Hoteliers - it's time to 'Right Price' your offerings
I’ve long said that our hotels are overpriced, for many years. Granted, the cost of food and electricity, to name a few are higher than other countries in our region. But labour costs are relatively low – the Service Charge is one mechanism that still results in base pay rates of circa Rs. 10,000/- per month in some cases, which is precisely how much I was paid for an internship I did in 2008 at the Head Office of a major international bank prior to entering University. Over the past few months, I’ve met people working for some big brand hotels who have been compelled to leave their jobs because their basic salary was so paltry it couldn’t even cover their transport costs (since all allowances had been suspended). So, why are our hotels so expensive?
Let me give you a personal example. When we tied the knot in December 2016, my wife and I had two options for our honeymoon. Within Sri Lanka, or outside Sri Lanka? We looked at the prices of standard rooms on FB basis at the 4- and 5-star hotels from the big brands for a 3-night stay. We then compared prices of hotels overseas, as well as air tickets and visa costs. To cut a long story short, we enjoyed a 6-night honeymoon in Kuala Lumpur, staying in a 4-star suite in the heart of Bukit Bintang, and the total cost our honeymoon, including meals, snacks, drinks, air tickets, airport and other transportation, experiences and visa was slightly less than the cost of the 3-night local hotel stay plus an allocation for transport. I then realised why some of my well-heeled business acquaintances would choose to fly to Indonesia, Thailand, Malaysia or even Singapore for a long weekend rather than check into a hotel within our shores. Furthermore, I have had foreign friends remark with raised eyebrows as to how ‘pricey’ our hotels are, compared to the ones back home.
Covid-19 threw the industry on the floor and stamped all over it. No guests, no income. The curfew of end-March to mid-May brought many properties to their knees. Once things opened up, everyone (including myself) was raring to travel. But, how had the offerings changed? Well, it was a mixed bag where smaller players came out with price-competitive offerings that had a lot of value additions such as nature walks, foot massages, etc… while bigger players still seemed to want to ‘milk the cow a bit more’ and were less price-friendly as a result.
Since June, my wife and I have done two trips out of Colombo, both to places that did not advertise a star rating per se. The first was to Galle where we stayed at a quaint hotel within the Fort. Their offering was competitive – double room on BB basis for 10,000/- nett with complimentary foot massage. Upon arrival, we received a free upgrade to a suite. That evening, it rained heavily preventing us from venturing out for dinner as planned; so they offered us their dinner buffet for Rs. 1,000/- which was frankly, a bargain for a decent spread that included a divinely-prepared prawn curry. We requested a newspaper for the next morning and it was at our door by 7am.
An even more engaging experience was in Habarana, at a small hotel situated in a different corner across the lake from the branded ones. This too, was competitive – Rs. 20,000/- on Full Board basis for 2-nights in a double room, with a boat ride on the Habarana lake, a guided nature tour and a Minneriya safari thrown in. The staff waited on us hand and foot, and accommodated our every request. Even though both hotels did not carry a star rating, I would say that their product and service could easily be rated at near four stars.
Each time I booked a hotel, I checked out many offerings before deciding. Every time, I saw that the smaller players were providing a compelling value proposition, detailing all the benefits they were providing for the rate charged while the bigger, established players were simply saying “From Rs. X,XXX/- per person, on full board basis”. Sometimes, you’d see an ‘extra’ tossed in such as ‘free herbal drinks’ or “25% discount on extras”, but little else. Hence my hope that come 2021, our Hoteliers will resort to what I’d like to term ‘Right Pricing’, which is offering a compelling value proposition at a matching price.
For example, if I am paying Rs. 25,000/- per room per night, I must know that I am not getting something worth Rs. 10,000/-. Gone are the days where boasting of ‘air-conditioned rooms with bathtubs and televisions’ was a defining factor and a licence to charge an exorbitant rate. In fact, both small hotels I stayed in had this facilities. So, when you set your pricing for 2021, take a minute and consider this: if your brand was not an established one, would a customer pay the price you are asking? If so, why would they do it? What are you offering them as a value proposition? Gather your staff together and brainstorm practical and actionable ideas on how to improve the guest experience with the existing resources and thus craft a compelling value proposition.
Finally, detail how you are ensuring that rooms and public areas are kept safe – this is an area that I still find lacking in some hotel advertising. Furthermore, tell your guests what precautions you are taking to keep your staff safe in the back-of-office areas, the ones that are typically out of guest sight and access. This is of particular importance if your offering is on the pricey side, since guests will want to be reassured that you are taking as many precautions as possible and sparing no expense when doing so.
Ashraaq Wahab – Technical Director, Hospitality Sri Lanka, Automotive Journalist, Marketer and Writer who enjoys penning his thoughts, insights and ideas on a variety of topics.
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