Among City hotels: Proper positioning to solve price war

CEBU, Philippines - Proper positioning is the only way to resolve the ongoing price war among hotel operators in Cebu.

Radisson Blu Hotel Cebu director for sales and marketing Ann Olalo said that “if there really is a price war going on among the hotels,” triggered by the oversupply of hotel rooms in Metro Cebu, then each hotel must observe proper positioning to solve the problem.

“Radisson Blu for instance, our price positioning is different from the others. We don’t under-cut our rate," said Olalo reacting to the impression that Cebu hotel players are now starting to feel the price war phenomenon amid the surging hotel room inventories.

Shoe however said that during the lean season, just like any business, hotels likewise would want to reap good profit, thus the introduction of attractive promotions.

Olalo said she still perceives competition among hotels in Cebu as healthy in general, however, at times, rates of hotels across categories and ranking could meet on level due to promotions.

On the other hand, in big city events, the hotel business will automatically apply the "supply and demand" system, wherein rates could go up depending on the size of demand in the market.

"I think everyone would like to yield revenues in big events such as the upcoming hosting of the Asia-Pacific Economic Cooperation and other bigger conventions," she added.

Earlier, Hotel, Resorts and Restaurant Association of Cebu reiterated its call to industry players to stop the ongoing "price war" particularly among city hotels,

"We don’t need to kill each other [in terms of rate], we have the demand," said HRRAC president Cenelyn Manguilimotan calling on hotel operators in the city to maintain a healthy environment amid the tough competition.

Manguilimotan, who is also the general manager of Parklane International Hotel Cebu, said that due to the fast growing number of rooms in Cebu, which now counts close to 5,000 excluding room inventories in Mactan Island, hotel players are forced to lower their rates during lean months to attract guests.

Although, outsmarting each other in terms of promotions is part of the business, Manguilimotan appealed to the bigger chains "not to step on smaller players' toes."

As an organization, Manguilimotan said HRRAC cannot do something about the price war, but if players will be sensitive enough to keep a healthy industry, reasonable pricing and market dictated prices shall be implemented based on their size and category.

About 70 percent to 80 percent of hotels and resorts in Cebu are locally owned and operated, meaning they don’t have the support of bigger chain operation.

"Hotel is a very expensive business. Operational cost is very high," said Manguilimotan adding that for a hotel to stay on a break-even business it has to reach a 55 percent average occupancy rate.

With more hotels being built up and opened,  Manguilimotan said there is a much needed call for Cebu to bring in more tourists, "room lost a day, is a revenue lost."

At present, the average standard room rate in Cebu ranges from P2,500 to P2,800 per night. She said some big hotels on the other hand occasionally offer much lower rates via promotion, and if done frequently this could kill the smaller players, she stressed.

While the oversupply of rooms has resulted to price wars, which is unhealthy for the industry, Manguilimotan is also calling on the government both local and national agencies to forge a stronger relationship with the private sector in promoting Cebu as leisure and business destination. (FREEMAN)