Travel & Hospitality Tech Outlook | Wednesday, February 02, 2022
Pricing strategies aren't static, with many moving parts and changing trends. With patience, logic, and experimentation, you can achieve greater profits.
FREMONT, CA: Revenue management is an everyday occurrence. Almost every product and service is priced following revenue management, including the price of milk at the supermarket, the green and red numbers on gas station signs, and airfare at airports.
Fundamentally, revenue management is the application of consumer analytics to maximize revenues through the sale of—the correct product to the appropriate client at the optimal time for a reasonable price.
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In other words, revenue management is the analysis of supply, demand, and the market as a whole that maximizes profitability. However, the application of revenue management concepts to the hospitality industry can sometimes be sluggish.
Many innkeepers, campground managers, and hoteliers are hesitant to implement competitive methods due to personal biases, a lack of information, or the convenience of flat rate pricing. Or, they may be utilizing revenue management but making key errors or overlooking important factors. They need to pay more attention to potentially substantial earnings by failing to price these assets adequately for the market.
Here are some common revenue management errors I've observed innkeepers, hoteliers, and campground managers make.
Flat Rate Pricing: The greatest error a property can make in revenue management is to utilize none. This is referred to as flat rate pricing. It signifies that the manager lacks any pricing strategy beyond "what feels good." The only advantage of this technique is that the unit rates are always simple to recall.
Flat-rate pricing disregards the numerous variables that can affect the value of room nights, campsites, cabins, etc., such as the time of booking, days of high demand, and incentives for longer stays. This error is the most significant because it encompasses all others, and flat-rate pricing leaves money on the table.
Excessively Aggressive Pricing
Many perceive "revenue management" as a synonym for "rate increases," but this is not always the case. Increasing your prices requires a clearer plan, and it could lead your occupancy to plunge to the point where even a few high-paying guests cannot make the difference.
In many instances, it is advantageous to lower rates. Offering discounts for longer stays, reducing rates during slow seasons to boost occupancy, and providing loyalty programs to repeat visitors are all examples of delivering better value for the consumer. The revenue management process is bidirectional.
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