Travel & Hospitality Tech Outlook | Wednesday, April 19, 2023
Hotel pricing strategies come with numerous benefits, such as an increase in the number of customers, an increase in revenue, and maintaining a competitive edge over the competitors.
FREMONT, CA: The pricing of hotels is one of the most crucial aspects of hotel management. Providing a luxurious experience while keeping the hotel affordable is very crucial.
The price hotel owners fix is based on numerous factors.
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It is crucial for accommodations to understand the importance of pricing if they are to sustain and grow.
Hotel room prices are influenced by a large number of factors, and these are as follows:
Cost of operation: A company's operating costs include fixed monthly overhead expenses such as salaries, electric and water bills, maintenance expenses, raw materials, selling and distribution overheads, and advertising expenses. Before setting prices, it is important to analyze all costs.
Market structure and demand: Room prices are heavily influenced by market demand. Prices need to be adjusted according to demand. There are days when demand is extremely low and other days when it is extremely high. Price changes may, however, affect different guest segments differently.
Governmental laws and regulations: Governments set pricing rules in many nations. As a result, hotels are not able to raise their prices unreasonably.
The seasons: There is a fluctuation in the number of travelers to a destination during peak and weak seasons. To maximize revenue, hoteliers must account for these factors and adjust their prices accordingly.
Circumstances beyond our control: There is no way to forecast the exact perimeter or effects of natural calamities like earthquakes, tsunamis, landslides, cloud bursts, etc., before they occur. A change in demand can also be triggered by government announcements such as demonetization, a new tax regime, curfews, arrests of VIPs, etc.
The best pricing strategies for hotels to increase revenue are described below:
Pricing based on occupancy: In occupancy-based pricing, hotel room rates are set based on demand and supply.
For example, during peak season, if the 7 to 8 rooms are still unoccupied, hotel owners can increase the room rates for more profit. Likewise, when it's off-season, and the hoteliers want to fill their rooms, they can charge less to encourage people to book.
Pricing based on forecasts: For setting the prices of future dates, forecasting is an important factor to consider. In order to make an accurate forecast, one needs to know the booking history of previous months based on the season, events, demands, and promotions.
In this way, hoteliers can adjust the room rates based on the upcoming demand or expected occupancy.
As an example, if the hotel owners earned more revenue in December last year, they can set their pricing strategically for December this year to earn more profits.
Pricing based on the market competition: To compete in the market, hoteliers must take care of what their competitors are doing or offering. Therefore, they should constantly monitor their competitors' room rates and understand their pricing strategies. Hoteliers then should compare that with their room rates to see how the market is trending.
A properly monitored system will help hotel owners determine what guests are willing to pay for a hotel room. Using all this data, they can develop their hotel pricing strategies to gain an advantage over their competitors.
Pricing based on loyal customers: If used correctly, this is an effective hotel pricing strategy.
To attract repeat guests and earn revenue from them, hoteliers must apply a proper pricing strategy. Using discount codes via promotional emails/SMS to encourage repeat guests to book directly with them in the future. In addition, they can advertise their hotel loyalty programs to attract repeat guests and direct bookings.
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