The Untapped Potential of Day Rates
If you read blogs written by and for hoteliers, I’m sure you’ve noticed that much of the conversation is centered on physical spaces — tearing down outdated concepts and building new ones that help hotels perform better with guests. Lobbies, common areas and guest rooms are constantly being reinvented to give people (particularly millennials) more of what they want.
This is great stuff, and we need it. But the innovative impulse needn’t be limited to the physical services and amenities in the hotel. It can extend into the booking experience, into promotional offers and loyalty programs. It can even extend into check-in and check-out times.
Many hotels shy away from day rates — either because the cost-benefit metrics don’t seem to make sense, or because of long-standing negative associations with this type of booking. Hoteliers are wary of the housekeeping costs and scheduling requirements, and they are understandably concerned with projecting the right image.
But are these concerns outdated? Can the untapped potential in the day rate market be ignored?
As you might expect, entrepreneurs and investors have already mulled these questions over, and a leader has emerged to reinvent the concept of the day rate. It’s a French-based startup called DayUse.com, and the sleek booking platform is reminiscent of AirBnb and other OTAs. The service allows hotels and resorts of all sizes to offer flexible, dynamic day rate pricing — in fact, over 4,000 hotels across more than 20 countries have already done so. DayUse has contracts with Marriott, Accor, Hilton, and many other properties big and small. The end user can quickly and easily search day rates in one easy place, and the prices are often a third of the full nightly rate.
So why has this model met with early success? Why are day rates gaining relevance?
Well of course there is a contingency of couples who wish to use this option (especially in romantic cities like Paris, where the company was founded), but DayUse reports that the majority of its business (around 70%) comes from business travelers and people with awkward layovers. A traveler with a 10 hour layover, for example, might very much prefer to check into a hotel for 8 hours and be totally refreshed for the outgoing flight, rather than grinding it out in the airport terminal. The business traveler in town for a day, with meetings in the morning and evening, might prefer somewhere quiet and calm to work, rather than hanging around all day in public spaces and coffee shops (or paying the price for a full night and not being able to check in until 2 pm). Entertainment companies are also known to use day rate bookings for filming interviews.
The biggest day rate markets are currently New York, Paris and London. If you think about it, this makes a certain degree of sense. There are simply more people with more reasons (business, romance, even show business) to book day rates in locations like this. But there are many other cities around the globe that could and should be more proactive in exploiting the potential of day rates.
At the time of this writing, a day rate search for Melbourne produced only three options, while a search for Sydney turned out fourteen. But the search parameters could change significantly when different dates were used. That’s the whole point. The system allows participating hotels to offer day rates in a dynamic way, ultimately giving them more flexibility in terms of how they manage and sell inventory.
It remains to be seen whether DayUse will hold water and become the “go to” for day rate bookings worldwide. Australia seems to have only a few early adopters, while many notable cities around the globe — Quebec, to give one random example — had no participating hotels as of this writing.
But the fact that big players are attracted to the platform is promising. Hotels are often depicted as being victimized by the share economy revolution, but a resurgence in day rates is the just kind of thing that proves otherwise. It may not be a smart move for every property, but it shows that the hospitality landscape is still changing, and that hotels can innovate their way to a stronger position. All it takes is a willingness to look at things from a new angle.
For further industry insight, please follow the links below.
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December 27, 2017