Fees Skirt Room Rate Rises

<B>Fees Skirt Room Rate Rises</B>

By Bruce Serlen

Upper-upscale hoteliers quietly are using fee-based amenities to increase their revenue without having to raise room rates further, according to a PricewaterhouseCoopers report released last month.

Room rates in this sector are expected to rise 4.7 percent in 2000, a steeper increase than in the industry overall. This follows a 5.5 percent increase in 1999 and an expected increase of 4.4 percent in 2001. Again, these increases are above industry averages.

For the hotels, charging fees for amenities is a way of upgrading its service levels without engendering resistance to already high room rates. "Special spa services, such as in-room massages and expensive hand-drawn baths, are inventive ways for hotels to charge guests more for a room without raising rates," said Bjorn Hanson, head of PricewaterhouseCoopers' hospitality practice, who authored the study.

At the Ritz-Carlton Atlanta Downtown, for example, the fees for butler-drawn, in-room baths range in price from $25 for the Invigorating Bath to $350 for the bath that the hotel calls, "Bubble, Bubbly and Baccarat," which includes fresh strawberries and whipped cream, Taittinger champagne and keepsake crystal flutes.

For travel managers, the study findings are further argument for negotiating with hotels at any price point, though especially at this upper tier, on the basis of total spend versus room spend alone. The more travelers spend on high-end amenities, the greater the company's total outlay at the hotel will be--and the stronger the buyer's bargaining position will be in room rate negotiations.

Hanson noted that the large percentage increases in room rates were on top of higher dollar amounts these hotels charge to begin with. Yet, Pricewaterhouse-Coopers said increasing revenue isn't the only reason that hotels are promoting high-end amenities. For one, the amenities enhance the experience guests perceive they're having during this period of significant rate increases. In addition, they give properties new ammunition to compete for top-paying guests in an environment that remains highly competitive. They also allow the properties to try to keep pace with a rise in travelers' expectations across the board.

"These properties are attempting to add more value and make the guest stay seem extra special," according to Hanson.

Upper-upscale properties currently represent 18 percent of the U.S. hotel supply and 26 percent of the supply in the market of new properties under construction. "With these new rooms coming into the market, an environment of intense competition for travelers exists," he said. In fact, it extends beyond the upper-upscale segment to all areas of the industry, where supply growth has been rapid for the past three years.

From the hotels' point of view, price resistance for a certain level of traveler isn't an issue. "The bath program here has been surprisingly popular," said Jeff Brower, executive assistant manager of the rooms division of another Ritz-Carlton, the newly opened property in Philadelphia, which has a butler-drawn bath menu of its own. "The baths are restful and soothing. Stressed-out frequent business travelers have responded particularly well."

Hanson confirmed this. "Hotels are finding acceptance of both the fee-based and the free amenities," he said. "Travelers today are accustomed to a certain level of affluence and comfort and expect this to be reflected in their hotel experiences."

Not all the amenities cited in the study are spa-based. Among the non-spa touches mentioned were: in-room fireplace, selection of bottled water, humidifier, driver on call, variety of pillow types, towel warmer and shoeshine machine.