How to build a pricing strategy for hotels
Pricing strategy for hotels is crucial for hotel growth. Working on a fixed pricing policy will not make your hotel successful.
Hotels do not have an approved strategy to achieve their goal of earning high revenues.
A combination of different methods of pricing will take you a long way to be competitive in the hotel industry.
Right pricing strategy helps increase sales and makes the organization a success.
In fact, the key to success can be to make room rate adjustments based on demand, customer segmentation and other factors.
To decide the right pricing strategy can set you apart from your competitors and prevent new businesses from entering a competitive marketplace.
A wrong pricing strategy can also ruin your business.
You will set yourself apart from your rivals to decide the right pricing strategy and prevent new businesses from entering a competitive marketplace.
Wrong pricing tactics can destroy your business too.
To increase your market share it is important to have a pricing strategy that works consistently for your company.
Following steps, you should take to good pricing.
Rate Parity Strategy
Rate parity strategy, across all online distribution channels, maintains consistent rates for the same product.
It provides transparency for consumers, and advertising rooms via online travel agents are also required.
OTAs charge commission, however, and paying this when charging a low rate will cut revenue.
Forecasting Based Pricing Strategy
Use of forecasting is the most important to set prices based on anticipated demand.
It helps in deciding the hotel charges depending on demand.
For instance, times of high demand may lead to higher room rates, in order to maximise revenue.
A useful method for forecasting based on past data such as room occupancy, revenue, room rates and average spending per day.
It is also important to make use of data already in the records, such as reservations and market trends.
You can use that data to make pricing decisions.
For instance, if your hotel has experienced low demand in Rainy season in the past, you might consider lowering prices in Rainy Season to try to build demand, or you might raise prices to get more out of the smaller client base.
Dynamic pricing strategy based on occupancy
Dynamic pricing strategy based on occupancy in a hotel is a way to increase room revenue.
You can increase your room rates when demand exceeds supply, based on supply and demand policy.
For example – if 20 out of 25 rooms are occupied, you can charge more for the remaining 5 rooms.
Dynamic pricing strategy based on occupancy in a hotel is a way to increase the revenue from rooms.
When demand exceeds supply, you will increase your room rates, based on supply and demand policy.
For instance – if you occupy 20 out of 25 rooms, you can charge more for the remaining 5 rooms.
This approach will increase your ADR and RevPAR.
Additionally, at low demand seasons, when your occupancy is low, you can charge less for your room to attract bookings.
Length of Stay Based Pricing Strategy
A length of stay strategy is based on adjusting the price based on the length of the stay.
For certain situations, such as when demand is more important than the supply, imposing a rule where visitors are ‘obliged’ to stay for a certain number of days can be helpful.
In such cases, it may not always be necessary to take lower rates.
At the other hand, if demand is lower, visitors may be encouraged to stay longer by giving them a lower rate if they stay for several days, resulting in fewer total empty rooms.
Segment Based Pricing
For those in the hotel industry, one of the most widely used pricing techniques is the price per section.
In this scenario, you can change the price for different types of guest segments in the same room.
When customers see value in their products and facilities, they won’t be bothered by what you charge them for.
In this sense, having outstanding online credibility can be of tremendous help.
Although “open market” rates would be subject to a rate parity policy, corporate segment rates may be lower, especially if they commit to a number of rooms or a number of meals.
Another choice will be to sell several rooms at a lower rate to travel agents so that the travel agent could include the rooms in packages.
If you can execute this specific pricing strategy for hotel rooms effectively, it will help you realize more profits and attract your customers.
Packages based Pricing
Offering packages is one of the hotel industry’s most effective pricing techniques.
Instead of merely selling rooms, you could create specific packages at a reasonable rate including additional offerings/services.
It compels people to think they get more for less.
Packages could be as basic and straightforward as “Breakfast packages”.
It can include an extravagant breakfast buffet at a price that is much more economical than what it would cost the guest if they opted for it separately.
You can also offer something more customized like a ‘Honeymoon package’ that you can throw at an enticing price for couples in various activities and facilities.
There are a number of ways to design packages, and just as many factors affecting them.
Therefore, study your audience and understand what works best for your hotel.
Conclusion
Implementation of the right pricing strategies maximises revenue in the hotel industry.
This requires the use of forecasting to understand and anticipate demand, as well as a willingness to adjust room rates strategically.
You can also make use of cross-selling and up-selling techniques, and manage online customer feedback.
All the above mention steps will help your hotel business to be competitive and successful in the market.
Thus, your hotel business can run for a longer period of time.
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