HOTELS' LOSS, ROAD WARRIORS' GAIN
By Joe Brancatelli
October 21, 2009 -- Here's the bad news: The U.S. hotel market is now officially in worse shape than some segments of the American housing market. Here's the good news: Savvy business travelers can ride the lodging industry's train wreck to substantial savings.
Confirmation of the sorry state of hotel properties came last week from Fitch Ratings, which tracks the delinquency rate of commercial mortgage backed securities. A surge in hotel defaults in September means that the lodging sector now has a higher rate of late pays on mortgages (5.83 percent) than multifamily homes (5.72 percent), retail (3.65 percent), industrial (2.96 percent), or office (1.97 percent) properties. Worse, Fitch says it expects "hotel property values will decline by as much as 50 percent" and believes lodging delinquencies will eventually be "approximately double that of the other property types."
Of course, Fitch didn't tell us traveling business types anything we didn't already know anecdotally. After all, it's impossible not to notice that our nightly hotel tabs have plummeted recently. Depending on our destination and the type of lodging we favor, rates have dropped by 30 to 50 percent and individual properties are courting us with bonus meals, free room nights, and everything from complimentary spa services to insanely rich bonuses in our frequent-guest programs.
Yet buying hotels when things are rotten is often more challenging than when the travel industry is riding high. And the rules of engagement are certainly different. Consider the following a road warrior's guide to getting the best hotel room at the lowest price right now. No one knows for sure what next year or next month—or even next week—will bring.
Less Is, Well, Less
Hotels are slashing their operating budgets as they offer us substantial savings. So watch out for small changes that won't affect the quality of your stay and beware larger ones that could ruin your business trip. No one I know complains when a hotel scrimps on the landscaping a bit or substitutes a pencil for the fancy pen that used to accompany the pad on the nightstand. But a reduction in the hours that room service operates or the closure of the hotel restaurant can foul up your plans. Many hotels are reducing or eliminating concierge staffs or charging for services like in-room Internet that were once free. The bottom line in these bottom-line times: Confirm that the hotel still offers a product or service you expect it to have. One other tip: As hotels reduce housekeeping head counts, they are stretching out available personnel by moving up the checkout time and pushing back check-in time. Confirm the hours in advance.
If You Book It, They Will Charge You
Many hotel chains have adopted a favorite airline industry ploy: They've added substantial restrictions on their absolute lowest rates. Usually, the cheapest nightly rate you can find for a room will now require full payment when you make the reservation. And that payment will be nonrefundable. If you don't show, the hotel not only won't refund your money, it probably won't give you credit toward a future stay. Of course, there's nothing wrong with prepaid, nonrefundable rates. But proceed with extreme caution if you think your plans may change.
The Naked Truth
The hotel industry is split along what passes as ideological lines when it comes to discounting. Some chains (most notably Hilton) have slashed their nightly rates with gusto in order to fill their properties. Others (think Marriott) are adding value-added perks (free meals, gift cards) to keep the nightly rate up. Absolute rate cuts are called "naked discounting" in industry parlance, and they have a clear and present advantage: They're cheap. But paying more for a value-added rate can yield more, well, value—if you actually use the additional perks. If all you need is the room and board, go for the naked discount. If you like what you're getting in a value-added package and the rate is priced right, go for it. (Wondering about the underlying ideology? Some hotel marketing executives insist that it will be harder to raise rates in good times if prices are cut now, so they prefer to bundle the higher rate with extras to keep up appearances. Others insist travelers now understand the realities of supply-and-demand pricing.)
The Blind Buying the Unknown
Third-party travel sites such as Priceline and Hotwire have long offered "blind" buying of hotel rooms: You state the price you want to pay or are offered a low nightly rate, but you don't know the property you're booking until after you pay. Until recently, the blind-booking sites were almost totally the province of leisure travelers. But as more hotels in the four- and even five-star class look for ways to move distressed room inventory, some business travelers are dabbling in blind buying. Personally, I don’t like booking blind—hotel rooms are not a commodity like coach airline seats—but these are interesting and challenging times for dedicated bargain seekers. If you go blind, try to get some real-time advice by googling terms like "Priceline booking tips." A little advance sleuthing could help you avoid a dump or turn up a real bargain.
Keep It In the Family
Big hotel companies aren't even chains anymore, but instead they're "families" of brands across many price points and lodging types. So a company like Hilton has luxury hotels (Waldorf Astoria and Conrad), full-service brands (Hilton and Doubletree), so-called "focused service" properties (Hampton Inn and Hilton Garden Inn), and specialty products like all-suites (Embassy Suites) and extended-stay lodgings (Homewood Suites). The same is true for Marriott, Starwood, InterContinental, Hyatt, and the other lodging firms. Concentrating your stays within one family does wonders for the balance in your frequent-guest program. That'll not only yield elite status—a wonderful perk that often yields free upgrades and extra in-room amenities—but a bonanza of points that can be converted into free nights for future business trips or a family vacation. By the way, if you're booking a family of brands, use the hotel company's proprietary website. The chains demand their franchisees give the lowest prices to the company site.
The Price of Independents
Despite the power of the hotel families, there continues to be a thriving market for independents, especially in bigger cities and in market segments like luxury properties, boutique lodgings, and resorts. You'll often find the best rates at independent properties because they don't have to pay 12 to 15 percent of their nightly take to a chain for use of the name. But finding a reliable independent property can be daunting. When I go independent, I rely on Quikbook. In my experience, it offers the best combination of price, reliable ratings, and information—and most rates do not require prepayment.
The Fine Print…
The once-reliable ploy of calling directly to the hotel and asking for a lower price isn't so reliable anymore. That's because many properties no longer even maintain an on-property reservation office but instead route you back to the chain's central booking service. Still, it couldn't hurt to call direct, especially if you're trying to reserve a luxury hotel or large, big-city property.
ABOUT JOE BRANCATELLI Joe Brancatelli is a publication consultant, which means that he helps media companies start, fix and reposition newspapers, magazines and Web sites. He's also the former executive editor of Frequent Flyer and has been a consultant to or columnist for more business-travel and leisure-travel publishing operations than he can remember. He started his career as a business journalist and created JoeSentMe in the dark days after 9/11 while he was stranded in a hotel room in San Francisco. He lives on the Hudson River in the tourist town of Cold Spring.
THE FINE PRINT This column is Copyright © 2009 Condé Nast Inc. All rights reserved. Reprinted with permission. JoeSentMe.com is Copyright © 2009 by Joe Brancatelli. All rights reserved.