Tiered pricing thoughts

A few weeks ago, I started talking about a tiered pricing model for Strip hotels on the Vegas Gang. I took some time to

On one side, pro-fee advocates argue that they offer convenience. On the other, resort fee opponents maintain that fees are poorly advertised and shock the customer. There may be a way to please both groups of visitors, those who want convenience and those who want low prices. A tiered pricing model, in which customers get to pick one of several levels of service for the same room, might help generate additional revenues and give guests a greater feeling of control over their experiences, which may translate into greater customer satisfaction and stronger bottom lines.

For example, imagine a three-tiered pricing structure for a guest room, with “standard,” “gold,” and “platinum” levels.A guest booking a room at the “standard” rate would receive a room key and not much more. He or she would have to pay extra for virtually every other hotel service; for example, to visit the health club, use the Internet, or make phone calls.

At the “gold” rate, customers would receive everything that came with the standard, plus free wireless Internet, phone calls, bottled water, copies of the local paper, etc.

For guests looking for more, a “platinum” rate could deliver all the benefits of the gold rate, plus several extras — dining credits, a selection of prix fixe menus at select hotel restaurants, tickets to the hotels big show, complimentary spa services, and nightclub admissions.

Guests opting to “go platinum” will value cost-certainty and convenience over spontaneous choice.

Some resorts are already offering something close to platinum-tier pricing. Wynn Las Vegas, for one, offers several packages, including a golf getaway, jetsetter package, romantic retreat, and the Ultimate Wynn Package, that offer guests varying levels of amenities.

We’ve seen the trend towards cost certainty become popular over the past year in Strip restaurants. From all-day, single-price buffet offers to prix fixe gourmet dining, visitors have responded positively to the chance to pay one price for an expected level of service. It stands to reason that an operator to apply this model more broadly to the total guest experience could become a trend-setter.
Companies owning several properties along the Strip are particularly well-poised to offer a variety of dining and entertainment options that will generate true economies of scale and diversity.

Whether it’s called tiered pricing, a vacation package, or something else, this may be an idea that needs to be explored more aggressively as resorts seek to defend their market share in what promises to be a challenging year.

via Las Vegas Business Press :: David G. Schwartz : Tiered room pricing: A modest proposal.

I came in about 250 words over for the article which was shortened for publication, and I included some of the cut material in the quote above where I lay out the proposal.

The industry’s moving in a few different directions right now, and this is one of them. I’m sure that there are a million back-of-the-house reasons not to do this, but coming at this from the consumer’s perspective, it deserves consideration.

Author: Dave

Director of the Center for Gaming Research at the University of Nevada, Las Vegas and author of several books, including Roll the Bones: The History of Gaming. Also Gaming and Hospitality editor for Vegas Seven magazine.

12 thoughts on “Tiered pricing thoughts”

  1. I liked the idea when I first heard it on Vegas Gang.

    I have 41,000 subscribers to my newsletter and 89% of them are tourists (non-locals). In a future issue, I’ll float this (obviously along with credit to you for the idea) and see what kind of input we get.

  2. I’m not familiar with this new (resort fee?) thing I’ve been hearing about lately. But I DO understand low-mid-high pricing systems…and I know if given a choice people (the kind I know) will usually simply opt for platinum and feel good about it.

    If these option designations of standard, gold & platinum sound good and sort of remind me of Starbucks’ system of calling a small drink a ‘large’ and the next size a ‘super-large’ and then the largest large…becomes a ‘ultimate-grande’ (or something like that…I’ve never ordered there).

    These ‘option names’ seem good…and much better than using other option names like The Earl Special, The John-Doe Deluxe and lastly The Geoffrey Super-Dooper-Give-Me-The-Best-Of-Everything choice.

    However they name it…the ‘option system’ seems good. Desk clerks could easily ‘move a customer up’ from the ‘Standard Choice’ to the ‘Gold Choice’….especially if his girlfriend is standing near him at the registration desk.

    As for me. When I saw those ‘all-day-buffet’ Specials…a few months back…I sincerely wanted to book a room just to take a Buffet Vacation.

    So yes. Always give people a bunch of options. Once you do…few people will chose the ‘basic’ one. Not even with cable TV.

    Basic, Regular, & Premium.

    Not too many people choose ‘Basic’.

  3. I choose basic, and I HATE an upsell. Basic affordable room rate (with no resort fee) including the most important amenity of all – a goldarn coffee maker in every room! If you want to throw some extras at me gratis, fine, but don’t expect me to cave to some stupid perceived notion of Vegas luxury fantasy and shell out more money at the reservation desk. It is NOT going to happen, and I’m going to get very cranky.

    Use of the swimming pool, and exercise room should obviously be included. Free wifi, and local calls – yes.

    There already is a tiered system in Las Vegas — it is called comping — and for Joe Schmoe — do you want a standard room or a suite? That’s it — folks.

    People (like me) hate extra fees, and stupid package deals that seem like a rip-off.

    I like freebies, I like comps, I like being treating like a valued customer — I don’t like being treated like a rube who just fell off a turnip truck, and is here in Vegas to be taken advantage of.

    If Casino/resorts are serious about surviving the recession they need start treating the little players like high rollers again. Hey, if it is slow why not upgrade someone to a suite? I guarantee that customer will remember it (and tell everyone they know about the incredible room and service they received.) They will probably take cell phone pics of the swank digs and send them to their friends (I have). They will probably even suggest their friends join them, and before you know it you have a hotel and casino swarming with happy campers.

  4. Well, (for the time-being at least) I switch my vote and chose the Joe Bob Vegas Deal. Hotels should treat the little-guy like he’s a whale anytime they can. If they have un-used amenities that are just ‘going to waste’ they should give them away to the little guy whenever they can.

    It reminds me of seeing fine chocolate eclairs being thrown into the dumpster cuz no one bought them that day. I prefer that the ‘use it or use it’ system start being applied in the hotel industry. Give the customer all you can…and long as you aren’t actually losing money by doing so.

    Of course…I have sort of a slight communistic bent in my thinking. I used to give free cab rides…so what could I possibly know about how to earn a profit. But, I feel Las Vegas needs to lean over backward for our guests…come heck or high water.

    I’m all in favor of putting hospitality ahead of the bottom line. That she be every Vegas hotel’s first focus.
    =====
    I’m likely to change my mind by the next commenter’s post. Especially when AGG sheds some good logic on this subject.

    But for now…I’m with Joe Bob. Give me free Wi-Fi if it’s not going to hurt you any.

    IMO

  5. Today – Apple just introduced their I-Pad multi-media tablet computer. It comes with 3 ‘tiered pricing’.

    ——–
    There. That’s the shortest comment I’ve ever written here. I knew I could do it eventually.

  6. Some interesting concepts and entertaining expressions here. Employees are often familiar with the term “cafeteria plan” from their employer health benefit selection process. Its nice to be able to have the ability to allocate your dollars to items that one thinks are relevant to their particular needs and desires.

    Resort fees are currently very much hated but I think the most hated feature is the lack of prior disclosure which makes people think of terms such as fine-print as well as Bait and Switch. These are not good thoughts for a casino to be instilling in its customers in an industry predicated on trust.

    Some people do not use the internet at all during a vacation, others want a quick email session once or twice a day and others want to be massive users. Often the Free WiFi in the Lobby Areas will take care of most peoples needs but some don’t mind paying the fee for all day internet access. As with anything in a hotel, its a selling point for someone and a useless annoyance to someone else.

    Hotel packages are often notable by their variety, their cutesy names and their generalized lack of being any sort of real bargain. Tiered pricing is simply Hotel Packages with names such as Silver or Gold rather than names such as Golfers or SpaLovers.

    I want gambling, buffets, microbrews, steaks and wine. My companion values room size, room decorations, TVs, free shampoos, availability of spa services and shows. No one wants to pay for what they know they will not be using. Yet its often just easier to pay one price and not be troubled.

  7. I stayed at Boulder Station in March of 2007 for two nights during the week (Tuesday and Wednesday) and the room rate was $49.99 a night which I thought was a pretty good deal. Then after I checked out I looked at the bill and saw that the resort fee was $6.99 per day for the phone, TV, etc. As Fools Gold mentions above I was pissed off because I have never heard of a resort fee until I looked at the bill and it just seemed like an extra way for Station Casinos to charge me more for the standard room.

  8. >Starbucks’ system of calling a small drink a ‘large’ …
    Yeah, I hated that too. Its not just the amount of coffee but the fundamental
    gross deception that is so irritating. If the sizes are small, medium and large,
    its so much simpler than cutesy and annoying euphemisms. If there is going to be tiered pricing, the tiers better be few and well-delineated.

    I wonder if gourmet restaurants going to Fixed Price is simply a way of turning over their tables real fast. After all, who is going to debate with themselves or their companions about what to order? If its all the same price, choose what you like and just Eat It And Beat It.

    Most of the complaints about the Resort Fees do not involve the amount of money at all, only the lack of prior and prominent disclosure. With a vallet parker averaging 7.00 a car, a 6.99 resort fee is peanuts. Most people in Vegas tip more than that a dozen times a day. The sore spot revolves prior disclosure of it.

  9. @Joe Bob: “If Casino/resorts are serious about surviving the recession they need start treating the little players like high rollers again. Hey, if it is slow why not upgrade someone to a suite?”

    This is something I’ve advocated for a long time. The suite’s already been built, and the debt service is the same whether it’s used or not. The labor costs to clean a room and suite are probably so close as to be negligible. If I was running the hotel, I’d never want those suites empty except for maintenance.

    Plus, an unexpected upgrade gives the customer the feeling that they’re getting something for nothing, which is going to encourage them to spend more. Maybe you devalue your suites, but if the customer believes the upgrade is a fluke, the perceived value is intact.

    In fact, I’ve suggested some just picking a set number of standard room check-ins at random and upgrading them. It’s a kind of gamble that customers can’t lose at–no matter what, they get what they paid for, but they also have a shot at something more than they paid for.

    To my knowledge, no one’s taken me up on this–possibly for very good reasons, though maybe not.

  10. Dave,

    When I have been upgraded unexpectantly, it was usually when I checked in late. Back in the glory days of yore, I believe they kept the suites open for possible arrivals of high rollers, and then when they filled the regular rooms with average folk, and a reservation showed up a little late, they had no choice but to offer a suite, as that was all they had.

    But, you know these days it is a whole nother ball of wax.

    Actually, today I got a offer from the Luxor for a Valentines Special that includes – Romance Kit (chocolate truffles, flavored condoms, scented massage oils and pair of erotic dice)
    – 6 Chocolate Covered Strawberries, and
    – 25% off Fantasy or Carrot Top tickets!

    I’ll never stay at the Luxor again . . . just the thought of all that rolling around on the bed sheets turns my stomach.

  11. Pricing to an efficiency of mediocrity?

    Its clear that an amenity such as a gym has costs associated with it and bundling that cost into a resort fee is an option as is simply including it in the quoted room rate.

    Some casinos now offer the ability to order your drinks directly from the slot machine. This is considered efficient, since cocktail waitresses only deliver rather than also solicit drinks. However, it also denies the player any options such as extra olives or a particular brand of alcohol. Supposedly the overall efficiency is worth the limitations that are imposed.

    Perhaps tiered room rates offers the same efficiencies? As long as there are only a few easily selected tiers I can see efficiencies being achieved. Let the hotels offer zillions of cutesy named tiers and it will simply be annoying and time consuming.

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