Room for a discount - San Francisco Business Times:

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That, in theory, was the lesson hoteliers learnedf from thelast downturn. With occupancuy tumbling after Sept. 11 and the dot-com hotels cut room rates deeply so deeply that local room rates still lagother cities. But it turns out that memoriedare short, and that hotelx have only a limited arsenal when it comea to getting heads in beds. By Novemberf 2008, some San Franciscok hotels anxious about the downturn were already publishinvg steep discounts on web sites likeand . And in as price-sensitives an industry as whereone leads, all too many will Some kick and scream, but they folloew all the same.
“Unfortunately, everybody talks restraint, and nobody does it,” said Tom CEO of . “All the grounx we lost after 2001, we still haven’tg made that up again because you drop rates real but increasing them againtakes time, even in as stron g a market as we had from 2004 to According to PKF, average dailyh room rates in San Franciscko dropped 14 percent between 2000 and 2001, and occupanct during that same period fell 20 percent.
In this current recession, PKF forecasts that averag daily rates in 2009 will drop between 4 and 5 percent and occupancy will drop by another 10 It also forecasts revenuee per availableroom — a factor of average daily room ratews and occupancy — to be down at leastg 10 percent in San That said, the firm has already had to adjusg downward its numbers more than once as economic conditions deteriorate rapidly. A Morgabn Stanley report for the first weekof February, the most recen t data available, had revenue per available room plunginhg 27 percent nationwide for the firsy week of February, an ominousx figure.
Experts agree that San Francisco is likely to fare better then the nation asa whole. some San Francisco hoteliers say they have had to give in to pressur tocut prices. “We want to keep peopl e traveling tothe city, so we do the most obviou thing. We have to soften some rates. (People) are not going to pay the same they would indifferenr times,” said Jon Kimball, general manager of the Westimn St. Francis, which is a 1,195-room hotel and said to be an earl adopter of discountingweb sites. “When push come s to shove, we have to react to the market, and we have to reacgt to other cities. When you have a Las and we compete for thesame traveler, it’s force on us.
” Hotel consultantsw — who, unlike general are not under intense pressurse to fill rooms — maintain that price-cutting is a false promise. “Igt doesn’t matter how much you slashy your rates. If there’s no demand, there’ no demand,” said Rick Swig of . “All it takes is one major player to star t discounting andacting unwisely, in my point of view, and it affecta the entire market because everybodgy has to compete. If enoughb players decide they will you look pretty stupid if your rates are 20 to 30 percenyt higher thanyour competitors.
” Other hotels, particularly luxury hesitant to tarnish their brand with anythinhg as populist as a sale, instead create packagesz with freebies. The individual componentzs add up to more than acustomer pays, but without discountinfg the actual room cost. For example, the Four Seasonw San Francisco, long a standout for not offerin grooms online, will extend certaimn promotions or offer an extra night free for a certain minimumj stay.
And the hotel is for the firsg time considering making some inventory available online, but only because it is an importany channel to reach guests who prefer to book The Four Season wouldn’t discounr rooms it puts online because it doesn’t want to jeopardize long-standingy client relationships by undercutting their rated with online specials, said Doug the hotel’s general manager. “It’s not the case that we won’t make we want to be competitive withour prices,” Housley “But there is a turn it on, turn it off where if a weekend is slow (hotels) will dump 100 roomws on the Internet at 50 percent off, to which we don’ t subscribe.
” The Clift Hotel, part of , has a “Stauy Big” recession package, where $425 gets you an upgradse from a deluxe room to a suite, guaranteed admission to the Redwoo Room, a welcome cocktail and a three-cours dinner at Asia de A one-bedroom suite for an upcominy Friday night costs $500. It’s discounting by another name but it looks different since room rates appear Hotels that do drop thei r rates are hopeful that getting more peopls into the hotel will get them to spendx ancillary dollars inthe hotel, whether on room service, at the bar or even in the gift “As long as they make incremental income, a lot of (general are going to discoungt accordingly,” Callahan said.
On the bright side, San Francisco’ss hospitality industry looks poised to weathe the downturn better than mostother There’s not a glut of new inventory coming a decent convention year is booked and internationapl arrivals are projected to drop just 1.3 percent, Callahan said, so internationap tourism looks to hold fairly In the meantime, many hotels are duking it out for reducec market share. “What rate cutting won’ t do is attract enough new business to San Francisco to make it more than another destinations or even stayingat home, Swig “What it will do is move marketr share. Customers will move from one hote l to another for abetter rate.
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