Lodging Industry Seeks To Offer Value In Current Market

OCEAN CITY – Those upset with summer time room rates in Ocean City might point blame to the economy, or even perhaps their own personal economies, but some say that they should really be pointing to a basic lesson learned in Economics 101.

Hoteliers contest that higher prices in Ocean City, especially on the weekends, is a simple case of supply vs. demand. However, some in the industry concede that the reasoning in determining what the rate raises will be for the consumer goes beyond that.

“I don’t agree with the rationale, but I think the rationale is that it’s not the particular hotel’s fault that the consumer waited until Friday night to book a room for the weekend,” said Park Place Hotel Manager Todd Berger. “Unfortunately, some people think that it isn’t price gouging if people pay whatever the price is set at, regardless of how high it is.”

Reports of $400-plus-a-night rooms off the island in non-waterfront West Ocean City hotels were rampant this week, most notably the Route 50 Comfort Inn Suites, which according to Internet posts and a verbal confirmation from management this week sold rooms for $429 last weekend. In some hotels on the island, an oceanfront room at the Holiday Inn Hotel and Suites or the Hilton Suites, for instance, was going anywhere from $350 to more than $500, before taxes.

Manager Stephanie McHenry of the Comfort Inn Suites would not go on record with any further statement other than, “our rates are where they were last year, we are doing very well, and we’ve had no one contest our rates to date.”

In comparison, those same rooms, according to Internet posts, are offered at the Comfort Inn between $249-$289 this weekend.

Granted, those prices were the exception rather than the norm, as many hoteliers in the area have been praised in the early part of the summer season for being “extremely creative” in their rates and have mirrored the town’s advertised mantra of “Ocean City is a value destination” with reasonable aplomb.

However, the reports of spiked rates raises a few questions of business tactics in local hotels, as well as the risk that those hotels might be taking when competition for customers is at an “all-time high”, according to Jon Tremellen, general manager of the Princess Royale.

Ocean City Hotel-Motel-Restaurant Association Executive Director Susan Jones said that many hotels have reduces their rates to what was being charged in 2006. Unfortunately, she said she heard reports of isolated price spiking over the Fourth of July weekend.

“I know it was only a few offenders, but some of the rates I heard were outrageous, but the vast majority of hotels in town have done a fabulous job at offering discounted rates and promotions,” Jones said.

It is common knowledge that hotel rooms are more expensive in Ocean City during the summer months, and rightfully so, as the town’s 10 miles of beach and bayfront real estate is a huge draw for millions of visitors each year.

However, there has been a dull roar of concern for many years, from locals and visitors, that the cost to stay a night in Ocean City is far higher than in competitive resorts.

Many in the hotel industry use what is called a yield management rate, which incrementally, or in some cases, substantially, raises the rates of the rooms once occupancy rate gets to a certain percentage, or nears “no vacancy.”

“[Yielding] was pioneered by hotels in Las Vegas and Atlantic City about 20 years ago, and in our case, once occupancy hits about 60 percent, the yield rate goes up for a room a very small percentage or a few dollars”, said Berger, “but I have heard about some hotels that were charging rates after their yield that were very hard to justify.”

Tremellen said that the rates for some hotels in town, such as the Carousel and the Grand, have “never been lower” but pointed out that the length of time that visitors are staying is much shorter, as well as the last-minute booking trends that have been prevalent this year as reasons why there might be price spikes on busy weekends.

“Personally, I haven’t heard of anyone price gouging, but it’s happened before in this town when the demand for rooms far outweighed the supply,” said Tremellen. “But, this was the first year in 19 years that we couldn’t get a three-night minimum, and on July 4, it took us until Thursday night to book Friday night, and into Saturday to book Saturday night.”

Tremellen also noted that any hotels that raise their rates to obscene levels on the weekends run the risk of shooting their businesses in the proverbial foot.

“It would be suicide because you’d get killed with complaints, and you would lose all repeat business,” said Tremellen, “especially this year as there is more supply and less demand. Everyone is trying to get their line in the water, but there are more lines in the water trying to catch less fish.”

Even though Demoflush numbers reported record weekends in June despite what was considered dismal weather at best, the general consensus throughout the business community was that June was very tough on local businesses, and the softness of June could also have prompted some to spike rates or price points during July 4th weekend.

Tremellen said that the perception amongst consumers is that if they book last minute, they will get a deal, and he said that the days appear to be gone for the “early bird getting the worm.”

“The room tax revenue numbers for June will really start to tell the story,” said Tremellen, “and more so than ever, consumers want to know what else they are getting for their room rate. Unfortunately, everyone wants to be flat for this year, compared to last year, but no one is thus far.”

Still, hoteliers are collectively staying positive for the season, and should be given at least a nod of approval for the added value they are offering, especially considering the fact that many year-round hotels rely on a few months of the year to turn an annual profit.

“The season has been tweaked and squeaked so much that it’s really on 10-12 weeks to make a profit for hotels anymore,” said Jones. “People tend to forget that their bills keep coming all year long too, and they don’t get a rate reduction on bills.”

Berger noted that it is backwards logic for consumers to think that the rate of the rooms will go down the longer they wait to book their stay.

“It would be like offering concert tickets for fifty bucks and then selling them for next to nothing on the day of the show”, said Berger, “It would be a riot.  So, I don’t know where the perception came from that people think they are entitled to a deal at the last minute because if yielding is practiced, and it is, that rationale doesn’t work.”

Tremellen said that in this economy however, value wins and so does the lowest rates as far as drawing customers, either last minute or pre-booked ones. From a business standpoint, selling the product for less money, on the pretty strong assumption that you will be hosting less people also creates a bottom line creeping toward the red.

“There are so many price tiers in hotels in Ocean City that if you screw someone over, you won’t make it,” said Tremellen, “but we are staying positive, and there is a lot of value for the consumer in Ocean City right now, and you don’t even have to look that hard for it. If simple economics of supply and demand is true right now, then the customer will always win.”

A short drive along Baltimore Avenue this week proved there are a number of values to be had in the resort area these days. For example, on Sunday night, the oceanfront Phillips Beach Plaza Hotel’s marquee read: “July 5 to 19th, Sun-Thurs, 50% off … Fri & Sat 25% off …”

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