Hotels and fuel subsidies

While airlines are adding fuel surcharges to compensate for rising aviation fuel costs, the Wall Street Journal reports that some hotels are heading in the opposite direction and offering fuel rebates to customers to help alleviate the sting at the gas pump.

The Journal writes that “from big-name hotels to tiny bed-and-breakfasts, the lodging industry has started rolling out incentives that help guests offset some of the costs of hitting the road. Some are offering prepaid gasoline cards (ranging from $10 to $50); others are extending cash bonuses or reduced room rates to guests who drive a hybrid vehicle, or take a train or bus to their destination”. The article notes correctly “subsidizing the price of gas to lure in cost-conscious guests is nothing new for the lodging industry”. Back in 2006 Best Western International was one of the first to embark on a marketing effort that sought to induce consumer travel in the face of gasoline price hikes. That it did not make an appearance in the following year and has taken this long to come up again is reflective of the consumers’ relative comfort level with the steep rise in prices.

It has taken the threat – if not the reality – of a recession to stoke fears of a contraction in travel to roll out this marketing effort. Ultimately, the effectiveness of these campaigns will be limited at best as the discretionary aspect of consumer travel and hotel stays will see a rebound only when customer confidence in the economy returns at the end of the trough in the economic cycle.

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Vijay Dandapani

Co-founder and president of a New York based hotel company for 24 years. Grew the firm to five hotels in Manhattan and also developed a greenfield project at MacArthur airport, New York. Speaker at numerous prestigious forums including Economy Hotels World Asia, Lodging Conference, NYU, Columbia University Real Estate Roundtable, Baruch College's Zicklin School and ALIS. President and ceo of New York City Hotel Association since January 2017.

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