The second shaping event is on the customer side of the
ledger. The buyer, especially the business traveller, is
beginning to consolidate power and demand better pricing
policies from the hospitality provider. The corporate travel
manager is also reducing the number of middlemen in the
distribution channel. Hospitality firms functioning at the
high end of the market, and seeking to attract this type
of customer, are experiencing considerable pressure on
pricing from these more powerful buyers. While increased
buyer power is recognised as part of any mature
marketplace, the price flexibility enjoyed by manufacturers
who are able to reduce costs to meet the problem by
engaging in long production runs is not an option readily
available to the hospitality industry. For example, the hotel
manager who has to sell rooms that cost from $125,000
to $400,000 and higher to build, cannot afford to price them
at $100 a night or less if he is to survive for very long.
This important change in the industry structure is likely
to put significant pressure on the industry both in the near
and in the long term.