For Some People, Setting Prices is Straightforward, While for others, Itโs More Challenging. But letโs Put Aside Whether itโs Easy or Complicated and Focus on the Core Question: Is the Price Iโm Setting for my Hotel Rooms Logical?
Consider these scenarios to explore this question:
- You have a 50-room hotel with one room type. A group books 25 rooms, bringing your occupancy to 50%. Should you increase or hold retail pricing on OTAs and your brandโs website? What factors influence this decision?
- If your Corporate Individual โ Negotiated Segment bookings are strong, should you increase or hold retail pricing? Why?
- If you have only 5 rooms left to sell for today, should you raise prices or keep them steady?
While it might seem intuitive to raise prices as occupancy increases, is occupancy the only factor to consider when setting prices?
Ultimately, the customer decides whether to book your room at the given price. You can set whatever price you like, but itโs the buyerโs decision to accept or reject it. To ensure youโre competitive and growing revenue and profitability, you need to find the right price point.
How Do You Determine The Right Price?
The answer lies in understanding the Behaviour of your property. Just as people can be polite or rude, hardworking or lazy, hotels have characteristics that inform pricing decisions. To understand your hotelโs Behaviour, consider these key aspects:
๐ขLead Times: Do bookings happen well in advance or closer to the arrival date? For example, weddings are typically booked well ahead of time, while business Travellers might book closer to their stay.
๐ขDay of the Week Patterns: Leisure Travellers might prefer weekends, while corporate clients usually book weekdays.
๐ขLength of Stay (LOS): Whatโs the typical length of stay for different market segments?
๐ขPrice Elasticity: How does demand change with price fluctuations on different days of the week and during different seasons?
๐ขDemand and Supply Balance: How does seasonality affect demand and supply across different market segments?
๐ขPast and Current Trends: Are there noticeable changes in booking patterns?
๐ขSocio-Economic Factors: What broader factors could impact customer Behaviour?
These insights help you forecast more accurately and make better pricing decisions.
Itโs important to remember that simply raising prices doesnโt guarantee increased revenue. You need to consider the market segment mix, channel mix, and strategies to extend length of stay to grow occupancy during quieter times. Accurate forecasting enables you to make well-informed decisions about pricing, yield management, and channel management.
Expanding your distribution through a channel manager with a wide reach can also help increase demand, boosting your propertyโs revenue.
RedSKY Hospitality provides services and expertise to help revenue managers optimize market segments and channel mix to maximize revenue and profitability. Using advanced technology, they can forecast and make informed pricing decisions.
Precium Technologies offers tools to aid accurate forecasting and competitor rate shopping to keep you up-to-date with market trends. Their AI-based pricing recommendation tool helps suggest the optimal price to maximize RevPAR and profitability.
By understanding your propertyโs Behaviour and using advanced tools, you can set prices that attract customers while maximizing revenue and profitability.
