Where hotels are hiding their lowest rates now

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Hotels are dishing deals to lure guests. Consider that Expedia, the largest seller of hotel rooms online, is currently holding its biggest ever hotel sale. About 5,200 hotels are offering discounted rooms on Expedia right now, up from 2,000 hotels during the site's summer sale last year—and merely 800 during the summer before that.

But the absolute best hotel deals—with even deeper discounts than the amazing offers on Expedia—are still tough to find. That's because many hotel chains are discounting only selected rooms at selected hotels, and they're posting them online in only a few, "low profile" spots, like Hotwire, Twitter, and the "special offers" sections of their own websites.

During our ongoing Great Recession, large hotel chains like Hyatt and Motel 6 are not having huge, "We've Put All of Our Rooms on Sale for Half Price for the Next Month" promotions. (A recent Starwood sale that lasted a few days was a rare "half-off everything" exception.)

The reason for the lack of "big fat sales"? Hotel owners learned a hard lesson during the recession of 2002. In a desperate bid to put "heads in beds" in their vacant rooms, they slashed their rates. Those sales helped to get people traveling again. But they didn't profit hotel owners much. Once travelers got a taste of how cheap hotel rooms could be, they never again wanted to pay the older higher rates, even after the flush financial times returned. It took six years until hotel rates recovered to pre-9/11 levels, according to PriceWaterhouseCoopers.

This recession, hotel owners are determined not to make the same mistake again. (Probably never before has there been such a moment of self-examination at hotel corporations—at least one not performed by lawyers.)

One of their tricks is to use "opaque" pricing, according to industry analyst Jean Francois Mourier. More hotel chains than ever before are using Hotwire and Priceline to offer a small portion of their rooms at deeply discounted prices. That way, they can fill their hotels without lowering their publicly advertised rates. As you probably know, the blind-booking websites Hotwire and Priceline won't name the hotel (or airline or car-rental company) you're working with until your credit card has been charged.

Hotwire's "opaque" inventory is at an all-time high. In 2008, Hotwire added 20,000 hotels, and added another roughly 4,000 through the first few months of this year, many of which are 4.5- and 5-star hotels, says spokesman Chris Fucanan. This year, Hotwire plans to increase by another 20 percent in total partners.

Meanwhile, Priceline had a 53 percent jump in bookings last year. It says it has seen an increase in hotels approaching it (versus the other way around) to offer their properties through its opaque service. Says spokesman Brian Ek, "What's kind of interesting is that the calls aren't just coming from the higher-end 3-, 4- and 5-star properties. Even the 2-star end of the market is growing." And the percentage of discounts hasn't changed. Hotels are continuing to accept offers of around 50 percent below their retail rate.Budget Travel's advice from last winter is even more true today:

For Hotwire, you'll find the most eye-catching deals by clicking on the "Deals" tab on the site's homepage.

For Priceline, try a lowball bid, using BiddingForTravel.com as a guide. Throw caution to the wind and be aggressive in your bidding. If you see hotels going for $120 as an average rate in a three-star hotels in a particular city's downtown, then offer $60 as a bid on a comparable hotel type at Priceline. You will be surprised, maybe even shocked, by how often your lowball bids will be accepted by hotels.

A tip: You should even try these sites for the upcoming Memorial Day and Thanksgiving holidays. For instance, this past Fourth of July Holiday, hotel bookings through Hotwire were up 50 percent from the previous year. For Memorial Day, bookings were up 25 percent. In words, more and more people are successfully finding blind-booking deals for major holiday weekends.

Twitter is another place where hotels are offering deeply discounted rooms in small batches without lowering their "front door" price. Reporter Dennis Schaal uncovered the following deals when he recently searched the term "Cancun vacation" at twitter.com.

bestcancuntrip Cancun Family Vacation Package! Stay in 5-Star beachfront resort Club Internacional for $599, 5Days/4Nights http://ow.ly/ioYM

DunhillVacation travel tuesday continues with another great caribbean vacation. Secrets Resorts & Spas in Cancun. $200 resort credit http://ow.ly/iod9

bestfares Little Peso Vacation Deal Of The Day 4 Night, 4-star Hyatt Regency Cancun Weekend Getaway Airfare Included From $339 PP http://bit.ly/M1fnd

The use of Hotwire and Priceline and Twitter to offload extra deals is part of a larger strategy: Hotels are playing mind games with consumers. They know that value is created by supply and demand. In other words, the more likely you can't get a room (or believe that you can't get a room), the greater your desire to get in, the greater your willingness to pay top dollar—and to believe the price is really worth it. So hotels don't want to tell you that their entire hotel is on sale. They want to pretend that they're not hurting for cash. For proof, go to the website of the major hotels, and you'll typically find that only a handful of rooms at a handful of hotels are deeply discounted at any given time.

In short, hotel owners are playing mind games with consumers. Visit the website of, say, Hyatt, and you'll see a luxury-priced room listed next to a deeply discounted room. You may ask yourself, who is paying $300 a night for a room in this recession? The answer: Hardly anyone. But Hyatt hopes to fool you into paying more than you otherwise would by showing you that $300 room next to its cheaper offering.

In other words, hotel owners are taking a page out of the marketing playbooks of chain stores. Imagine if a store like Target put three types of products on its shelves: An expensive one, a middle-priced one, and a cheap one. Target isn't expecting to sell the expensive product. The store places the product there to make the products adjacent on the shelf seem cheap in comparison. Chains like Target stores know that if they increase the price of the expensive product, you'll be more likely to pay more for the middle-priced product because it will still look smart in comparison.

Hotels are doing the same thing with room rates on their websites. On their websites, you'll see a $300 room next to an $89 room. You may grab that $89 offer (which looks comparatively great), rather than shop elsewhere and find that the $89 room can be had for only $70 at another site.

Another thing to keep in mind: Many of the best deals are coming at the "last minute." People who are taking trips are making them shorter and are booking closer in (average has shifted from 4–5 weeks out to 2–3 weeks out). Hotel owners are responding. So now more than ever, it pays to make a reservation you can cancel for free at a hotel far in advance, and then follow up about two weeks before your arrival to see if you can find a better deal elsewhere. If a better deal pops up, cancel your earlier reservation.

Budget Travel's advice is that you shouldn't feel rushed to book a hotel deal right now. For the rest of this year, the best deals in travel will likely be at hotels. The logic is simple: Hotels are stuck with empty rooms. The owners still have to pay their lease and electric bills, whether or not any guests show up.

That cruel business logic isn't true for airlines, which can swap out their larger planes for cheaper, smaller ones. (The airlines ground the larger planes in the desert southwest, where the machines won't rust and can wait to fly another day.) Rental car companies also have a way of surviving during a recession. They can shrink the size of their fleets, jacking up rental car rates by essentially creating an artificial shortage of vehicles. Hotels are stuck with their vacancies, and they've seen their nightly revenues drop 18 percent on average in the past year.

What's worse, after every recent recession, there has been a permanent drop in the amount of money business travelers spend on hotels (and front-of-the-plane seats, for that matter). With teleconfercing technology improving with every year, the need for business travel shrinks. So you may find some of the deepest discounts at business hotels, even if you're a leisure traveler. Targeting your hotel search on the financial districts of major cities may turn up the lowest rates. They're the hotels that are hurting the worst (with corporate travel forecast to drop 15 percent this year, according to a report issued today by PhoCusWright. Yet business hotel (and extended stay) facilities are often well appointed and recently renovated.


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