Hotel Chains Struggle To Maintain Rates

Declining occupancy is pushing hotel rates lower, despite a desire in the industry to maintain “rate discipline,” the Dow Jones News Service reports in the Wall Street Journal.

A recent survey of hotel rates by Hogg Robinson showed that Moscow was the only global city to record rising room rates in February. Rates were down 5% in London, 19% in New York, 16% in Hong Kong and 22% in Zurich…

Hotel chains are facing the same  pressures as airlines, which have no rate discipline to speak of. Their cut-throat competition means they’ll slash anything — services, flight schedules, whatever they can — to keep rates low. But that’s not so easily done in the hotel industry, which can’t just park its buildings in the desert.

Interestingly, the article says that rates are not declining at budget hotels. At least not yet. If rates drop enough at more luxurious hotels, budget hotels may start to see occupancy fall, which will challenge their rate discipline, too.


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