Dynamic Pricing Moving In?
Dynamic pricing appears to be making its way back into corporate contracts, at least in the hotel arena. InterContinental Hotels Group reported that almost a quarter of its corporate clients will be using some sort of dynamic pricing model for 2011. IHG has been pushing buyers to accept floating rates since at least 2008. Since then, more than 1,000 accounts have agreed to discounts from best-available market rates rather than a fixed rate. IHG director of business travel and worldwide sales Lara Hernandez told a conference in December 2010 that dynamic pricing is the only way the company can guarantee clients that they will receive discounts on 100% of room nights. Several major hotel groups tried to require dynamic pricing during the last seller’s market, but corporate clients generally resisted. This time around, about 22% of corporate buyers are going with some version of dynamic pricing, with or without rate caps.
AA-Travelport Squabble: It’s All About Travel Managers
“The American Airlines/Travelport (Orbitz) debacle is all about how these two parties perceive the need to deal with each other as it primarily relates to travel managers. In the end, travel managers are going to need to make the decision based on what their respective companies’ strategic and tactical digital management platforms demand, not on whether the airline or the GDS wins this particular foray into the changing distribution model. Buying trends suggest that neither solution is the end-game, but only a step toward integrated real-time digital packaging of bigger, more holistic, and integrated travel/communications services.” – George Eastman, president, The Eastman Group
Air, Hotel Prices Back to Pre-Recession Levels
Say adieu to lower prices brought on by recession and decreased demand. American Express is predicting air and hotel increases of up to 10% this year, effectively returning costs to 2008 levels in key markets. Asia-Pacific is leading the way on pricing, fueled by steadily rising demand. The U.S. and Europe should see slightly lower increases as demand is slower to recover from recessionary lows.
Global Entry Cuts Re-Entry Wait
Business travelers who want to opt out of long waits at immigration and customs when they return to the U.S. now have an out. Global Entry lets U.S.-based travelers bypass passport control lines at many airports by using biometric kiosks that read fingerprints. Global Entry costs $100 per traveler and requires a successful background check. Qualifications include no criminal convictions; no customs, immigration, or agricultural violations; and no current investigations by federal, state, or local agencies. While the program is primarily for U.S. residents, a pilot program for Mexican travelers is expected later this year. Dutch travelers can already enroll, and the Netherlands has a similar expedited entry system for U.S. travelers. Travelers must apply in person with U.S. Customs and Border Protection.
U.S. Hotel Construction Hits All-Time Low
New hotel construction won’t provide much relief from increasing hotel rates any time soon. That’s because hotel chains are focusing more attention outside the U.S., where there are higher rates of return. Just over 1,200 projects, a total of fewer than 130,000 rooms, are slated to begin construction this year. That’s the lowest number since 2004, according to research firm Lodging Econometrics. The result: Growth in the supply of hotel rooms over the next two years will remain at the lowest rate the industry has seen since the early 1990s, leaving sellers in a stronger position to demand higher rates and offer fewer concessions.