Why You Should Care About Rate Integrity

As hospitality professionals, we spend a lot of time talking about the importance of such things as “value for price paid,” “rational pricing,” and “rate integrity.”  These are all terms that have become mainstays in our hospitality lives.   However, because these are so common in our work, there is an inherent risk that we may inadvertently lose sight of what these phrases truly mean or worse, there is risk that we may lose sight of how to execute strategies that reflect these important principles.

What are we talking about?  “Rational pricing” and “rate integrity” are phrases which have very specific definitions.  Pricing that is rational is pricing that makes sense; sense to the merchant (us) and sense to the customer (the guest).  For example, when a customer goes into a convenience store to buy a gallon of milk and the price today is $4.50, a price of $7.50 next Tuesday would not be considered “rational.”  The customer understands market dynamics enough to know that there can always be fluctuations of a sort that cause prices to shift, but there is typically a range that is considered acceptable by most.

Similarly, “rate integrity” points to a fundamental responsibility of the merchant (us), which is to be honest, transparent, and understandable in how we establish our prices.  We are in business to be profitable but we have an obligation to our customers to present our pricing in a fashion that is logical and comprehensible.  If we fail to meet this obligation, we must understand that the customer can choose to take their business elsewhere.

Think about the hospitality universe as it exists today.  Technology has afforded everyone (hoteliers and customers alike) incredible new opportunities to share data, update availability and pricing on a moment-to-moment basis, and make doing business far easier than ever before.  However, when this same technology can cause us to present products and prices that are confusing to the customer, problems can arise.  Today, it is a common practice for hotels to make themselves available through numerous on-line distribution channels which have the ability to feature prices in “real time.”  As a concept, this is not a bad thing.  However, when this same price that was available one hour ago at, say $275 is available one hour later at $119, the integrity of that original price, and therefore of ourselves as the vendor,  cannot avoid being called into question.

The reality of competition in today’s hospitality world is that competition is fierce, supply continues to grow, and owners and managers of hotels are extremely concerned about their eroding top and bottom lines.  We must remain competitive (and relevant) in order to survive, but we must do so without sacrificing the basic principles of our business.  Integrity in pricing, rationality in our strategy, and transparency to the customer are crucial not only to “weathering the current storm,” but to our long-term success as well.