How hotels position, price day bookings of guestrooms
 
How hotels position, price day bookings of guestrooms
09 MARCH 2020 7:47 AM

Flexible bookings appeal to a different type of guest, such as those looking to rest during a long airport layover.

REPORT FROM THE U.S.—Most hotel guests are booking overnight stays, but there’s a small and growing contingent, particularly among business travelers, that need a room for the day—for example, as a comfort during a long layover between flights.

For these guests, many hotels offer a special, and typically unpublicized, rate. Though far from the room-by-the-hour, “no-tell” motel, this type of service may carry a stigma. But, for hoteliers, it’s an alternative revenue source, and creative, flexible use of their space.

“Hotels are very traditional, and companies are usually behind the trends,” said Roxanne Bilodeau-Cupp, assistant area director of revenue management for Viceroy Hotels, which has multiple hotels offering flexible-use bookings. “There’s a lot of hesitation from hotels, but it works for ours very well, especially on those days when we have a bunch of rooms to sell.”

Independent hotels might be more likely to experiment with flexible-use bookings, sources said, but branded hotels, like the Bernic Hotel in New York City, a Tapestry Collection by Hilton property, are seeing the benefits of the practice, too.

“At Hilton, we are always testing new initiatives and programs to determine what works best for our guests and owners,” a Hilton spokesperson said. “We have conducted a limited test of the short-term concept with select hotels. As with all tests, there are operational and financial considerations that must carefully be reviewed. While we are collecting and listening closely to all feedback from our guests and owners, there are no plans to expand this test to the entire portfolio at this time.”

That’s all starting to change as interest among brands in general grows, while the lodging industry’s growth slows, sources said.

The Tampa Airport Marriott began offering flexible-use rooms in 2018, and is already seeing positive results, Scott McClinton, the hotel’s GM, said.

“The bookings of our day-use rooms have continually grown month to month,” McClinton said. “I’m averaging anywhere from an extra $6,000 to $10,000 a month in additional revenue. It’s easy money, to be honest with you.”

How it’s done
Just as flexible-use room bookings appeal to a different type of guest, they also must be managed differently than typical room bookings, but the potential disruption is relatively minor, especially when compared to the profit potential, sources said.

For one, flexible/day-use bookings typically do factor into hotel occupancy, as it would be problematic to track a room sold twice in just one day. Instead these bookings are an added revenue stream, which are factored into hotel average daily rate.

Hotels offering day-use rooms don’t even need to set aside inventory for this purpose, according to sources. Day-use bookings are based on availability, focusing primarily on standard rooms, but also suites, when possible. It’s just another way for revenue managers to fill their hotels, offering valuable flexibility to both the hotel and customer.

“We’re not setting aside specific rooms that we’re not selling to other guests,” Cupp said. “We’ll always have our standard room available, because that one’s kind of easy. But we can put day-use customers in any type of room, so it’s not specific rooms that are assigned. It depends on what room is clean when the day-use guest shows up. We just have to be a little bit more careful with suites and double-bedded rooms.”

Pricing also works differently for flexible-use rooms, and is based more on length of stay than market dynamics and day of week.

McClinton and Cupp said their hotels provide fixed rates for day-use rooms, based on the number of hours booked.

In the Marriott booking system, this manifests as a dedicated rate type and booking code. The day-use rate might actually exceed the price of an overnight booking.

“Right now, we can’t make any changes to our day-use rate in the system, so sometimes our overnight rate is actually cheaper,” Cupp said. “It’s just a set rate depending on the room type and period of time you’re staying. It ranges from like $119 for standard rooms, to $229 for the suites.”

Impact to staffing, especially housekeeping, is minimal, sources said. In some cases, it requires keeping cleaning staff on site in the late afternoon or early evening, to turn around any day-use rooms before traditional check-in.

Even with these changes, the boost in business offsets any additional labor costs, sources said.

“The biggest change for us was we had to add additional housekeepers in the afternoon shift,” McClinton said. “They are here until 7 or 8 at night, so we can clean those rooms and resell them that same night. It costs the same to clean the room, whether it’s an overnight stay or a day-use room, so the day-use profit may be less, because of the lower rate. But it’s all additional profit, so we’re adding revenue, not taking away from another bucket.”

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