. The room would go for $119.

An unusual situation? An overeager front desk clerk?

Hardly. The law of supply and demand is in favor of the potential guest. There is a tremendous glut in the number of hotel rooms, not just in the United States but in many countries around the world. As a result, guests have unprecedented power in negotiating room rates.

Believe it or not, at most hotels each room has several rates.

What rate will you pay? Did you make a reservation through a central reservations number?

If so, chances are that it will be higher, as many of these systems only list full, or rack, rates.

Did you make your reservation through a travel agent? Unless the agent has a special deal with the hotel you could be paying a higher rate because the hotel pays the travel agent’s commission.

How far in advance did you make the reservation? Have prices gone up or down since then? Or, like the scene I witnessed, did you simply walk in, late at night, and ask for a room?

“The one thing none of us likes to admit,” said a general manager, “is that with few exceptions, a hotel room rate is negotiable.”

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Thus, a growing number of hotel companies, once rigidly married to their published room rates, are beginning to give their reservations and front-desk clerks the flexibility to either set or negotiate room rates rather than turn down bookings.

In short, the hotel industry is beginning to learn. “When there is an oversupply in the hotel industry,” said Jonathan Tisch, president and chief executive of Loews Hotels, “you have to have some flexibility in negotiating a rate.”

But it also depends on the hotel, where it is and the time of the year. For example, you would have a hard time negotiating a cheap rate at the Regency Hotel in New York City. It runs at such a healthy occupancy that it doesn’t have to negotiate rates, and offers two rates--rack and corporate.

Yet the 1,600-room Loews Anatole in Dallas has nine rates for each room: rack, corporate, transient, airline, advance and some different group and convention rates.

“We let the individual managers set their own rates,” Tisch says. “We don’t dictate them from New York. And our front-desk people are trained in a similar manner. A hotel room is the most perishable commodity there is. It won’t be around tomorrow. If you’re at 50% occupancy and people walk in, you’ll make a deal with them.”

What about markets such as Hawaii? Can you cut a good deal? In many cases the answer is yes, but most times the potential guest isn’t aware that it can be done.

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“What I do is oversell myself in cheap-room categories during slow periods,” said the general manager of a popular and usually expensive Waikiki hotel. The hotel has only a limited number of inexpensive rooms. “But when guests arrive, we simply upgrade them. This way, we get business we otherwise wouldn’t get.”

Some hotels call it “yield management.” Others prefer to label it “revenue enhancement.”

“All of us are going to yield management,” said Leo Hart, chief of marketing for Ritz-Carlton hotels. “The guest wants to know more and more about what he is getting. He is much more price-sensitive now because he knows he can make choices. He is also much more aware of seasonality.”

Depends on Season

To be sure, it would be easier to negotiate a better rate for a room at a Palm Springs or Miami Beach hotel in mid-July than in mid-January. But seasonality isn’t the only determining factor.

The fear of political instability in some locations, or overbuilding in others, can also work to advantage. And in these cases you don’t have to wait to walk up to the front desk to haggle for a cheap room. You can reserve the rate in advance.

For the last four years, although no foreign tourists have been victimized, fears of violence have severely hurt the Philippines’ tourism business. As a result, smart business and vacation travelers have been able to ask for, and receive, incredible room rates at some previously expensive hotels.

In cities from Singapore to Houston there are simply too many hotels. Negotiating a ridiculously low room rate is almost the norm.

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“In these places,” said one hotel marketing executive, “anyone who pays the full rate was really born yesterday. No one even recognizes the published rate, because virtually every hotel is scrambling to compete for each customer.

“Many of us,” he said with a smile, “insist that we don’t discount to try to support some larger corporate policy or agreement, but we all do.”

In some markets, however, and during some seasons, no discounting occurs. In Hong Kong, don’t expect discounts at hotels such as the Regent, the Peninsula and the Mandarin.

The law of supply and demand may soon change the policies of those hotels. In the next four years more than 35 hotels will open in Hong Kong, and the discount situation could change radically.

“Yield management is a hell of a problem for us,” said Bill Marriott, chairman and president of Marriott Corp.

“Conventional wisdom has always been that if you call far enough in advance, you’ll get a better rate. Not necessarily. I remember when we opened our first hotel. We did a big weekend business. We had an outdoor check-in booth, and we charged by how many people were in each car. It was $8 for one person, $10 for two and $12 for four.

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“We told our people that if a guy drove up in his car by himself to check in, to tell him we were full. Was it good business? Yes. Was it ethical? No. Yield management is still at the primitive stages, but not for long.”

Indeed, computer systems are being devised that not only allow hotels to establish realistic regular rates but also enable them to offer discounts based on expectations of supply and demand.

Computerized System

One system called “Confirm,” which may be operational next year, is being developed as a partnership between Marriott, Hilton, Budget Rent-a-Car and a subsidiary of American Airlines.

Computer programs will be able to forecast daily room demand, interpret traditional booking patterns by both business and vacation travelers and will relate it to time of year, local economic conditions and convention and meeting schedules.

But what happens after you’ve made your reservation and arrived at your hotel only to find that you can get an even cheaper rate? Are you entitled to the cheaper rate?

There are no easy answers, but it doesn’t hurt to try. After all, when it comes to yield management, you may be holding the winning hand.

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