-Shoaib Ali- National Sales Head, STAAH India
If you are a hotel or home-stay owner, you’ve probably broken your head wondering how to price your rooms just right. In the hospitality world, you are not alone! This difficult question deserves all your time and a well-thought out strategy for it to be addressed correctly. Room pricing is, after all, a critical element of revenue management for hotels.
The ultimate goal of hotel room pricing is to maximize revenue by charging the highest possible rate that guests are willing to pay for a room, while still maintaining high occupancy levels. It is no easy task because the challenge lies in balancing out high occupancy levels while maximising revenue. Hotel managers and revenue managers use tools like data analysis and revenue management to determine the optimal price for each room.
Here are other key factors that could help you arrive at the right room rate and as a result, drive your business:
Competitors
Knowing what your competitors are up to and what their pricing strategies are in your area, will help you position yourself fairly. Keep a track of their offerings and room rates by using tools like RateSTalk, an easy-to-use competitor rate checker that will help you stay informed and relevant. You might have to adjust your rates according to fluctuating market trends, but that’s all part of being competitive.
Guest Segmentation
Not all hotel guests come from the same demographic or have the same demands. You can charge different people different prices for the same room, depending on their requirements. Guests can be segmented by volume (booking more rooms at once), attributes (those wanting a sea view room vs. a garden view), service offering, time of purchase and time used, among others. You can price the room based on guest type, adjusting the price downwards for those who get more value. For example, corporate clients could spend more on services within the hotel and get more volume of bookings throughout the year.
Forecasting
Forecasting is thelifeblood of revenue management. It allows hoteliers to anticipate future demand and make key strategic decisions to meet that demand. It is one of the most crucial strategies for hotels seeking to optimize their revenue management as it allows you to set your price on the basis of this expectation of demand. Not everyone, however, can forecast successfully. This skill requires a deep understanding of your hotel’s daily running — its occupancy data, revenue, room rate and average spend per room for the last couple of months and in the same period the previous year. Once you’ve thoroughly analysed all this data, you can then go ahead and confidently set your prices.
Flexible Cancellation Policy
Guests are increasingly choosing hotels that allow room for cancellation over those that do not. Uncertainty and last-minute plan changes can happen to every traveller. Hotels that offer a flexible cancellation policy ensure their guests have the option to book stress free, making it a beneficial arrangement for both your hotel and guests. Some guests might even be pay a higher price for the option to cancel at will. This rate is also known as a non-refundable rate.
Length of stay
By putting into play strategies like offering a cheaper rate for multiple nights and a higher rate for single-night stays, hotels can encourage guests to stay longer thereby maximising revenue. Though this approach acquires less revenue per individual room night, it provides more revenue overall while also increases opportunities for guest spending.
Occupancy
The occupancy approach, one of the most common pricing strategies, works on the simple chain of supply and demand. When demand exceeds supply, you increase your room rates and when demand is low during off season, you reduce your prices to increase occupancy and ensure revenue.
Incentive-based on Loyalty
Incentivizing loyal guests could be a great way to encourage repeat business. Reward these guests for the value they bring through better pricing, discounts, promotions and package deals. Typically, promo and discount codes are used to implement this strategy. This could also encourage guests to book with your direct.
Upselling, cross-selling and packages
Give your guests options to upgrade to a better room, suite or a sea view or add in services at the time of booking that help generate more revenue per booking. Upselling encourages guests to spend more. Cross-selling encourages guests to book additional services such as spa services, tours, and airport transfers. In addition to these strategies, bundled packages or value-added pricing with some complimentary services thrown in can also help you grow additional revenue from existing clients.
Hotel room pricing is a complex process that requires careful analysis and strategic planning. These key factors could help you price your rooms right because the right rate could change the name of the game for you.
