DAVENPORT — It’s been said that with unemployment stuck at 9 percent and interest rates remaining at record lows, inflation isn’t likely to be a major concern for the U.S. economy. Even Federal Reserve Chairman Ben Bernanke has said the threat of accelerating prices would probably be “transitory.”
But just as Central Florida’s theme parks raised prices last year – Disney did so last August – even as the economy still appeared to be on shaky ground, a critical segment of the local hospitality industry is now doing the same.
“For the first time, we’ve raised all our prices — tremendously, acutally,” said An Flamand, who operates U.S.A. Vacation Homes & Spa in Davenport. The company manages vacation homes in Northeast Polk and Four Corners.
“And we’re actually going after and getting more of a response from the affluent market,” Flamand said. “So we’re going after extra services as well.”
This has been a critical issue for the vacation home industry, which has grown tremendously in the past decade, particularly in Polk and Osceola counties. These are fully furnished homes marketed to vacationers who want a house with multiple bedrooms, a kitchen and a private pool, rather than a hotel room, during their stay in the region.
But the entire hospitality industry was hard hit by the start of the recession in 2008 and 2009, and the Central Florida Vacation Rental Managers Association – the trade group that represents this industry – has reported that room rates fell as property managers struggled to book visitors.
Even as the local tourism industry showed signs of increased strength last year, hotels and vacation homes were nervous about raising their rates. But that sense of unease may be ebbing, said Flamand, who also serves on the board of directors of the CFVRMA.
Now, she said, the industry believes people are ready to pay a little more for a quality vacation in Central Florida.
“It’s nice to go more with the affluent markets than with tour operators who want to go to rock bottom prices,” she said. “We’ve noticed for the first time that we’re getting our full prices and not having to discount.”
Michael Eckersley, a member of the CFVRMA who runs Sunsplash Vacation Homes in Davenport — also a vacation home management firm — said he raised his rates earlier this year.
“I don’t think that we’ve ever been anything but confident,” Eckersley said. “I’ve always said that the one thing that probably 80 percent of people will not give up is their vacation. They’ll give up everything else, but they won’t cancel their vacation. So yes, we have raised our rates.”
It’s paid off in an increased number of bookings, he added.
“We are in June, and June figures are up from last year by about 18 percent,” he said – even with the higher rates.
“I don’t think there’s anything but health in our industry,” he said. “It’s a case of giving value for your money. When you think if you book a hotel room — generally, at a nice hotel — I would think the rates are going to be about $135 a night for a room, although there are hotels that are only $69 to $89 a night. But when you’re getting the value of a whole house with a private swimming pool and a kitchen, two bathrooms, three bedrooms minimum, then I think the value has to be there for the rates we’re charging.”
Eckersley also believes lower rates have a bad psychological effect – in essence, telling people that the room isn’t worth a higher cost.
“It’s a funny thing,” he said. “If you offer someone a cheap price, they will automatically think there is something wrong with it.”
“I’ve actually put a whole strategy together,” she said. “I’ve read a book and been to a conference on this issue, and it totally makes sense to me. It’s all about price strategy. It’s all about if you discount your prices, you’re discounting your product and saying it’s not worth pricing the right way. The fact that I’m allowing people to book my home at really discounted rates says that house is only worth that price.”
Flamand said she decided to go with a very different message.
“I raised all my prices 20 percent,” she said. “I didn’t raise them 5 percent. And I got two direct bookings over the weekend. They booked it straight on my web site (http://www.usa-vacation-homes.com/).
“Before I raised my prices, I had people say ‘Oh, I didn’t know you could afford those prices,’ but we can,” she added. “We always follow everybody else in the industry, and if you look at what the cost is for the owner to maintain the home and pool and have everything taken care of, the fact that they (vacationers) don’t have to stay in one (hotel) room or share a pool when theyneed to book eight people in one house, that says a lot. I think our prices should have been raised a long, long time ago. It’s overdue.”
Room rates across Central Florida’s hospitality industry fell sharply in 2008 and 2009 as the impact of the collapse of the housing market, the banking crisis and the national recession took a painful toll on Central Florida’s tourism industry. Hotels and vacation homes alike were forced to slash rates to remain competitive.
But even as bookings went up last year, hotels have been nervous about charging more.
Lana Yoshii, a researcher with Smith Travel Research, has advised hotels to start charging more. Her firm has estimated that average daily rates in the Orlando hospitality industry are projected to rise by 3.3 percent in 2011, a solid improvement after several years of declines. Consumers, Yoshii said, are willing to pay a higher price.
She was the guest speaker in February at the Central Florida Hotel & Lodging Association’s annual Smith Travel Research luncheon, held at the Hyatt Regency Grand Cypress. Yoshii’s “Lodging Industry Performance Overview,” reviewed at the luncheon, noted that luxury hotels have already started raising rates, by 3 percent.
Flamand said there’s no reason why the vacation home industry shouldn’t do the same.
“I believe in this strategy and I’m going for it, so I raised all my prices,” she said, adding that the local tourism industry is helping as well by offering more options for visitors.
“There’s Star Wars Weekends at Disney going on right now, and it’s Gay Days at Disney, and we’ll have Legoland opening in October,” she said of the new Legoland Florida theme park that’s opening in Winter Haven this fall.
“It’s all going to bring in new tourism,” Flamand said. “That always helps us as well. Its funny how things work. If you think about it, somethimes we think we need to compare ourselves to hotrels and Disney, but if you look at Disney, they’ve never really gone down with their prices. They had specials, but never dropped prices. If you do the right marketing and toward the right people, it shouldn’t matter.”
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