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The Travel Professor
Join me on a journey across the broad spectrum of interesting travel topics. We’ll discuss destinations domestic and abroad, some familiar and some off the beaten path. We take a look at suppliers like cruise lines, air carriers and tour operators and find their bargains and special offerings. Got questions? Email thetravelprofessor@gmail.com.

Tuesday, July 7, 2009

Last minute discounts

While taking in the sights and sounds of Ashland’s last weekend’s Summer Motion I was asked: “You’ve mentioned booking discounted hotel rooms on hotwire.com. I’ve also seen their TV ads but don’t understand how they can offer such great deals. Can you explain it? Also why can’t I get these rates from the hotel, airline and other travel companies’ web sites?”

I explained that perishability, one characteristic of the travel product, is why we see these last minute bargain rates. Travel products have a shelf life and if they are not sold then the supplier will never be able to recover these costs.

The physical properties of a hotel room can last for years while as a product it only exists in inventory for one calendar night. If it’s sold tonight then it generates revenue yet if it remains unoccupied then its profit potential perishes.

There are certain daily costs to maintain a hotel room regardless if it is occupied or not. The costs will increase slightly as you add in housekeeping expenses when the room’s occupied but there’s still an average daily cost of the carrying the room.

If the room is unsold tonight then this unit costs the hotel, sell it at a discounted rate that covers your per room operating expenses and you’ve made something on that room for today. For example the hotel figures it costs $20.00 a night to carry a room night in inventory and when they sell it for anything greater than $20.00 then they have generate positive revenue instead of settling for a loss. Make sense?

Of course they’d like to sell it for the $200.00 nightly rate posted on-line but they’ll gladly accept the hotwire.com brokered rate of $99.00 a night. Everyone wins here. The hotel gains revenue albeit smaller than preferred, hotwire.com also earns a fee and we travelers have obtained a bargain.

This is the rationale that fuels the other last minute sales offered by travel product producers. They will offer last minute specials on their individual websites but by using sites like hotwire.com they are greatly expanding their channels of distribution and market penetration.

If you can wait you may be able to snag a bargain. But there are no guarantees that these last minute rates will be offered. I suggest to shopping your desired travel dates evaluate the rates then make your buying decision accordingly.