Unethical Practices in Hotel Revenue Management

The term revenue management may have been introduced in the 20th century, but the concept is very old. In the olden days, unethical practices were more popular than ethical practices. Creating artificial demand, stockpiling, holding rates via consortium are older practices which are followed till today.

While generally among the masses, such unethical practices are thought to prevail only in the agri-industry, it does exist in many industries including the travel and tourism industry.

Unethical practices in the hotel industry are not followed daily but are rather occasional.

Let’s see the unethical practices followed in the hotel industry.

Piling Up Inventory: This practice is followed in zones with less inventory than the forecasted demand.  Here, a hotel shuts off its inventory wholly or partially so maximum reservations are processed with competition. This makes the competition go sold out or sell only higher category of rooms and this is when the hotel opens up its inventory at a higher price on its base category rooms. Remember that this practice can only be done when one is sure that the zone or city will get sold out hence being sure that the hotel will get sold out. If this goes as planned the hotel will achieve a higher RevPAR than its competition.

Closing a room category to sell it Offline: Some hotels on certain forecasted sold out dates stop selling their base category rooms so that corporates with contracted rates can’t process reservations online (or on GDS). Here the rooms are exclusively sold to customers (screened) who are willing to buy rooms at a higher rate than the usual corporate rates. Remember, that guests with corporate rates are denied availability and are only offered higher categories.

Sending fake queries/reservations to competition: No explanation is required here. All revenue managers have experienced this and have never known who the culprit was. Such practice makes the competition make wrong inventory decisions making them lose a few reservations (when no advance payment is taken or reservation has fake credit card number).

Not maintaining Parity in rates: Some hotels openly follow this practice while it’s a general norm to maintain parity. Reputed OTA’s do not contract with such hotels. Hence, if a hotel needs more channels of business it has to follow rate parity. Hotels offering a generic discount on their brand website is not considered a disparity while offering Special Published rates to Non-Travel Agent bookings may be considered a disparity.

Young Revenue Managers may not have witnessed all the above-mentioned practices, but experienced Revenue Managers may have applied it. Most of these practices are applied only by Revenue Managers with a lot of experience, and a lot of guts to take big risks.

Please note that the above practices were neither followed by me nor by the organization that I worked with. However, I know the industry due to my experience and that is how I am sharing this with you.

If you like this article of mine. Please like it, share it and comment with your views (negative or positive).

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