Peak Season Price or Rip Off?
Field days is in Hamilton very soon and it brings me to think about tarriffs and price setting for big events and peak periods. It is very important for moteliers to think very seriously and look at the big picture when setting rates for events. We hear stories around the big events such as a house being let for $6000 for the period of the V8’s and it is very tempting to say well if they can charge what they like so can we. There is however a much bigger picture to look at. There are two issues really the first being how do we attract and retain events and the second being how do we attract and retain customers.
In order for Hamilton to be recognized as an event destination we must of course have events being held here and then promote this. As you are all aware word of mouth is the best advertising and promotion so the experience of those attending the event soon spreads to others. If organizers of events receive feedback that the cost of the event was too expensive for participants then they will look at alternative less expensive options. We have experienced complications with events in the past. Very bad media coverage for Hamilton motels when a non WMA member charged exorbitant rates for a very ordinary room during field days was a distinct disadvantage to all motels who suffered from being labeled as a rip off town you would not want to stay in. Then both the larger Jehovah’s Witness convention weekend and the Amway convention moved away due in part to the cost factor of having it in Hamilton. This does not just affect Hamilton motels but also the larger Waikato as there were always spin offs for other areas from these events. For those of us who were around then it was a big chunk deleted from our income when we started to lose these major boosts from the economy. Conversely the growth of the event market can dramatically increase both the income from your motel and the potential selling price.
Many of you will say but why can’t I put my prices up. Everyone else does it. The airlines and the hotels! Well you are correct they do have peak rates and you as a motelier are just as entitled to have peak rates. It is a basic law of economics supply and demand. This does not allow you though just to pluck a figure from the air depending on how busy town is. Your peak rate can not be higher than your maximum rate advertised. If you have an advertised rate in Jason’s of $100 to $160 for 2 people then your maximum rate at any time of the year can only be $160 for two people. Selling your rooms above this rate contravenes the Fair Trading Act and is illegal.
It is not just the illegal side of your rates though it is how it affects your business. The people who attend events are travelers obviously and you can firstly, attract them for the event, and then retain them as a lifetime customer if you treat them with integrity. Not only will you gain them as a lifetime customer you will also have the potential to gain all the people whom they tell about their experience. If you charge a realistic peak rate for your room the customer will look at the facilities they are getting and be aware that for peak season this is reasonable value. They will then assume that your off peak rates are also reasonable and thus have the confidence to both return to your motel themselves or recommend it to others. If your rate is exorbitant then the customer will assume your off peak rate is also not value for money and will “spread the word” How many of them have corporate friends who travel, have relations who will come to the Waikato for various reasons or travel overseas and talk to people who are potentially international tourists. Do you want them to recommend your motel to these people in a positive or negative way? Look after them don’t rip them off and increase the long term value of the business.
I suppose we need to relate all this to a personal experience. How did you feel when you are buying fruit which is out of season. High demand and low supply. If you go to a shop and the fruit is $9.99 per kilo and you buy it knowing that normally in season the fruit is only $2.99 a kilo you are annoyed but think well that is a high season price. However I know if I then go to the other grocery shops and find that they are all charging $7.99 a kilo I feel ripped off and would not go back to the $9.99 shop. Also I will tell everyone I can that the shop is a rip off and go to the other shops as their prices are much more reasonable for the same product. Is that how you want your guests to feel about you?
May 28 2009 | Articles for current moteliers and Entering the Motel Industry | 2 Comments »