Thanks to everyone for reading! We have received some phenomenal feedback about last week's entry, and we have a really interesting question for this week, so read on, and keep submitting your questions to us at hgimayfaire@gmail.com!
Today's question comes from John in Pender County:
"My family and I like to travel around the area to different areas for sightseeing, vacation, and just generally to experience other things. When we travel, we like to choose the same hotel chains generally, but we are cost conscious, and especially lately we have found that hotel rates even for the same chain are very different. Last month, we were going to Myrtle Beach and we called 3 different hotels of the exact same hotel chain in Myrtle Beach and they all had different rates and one was $30 higher than the other two. I might expect that here vs. New York, but we travel mostly in the area. Why do rates fluctuate so wildly in the same chain and the same town, even?"
Thanks, John--what a great question! The simple answer is that rates for hotel rooms can vary widely based on supply and demand much like any product, but there are quite a few contributing factors that can cause either the supply or demand to fluctuate even in a relatively small geographical area, much less across cities in the southeast. I won't be able to review all of those factors here, but in order to foster a better understanding of how that works, I will detail the major factors for you. I'll focus the discussion on two (hypothetical) hotels of the same brand in fairly close proximity so that we can weed out other variables.
1. Seasons and events
Seasons are a particularly important issue for hotel supply and demand. You mentioned Myrtle Beach, which is a perfect example. A quick check of one particular hotel brand indicates that rates in August are nearly $100 higher than for the same room in February. I used February and August as an example, and you might expect that rates in summer and winter differ greatly in a beach town, but it does illustrate a point. You will find that rates in March, April, September, and October will be in between those marks, as even subtle differences in demand based on the season makea difference. In theory, the opposite will hold true in the mountains, as the scenic fall and skiing in winter will create large variances in rate that may nearly equal the amounts seen in beach towns.
Special events are also a major cause of fluctuation in rates. For example, I recently traveled to Columbia, SC on the weekend of a University of South Carolina football game. Hotels that would normally have had rates in the low $60 or $70 range were charging upwards of $120 because of the enormous surge in demand that is created by thousands of fans travelling into town for the football game.
The point to remember about seasons and events that may explain the more subtle differences even within a single town that you mentioned is that distance from the attraction or event can play a major part in determining hotel rates. During the summer, a hotel in Myrtle Beach that is one block from the ocean can have a drastically different rate than a hotel of the same brand 2 miles from the ocean simply because the vast majority of potential customers would prefer to be closer to the beach and therefore demand is stronger at the first hotel. The same applies to special events, depending on the size of the event. The closer a hotel is to the center of the event (i.e., the football stadium in our earlier example), the stronger the demand and the higher the rates.
2. Location, location, location
Even without special events or strong seasons, location is a major reason for rates differing even within small geographical areas. Differences in location are often subtle factors behind rate and can affect rate in various ways, but in general, even if two hotels carry the same brand name, one in Raleigh and one in Cary will generally have very different rates based solely on location, despite only a few miles difference. Even in more remote areas without attractions, a hotel 5 miles off of the interstate will usually have a lower rate than just off an exit on the same stretch of highway, as the location of the closer hotel creates more demand.
3. Groups
Simply put, if a hotel contracts with a medium- to large-sized group, demand remains the same but supply (the number of rooms available at the hotel) goes down, which creates higher rates. So two hotels of the same brand, one which has a large group of wedding guests and the other without a similar group, will likely be very differently priced.
4. Neighboring hotels/perceived value
This section goes back to location to an extent, but now we're talking about the finer points of location. Two hotels of the same brand in Myrtle Beach, to use that example again, can be priced completely differently based on what hotels they compete with. One is surrounded by and competes with mostly upscale properties, while the other is surrounded by and competes with mostly lower-end motel-type properties. With all other factors thrown out, most of the time the hotel competing with upscale properties will advertise a higher rate than the other--because of perceived value. As long as they have lower rates than most of the surrounding hotels, they can charge more than what would "normally" be an average rate for that brand and still have value in the eyes of potential customers coming to that area. The other hotel may have to charge lower rates than "normal" in order to avoid being priced much higher than its competitors and losing its perceived value.
Of course, there are quite a few other driving forces behind what rates hotels ask. The airlines have developed sophisticated mathematical formulas that help them determine demand for particular routes, the pace at which seats on a flight are booking, and how much to charge for individual seats given those factors. Hotel companies use similar tools, although most of the ultimate decisions on rate for hotels are made by the hotel managers themselves. But the rate variances you have been seeing, John, are likely to be due to one the four factors mentioned above. The important thing to remember when "shopping" for a hotel is that even for the most cost-conscious among us, value is the most important thing to look for. When looking for a new home, we factor in commuting time, quality of schools, quality of nearby amenities, safety of the neighborhood, and dozens of other things; most people focus not on price alone but instead look at precisely what the value of the home is and what amenities and services are important to them. The same should apply when looking for a hotel--look for the best value, taking into account what you and your family hope to get out of your stay, and the rate differences will (most of the time) make more sense.
Thanks for the question! Happy and safe travels to you and your family! And Happy Holidays!
We'll be back Tuesday with answers to more of your questions (including a particularly intriguing one submitted by a reader wondering about Priceline), so keep them coming to hgimayfaire@gmail.com!
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