There are certain questions to which the correct answer is almost always “both”. Wine or beer? Telecaster or Les Paul? Fixed or dynamic hotel rates?
NB: This is an article from CWT
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With the hotel sourcing season well underway, many corporate travel and procurement teams are likely trying to figure out which hotel pricing model makes the most sense for their programs.
On the one hand, fixed hotel rates offer price stability and predictability for corporate travel budgets, but negotiations can be time-consuming. On the other, dynamic rates are easier to negotiate and they adjust based on market conditions, potentially offering cost savings, but they introduce price fluctuations, making budgeting more uncertain.
Our experts explain how both types of rates have their place in a travel program, and the strategies that buyers can use to get the most bang for their buck.
Which Rate Is Best? A Question of Volume
Hotels continue to nudge corporate buyers towards dynamic rates. One of the primary concerns for buyers, however, is whether dynamic rates offer the best value compared to static, negotiated rates.
Richard Johnson, Vice President at CWT Solutions Group believes that while dynamic pricing can offer savings, it is essential for buyers to balance it with the consistency and benefits of negotiated rates, especially in high-volume markets.
In markets with fewer room nights, Johnson sees dynamic pricing as a complementary tool to static rates and chainwide discounts. “The most effective approach may involve a hybrid model, using both dynamic pricing strategies and traditional negotiated rates,” he suggests.
According to Michelle Kocina, Senior Consultant at CWT Solutions Group, dynamic pricing is especially beneficial in a travel program’s second-tier markets (cities with fewer than 250 room nights), where it can fill gaps left by static rates and chainwide discounts. “In these markets, dynamic pricing often provides additional room types and inventory availability during high-demand dates,” she says.
Accepting Dynamic Rates in Non-Preferred Markets: A Strategic Decision
Should buyers consider dynamic rates in destinations where they don’t have preferred properties? Angie Techmanski, Senior Consultant at CWT Solutions Group, believes it could be a smart move. “Yes, buyers should consider dynamic rates in such destinations,” she says, “but the decision should be based on the discount offered compared to chainwide discounts and whether there’s enough volume to support consolidation to a preferred property.
In second-tier markets, dynamic pricing can offer advantages like additional inventory during high-demand periods. However, Techmanski warns that if a buyer’s room nights in these properties increase over time, it may become harder for them to switch and negotiate more favorable static rates. “It’s a balancing act as the program evolves,” she notes.
