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Value for Money

Andrew Morgan - Wednesday, November 22, 2017

Written by Andrew Morgan, Queensland Tourism & Hospitality Brokers

Many times, over the years motel industry articles have focused on discussing issues that directly affect the owners and operators such as occupancy rates, sales revenue, and profit margins.  The one thing that has a major effect on each of these is the rates that can be charged for the product (and service) being supplied.

What are the factors that will determine the room rate that can be charged?  The bottom line answer is supply and demand for the product.  One operator alone cannot control supply and demand, but collectively the industry can manipulate it.  On an individual basis it comes down to how much of the demand can be achieved (market share).  Some can gain more and consequently as a result some will lose more, unless there is an increase in the level of demand.  In any town or city tonight there is a fixed number of overnight accommodation units available, no matter who is supplying it.  There is also a maximum level of demand, which can only be determined when the sun rises tomorrow.

To attempt to gain more of the demand and increase the occupancy rate, a motel can introduce various initiatives such as, discount their room rates, market the property to those expected to demand accommodation, increase direct advertising, work in conjunction with other accommodation providers, offer other incentives, etc, etc and the list goes on.  Underselling one’s product to get a quick sale is probably the easiest way to increase a quick, but short term market share.  However, the consequences will ripple throughout the business directly affecting the sales revenue and profit margin.

Current motel room rates throughout the state at present are at bargain prices for those consumers looking for a great deal.  Just as a shopper buys a new suit at half price and walks out of the store with a grin from ear to ear with the belief they “got a bargain”, those travellers requiring accommodation should really be doing the same thing at the moment.  After having stayed at various types of motels around Queensland recently there is great value available.  The high standard of motel and hotel units available at low overnight rates is something that really should be taken advantage of by anyone thinking of travelling.

Having stayed at many motels right around the state in recent months the value for money that customers are receiving is fantastic for them.  I have said to numerous people in recent times that the value for money staying at that rate was exceptional.  As a business, discounts are the last thing a motel operator wants to see, however room rates go up and down just like any other product or service and one has to try to make the best of the situation at that particular time.  Councils, Tourism Bureau’s, Chambers of Commerce, and other such entities in each region should be utilising this situation to the benefit of each region in trying to encourage more people to travel for work or leisure reasons, knowing that they will get a great deal and value for money on their accommodation stay.  Hopefully prompting them to take that business trip they were considering or that holiday or weekend away they were hoping to take.  Also, perhaps staying an additional night since they are getting such a good rate on their accommodation.  It needs to be sold to them though.  You can’t sell a secret and if the masses aren’t aware of the value for money available in accommodation then they are none the wiser.

Those additional nights of accommodation being achieved will mean increased occupancy rates and additional revenue for any motel or hotel that is able to take advantage.  The operator may still feel that the room rate is low however the compensating factor of increased occupancy is some consolation.  This will then lead to room rates being able to start to increase as a result of the stronger demand.  As the cycle starts to turn around (as it always does) and occupancy rates start increasing this obviously then leads to room rates increasing.  The “sandwich boards” start to disappear one by one and the room rates continue to grow overtime with demand.