A story in today’s Saigon Times reports that several Ho Chi Minh City hotels, suffering from low occupancy, are cutting their rates by as much as 40% in order to sell more rooms. It seems like an obvious tactic – cut your prices, and you sell more product. But does it work?

 

We’ve found in the past that it doesn’t. Previously we’ve cut rates for certain low periods such as public holidays or weekends, but the effect on our occupancy has been negligible, and we’ve noticed that rate cuts have the following negative side-effects:

 

  • Lower revenue, as customers who would have booked with you anyway end up paying less for their rooms, while few new customers are attracted
  • Negative value perception – whilst budget travellers are sensitive to price variance, luxury hotel guests are largely impervious to both discounting and increasing, and indeed they will often see discounts as a reflection of a decrease in a hotel’s quality, standard and brand value
  • Customers get used to the new low rates, making it difficult to increase them again
  • Gossip! When competitors and customers see a hotel reduce its rates, it isn’t long before tongues start wagging – “They must be struggling”, “Business must be bad” etc.

 

Many hospitality experts feel the same – have a look at this article by Neil Salerno, in which he concludes that the small occupancy gains that may accrue from rate discounting aren’t worth the decrease in revenue. As he says: Hoteliers who myopically focus on cutting expenses to produce profit, without a substantial effort to improve top line revenue, are doomed to failure”.

Like many hotels (though not, it appears, the majority) we regularly monitor travel review sites such as Tripadvisor, to see what the chatter about our hotel can tell us. We also collect guest feedback the old-fashioned way, via in-room questionnaires. It’s a good way of seeing if there’s a groundswell of opinion, good or bad, about any area of our business.

 

 

Most of the time our confidence in our product is confirmed; sometimes we learn that areas that we take for granted (such as our breakfast buffet) are a primary reason guests come back and stay with us again & again; and occasionally we identify an area which is a source of unhappiness for our guests.

 

Earlier this year we noticed numerous comments, both online and on our questionnaires, about our internet rates, both in-room and in our Business Centre. Most of our guests are business travellers and so email and internet are essential tools for them. These weren’t isolated comments; rather, it seemed a consensus had formed that suggested our rates were unrealistically high.

 

Of course, there’s no point monitoring guest feedback if you’re not prepared to act on it, so we sat down with our internet service provider and thrashed out a solution, the outcome being that we were able to offer free internet in our Executive rooms and suites, and slash the internet rate in our Business Centre by 80%.

 

It seems to have worked – we’ve not had one complaint about our internet rate since the new prices were introduced, and more guests are opting to upgrade to our Executive rooms, making it a win-win situation for us and our guests.

 

To be honest, in 2-3 years’ time I envisage that most hotels will offer free wi-fi throughout. People have it at home, and in many cities (including Saigon) most bars, cafes and restaurants offer it as well. The old model of paying to plug your laptop into a broadband connection will seem antiquated, and hotels and their ISPs will have to adapt to what’s going on outside their doors.   

 

In-room internet

In-room broadband - heading for extinction?

 

 

 

 

Welcome to Heart of Saigon, the Duxton Hotel Saigon’s new blog. It’s basically a new channel for us to talk about developments at the hotel in a more informal way, to give advice to visitors to Ho Chi Minh City, to talk about the local hotel and tourism scene, and hopefully to facilitate dialogue with our customers.

 

Traditionally, businesses communicate with their customers via brochures, ads, sales letters, newsletters, and emails. These are all well & good, but they have two drawbacks: they’re formal and ‘rigid’, and they’re one-way. Blogs allow businesses to chat with their customers in a more relaxed, open and less sales-orientated way, and allow those customers to respond, give feedback and even contribute themselves. In the new collaborative economy, web-savvy customers don’t just like the opportunity to converse with businesses, they expect and demand it, and hotels should be no different – we’ve all been quick to use the internet as a distribution channel, but a lot slower to embrace web 2.0 concepts such as social networking or blogging.

 

So please enjoy our blog and feel free to leave comments, suggestions and even contributions. All are welcome, and as you’ll read in future blog entries, we do listen to and act on customer feedback.