Hotels Look to Floating Rate Contracts

What could be more dynamic than the price of hotel rooms? Well, a lot of hotel room prices are set in negotiations with corporate travel managers. These rates tend to be fixed. So the buyer could pay more than rack rate at certain times. At other times, the hotel may be practically giving away a room. So hotels are trying to move their contracts to floating rates, which would apply a discount to the market rate.

This is a fairly substantial change in philosophy, and naturally many buyers will be leery. The floating rates seem to make more sense at a high level, though, and I think the transition will occur at some point. With strong demand forecast for next year, and expectations of rising rates already built in, this may be a good time to offer customers the new plans.

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