Is my Hotel Room Pricing Logical ?
For Some People, Setting Prices is Straightforward, While for others, It’s More Challenging. But let’s Put Aside Whether it’s Easy or Complicated and Focus on the Core Question: Is the Price I’m Setting for my Hotel Rooms Logical?
Consider these Scenarios to Explore this Question:
1. 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 brand’s website? What factors influence this decision?
2. If your Corporate Individual — Negotiated Segment bookings are strong, should you increase or hold retail pricing? Why?
3. 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 it’s the buyer’s decision to accept or reject it. To ensure you’re 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 hotel’s Behaviour, consider these key aspects:
🟢Lead 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.
🟢Day of the Week Patterns: Leisure Travellers might prefer weekends, while corporate clients usually book weekdays.
🟢Length of Stay (LOS): What’s the typical length of stay for different market segments?
🟢Price Elasticity: How does demand change with price fluctuations on different days of the week and during different seasons?
🟢Demand and Supply Balance: How does seasonality affect demand and supply across different market segments?
🟢Past and Current Trends: Are there noticeable changes in booking patterns?
🟢Socio-Economic Factors: What broader factors could impact customer Behaviour?
These insights help you forecast more accurately and make better pricing decisions.
It’s important to remember that simply raising prices doesn’t 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 property’s 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.
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 property’s Behaviour and using advanced tools, you can set prices that attract customers while maximizing revenue and profitability.
