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The Impact of Caribbean DealsNovember 24, 2008 By: Joe Pike Travel Agent
Is it smart to cut rates during an economic crisis?
To deal or not to deal? As the U.S. economy continues to struggle, and concern that people will not travel during the holiday season continues to hover over the industry, we pose the questions: Is it smart to cut rates or is it a panic move? Will cutting rates at hotels decrease chances of repeat business when prices return to normal? Are add-on values the smarter way to go? Or are clients smart enough to realize the real worth of the discounted values they are getting during the Christmas holiday, which have lately been perhaps the best deals offered since the aftermath of 9/11?
Caribbean beaches are available for less this winter
We spoke to some industry experts, some of whom are directly offering the deals, to see what the general consensus is. And we found the popular opinion is one we share: While discounted rates are never a bad deal—especially if resorts are looking to hedge their losses during the holiday season—add-on values are the safest bet.
Since our last issue, we told you to expect some unusual deals and incentives during the Christmas season to combat the struggling U.S. economy. But there were some we didn’t see coming—and we didn’t think we’d learn of new ones on a daily basis.
Let’s start with one of the best deals we’ve seen in years: Elite Island Resorts is offering guests $2,000 per room at The Verandah Resort and Spa in Antigua to offset the cost of airfare for the Christmas holiday through New Year’s Eve.
Steven H. Heydt, president of Elite Islands Resorts, told Travel Agent, “It may never happen again, and we hope that it never happens again,” referring to the lengths that companies like his are being forced to go during these trying economic times. “You [had] the election, you got everybody worrying about their 401(k) accounts, so we’re basically saying, ‘Okay, you want to stop worrying? You want a great family vacation? Well, here you go,’” Heydt says.
As a bonus, children stay and eat for free. All-inclusive rates start at $318 per night, per adult, based on double occupancy. A minimum seven-night stay is required. The normal Christmas price before Elite made this offer was $635 a night, plus $60 per child per night— so the room total was about $5,285 for seven nights. Guests were also paying more than $2,000 in airfare. If this special did not exist, guests would have paid $7,285, plus any airfare differential over $2,000. Now, the total amount with the kids-free accommodations and the airfare credit comes to about $2,840 for seven nights.
But is this a sign of desperation that may decrease the chances of repeat business? Will this turn people off when they have to pay full price again?
“A lot of major resorts are offering 50 percent off, so these deals are all over the place,” Heydt told us. “Is there fear that they won’t pay the full price next year? No, there isn’t because there will always be a market for travel. We know people will return gradually. For now, we would settle for having a full house and breaking even.”
Travel Impressions and Sandals Resorts offered a special that included some of the best agent incentives we’ve seen all year. Although the booking deadline has since passed, it still bears mentioning that these two major players have also pulled out all the stops to try and boost travel. Travel Impressions launched its “Suite Obsessions, Suite Incentives” promotion to reward agents who book clients a minimum of three nights in a suite room category (or higher) at any Sandals, Beaches, Grand Pineapple Beach Resorts or Royal Plantation. Through this promotion, which expired on November 20 (we will keep you posted if they decide to extend it), agents earned their standard commissions, plus up to $350 in booking incentives, plus an extra $25 for each “butler” room category booked.
“There is certainly a risk in the fire-sale approach,” says Kevin Froeming, president of Unique Vacations Inc., the worldwide representative of Sandals and Beaches Resorts. “At Sandals Resorts, we believe there are better ways to promote and communicate value. First and foremost, it’s about delivering a superior standard of service and quality for each dollar spent at our resorts. The memory of the vacation experience of a lifetime will ultimately outlast any recollection of what they paid for it. Additionally, while Sandals Resorts has introduced time-sensitive deals and incentives in the marketplace, including our unbelievable current offer of up to 55 percent off promotion for travel in 2009, these deals are designed to reward those who book in advance, with prices going up as the booking end date nears, rather than encouraging last-minute bookings.”
Last-minute bookings, however, are exactly what Maurice Bonham-Carter, CEO and president of tour operator Island Destinations, is seeing.
“It is the uncertainty that is affecting travel. People are worried that perhaps they might not have a job by the time they travel,” he says.
And this is why Bonham-Carter is urging hotels to be a bit more lenient with cancellation and deposit policies. Bonham-Carter also thinks added value as opposed to discounted rooms is the way to go. Devaluing the property may lead to less business in the future. And Travel Agent agrees. After all, do you think your clients will want to stay at a hotel that is $1,000 a night, but was less than half that a few months earlier? New clients may or may not be turned off to the hotel, but repeat customers could be scarce. The customer who stayed for $300 a night probably won’t come back for $1,000 a night, Bonham-Carter argues. Added value, however, such as flight credit, maintains the worth of the hotel while creating an incentive that will alleviate some pressure during these tough economic times.