This article is a direct example of what the hotel industry should be doing to increase their marginal profits. In the recent economy, nobody wants to be spending money on things like luxury hotels and expensive restaurants. In order for the hotels to attract customers that are willing to pay, they need to offer extreme discounts, cheap packages, and deals with local restaurants and credit-card companies, as the Ritz is now apparently doing. An example of one of the discounts that the Ritz is offering is the point system- “the new points program is one of a number of actions taken at Ritz hotels to try to attract more business and leisure travelers. For example, earlier in the summer, many resorts offered a special that provided free meals for children.” As the article states, room occupancy has risen almost back to pre-recession times, but “room rates are still sharply lower than they were two years ago. The average cost of a room at the chain in the second quarter was $297, down 19% from $353 in 2008.” Unfortunately, in the changing economy, it is virtually impossible for luxury hotels to draw in the same number of paying customers, and lowering room rates is still a necessary evil to stay afloat as a company, but the deals are helping to raise revenue and other luxury hotels should pay attention to the Ritz and follow suit.
Although the discount programs and other promotions that the Ritz is offering could potentially cost them more than they are earning, if implemented correctly, the profits could be more successful than any other luxury hotel is doing today. For example, “under the new points program, a 20-night stay at a $300-a-night Ritz room would earn one or two nights at most other Ritz hotels, or 10 nights at many Fairfield Inns or other lower-end Marriot brands.” This line truly struck me- the deals that this high-end hotel is offering could cost less than an extended stay at a generally “cheap” inn.
http://online.wsj.com/article/SB10001424052748704190704575490113861298350.html?mod=WSJ_Hospitality_leftHeadlines
I also find it very interesting that high-end hotels are now offering deals and promotions that seem to be better than those of some lower-end hotels and motels. It seems as though the Ritz is somehow trying to pioneer the hotel business back into it's pre-recession state, and by offering customers deals and discounts, it may very well be on the track to doing so.
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