Customer Retention and Revenue Management: Can hotels adapt to the recession - Essay Example

This study builds on previous research done on hotel pricing, hospitality investing, hospitality economics, and tourism economics. Previous research in this field has dealt with many types of methods for hotel management, but very few have thought about dealing with the issue of performance during a recession. It has also found that hotels increasingly let the demand and market conditions decide how much they will charge, rather than basing their prices on how much was spent on the hotel, and then adding profit.

This method is known as cost-plus method. This has increased since the internet became accessible to everyone, and customers can look at and compare rates from several hotels immediately, and make a choice. This makes it very important for hotels to be aware of the market situation at all times, so that they can price themselves competitively. Hospitality industry analysts have recognised the problems associated with basing the price of services offered in a hotel based on the cost incurred by the hotel in providing them, as they ignore a customer’s needs.

Because of many available choices, customers know exactly how much they want to pay to stay in a hotel, and they don’t care what a hotel has paid to have those services prepared. A customer’s loyalty does not depend on price now, but on service received. Kotler suggests that a hotel room that remained unoccupied is considered a room not sold that particular night, even if it gets sold the very next day. He pointed out a simple fact that since services cannot be stored; the hotels need to maximize their revenue.