To reach such heights in terms of profit or revenue generation one needs to have immense knowledge of the hospitality industry and its marketplace. (As knowledge alone creates all the difference.)

This is why every hotel owner puts a lot into serving its guests but only a few get an impressive revenue collection. 

Most of the time, this happens because of the fragile pricing strategies hoteliers set up without analyzing guests’ behavior and insights into the latest marketing techniques.

In one of our old blogs, we previously discussed various pricing strategies that hotels should be aware of. But in this article, I aim to expand upon that list and delve into some more unique pricing strategies to help you level up your revenue generation game.

So get ready and follow along if you want to attain excellence in the revenue department of your hotel.

Why Is It Important to Set Pricing Strategies?

The sole purpose of any pricing strategy is to optimize your revenue.

Let me be clear that setting prices on your rooms and services doesn’t count as a pricing strategy. It is how you mold and manipulate your prices according to the market scenario and your guests.

Let’s examine this with a scenario:  

All the hotels near your property are struggling through the shoulder season. To stay afloat and drive more bookings, they cut down their prices, whereas you kept them intact. Turns out, they came out well and you experienced a great loss.

Therefore, you cannot just put up the prices and let it be. It is a process that needs constant revision. You must have a great sense of the current market and ongoing trends in price modulation to do so.

 But I’ve got it all covered in the next section Let’s hop in, shall we?

Pricing Strategies to Optimize Your Hotel Revenue

Hotel revenue management is a tricky affair and there’s no single magic formula to optimize it. You require a blend of various strategies to ripe out the maximum benefits.

This is why I am mentioning some unique tactics for you to skyrocket your hotel revenue. 

1. Value-based pricing

The simplest pricing strategy is value-based. It is the cost that your service must get in return.

For example, a smoking room will have more price than a non-smoking room because it has an additional service that tops up its value. Same way, beach-facing rooms will have more value and thus more price.

So, what you are providing to your guests, how much that particular service costs you, or its value range across the market decides this type of pricing.

Value-based pricing is never negotiable. Because it drives you the minimum profit your rooms & services deserve.

2. Package pricing

Nowadays travelers lookout for good packages instead of arranging things separately. So it is important to build your packages and let your guests avail them at the right prices.

By including taxi/cab rides, complimentary meals, a local guide or tour, co-working spaces, a spa, laundry facilities, and much more in a package, you can make comparatively high revenue.

What you do is: keep a room booking, let's say at ₹8,457 for a week (high from its usual value), and a package with all the facilities at ₹9,849. Your guest will perceive that within a minor difference, they’re getting so many things.

Most of the time, they do not require all of these facilities but still tend to get overwhelmed by them and sign up willingly.

Even if they use them all, it is anyway beneficial for you. Because it helps in upselling your services.

3. Captive product pricing

Captive product pricing is to set a combined price for two or more services that are co-dependent.

For example, an ordinary room costs ₹5,000, and using the swimming pool has an additional charge of ₹800 which makes the total ₹5,800. However, if you choose a poolside room that costs ₹5,600 then there are no additional charges for using the pool.

This is how you can increase the sales of your poolside rooms. So every person who wishes to swim will ultimately buy your poolside room that costs high.

This pricing helps you increase the sales of your best rooms by adding a complementary thing to them.

4. Market-penetration pricing

When you introduce a new service or upgrade your hospitality, it is important to make it popular and known among your guests. This is the only way to make it win its place in the market.

To give this new service optimum exposure, you need a market-penetration pricing strategy according to which, you must keep it partially free at the start and increase the price with time.

If you have opened an in-house restaurant at your hotel, you can keep the first meal free for all your guests. This will market your restaurant effectively and its sales will increase fast.

5. Psychological pricing

A psychological pricing strategy is important for attracting your guests. It makes your price look good and affordable.

This price plays with your guests' psychology and convinces them that it is reasonable. The basic example is putting ₹999 for the swimming pool charges instead of ₹1000. This difference of one number somehow creates a lot of differences in the human brain.

Besides this, promoting offers and discounts is also a psychological game that excites your guests. They give in quickly if you showcase that a ₹9,899 package is available at only ₹7,599 if they book within a day. Note: This is how you make sales in your shoulder season.

Learn more about aligning your marketing strategies with your guest’s psychological responses below.

Psychological Principles for Better Hotel Marketing

6. Promotional Pricing

This is the average and the comparatively lowest price you use to promote your hotel. It helps attract your guests to your website. With this, they explore other things you offer and increase your chances of getting bookings.

So if the lowest room or package that is available at your hotel is ₹1,899 and the highest package is ₹10,899 then your promotional price must be the former one that is lowest.

It will amaze your guests that your packages are starting at such affordable prices and thus, they will visit your website. This will drive more traffic to your website and will increase your bookings and revenue altogether.

 Promotional pieces are mostly the one that highlights the least starting prices of your rooms.

Dynamic Pricing to Ace Your Strategic Game

All the strategies I discussed above are proven for optimizing your revenue.

But what is the real foundation for them?

Dynamic pricing!

The marketplace is ever-changing. What is selling out this week might not get any attention in the upcoming weeks. Therefore, you need to change every instant. (I am not exaggerating)

Recently when I was planning to book a homestay through an OTA platform, I was amazed at how quickly the price was fluctuating.

When I visited this XYZ property many times, its price went up within hours because they tracked that I am interested in it and will book eventually. After that, I started exploring other properties for a couple of days. Guess what! The rate of that XYZ property dropped again.

A dynamic pricing strategy analyzes every aspect of the marketplace and sets an ideal price for your services. It keeps fidgeting rooms’ prices across all your online profiles. This fluctuation in price ensures maximum profit at any given time.

But making all these calculations and analyzing the prices manually is NOT easy. You need a perfect revenue management system to do so. You can check out eZee Mint which streamlines the process of setting intelligent pricing strategies at the right time to optimize your revenue.

 

The post Secrets to Boost Your Hotel’s Revenue: Pricing Strategies You Need to Know appeared first on eZee Absolute.

What I am trying to say here is that there are a lot of underlying voids in a hotel’s operational aspect that goes unnoticed. And these are the ones that cause major damages.

One such void is a Broken Pricing Strategy.

No idea what is it?

Suppose you have implemented some sort of tactic in setting your room prices. But for one reason or the other, it isn’t driving any results.

You still believe that your strategies are fine and perfect. But your rooms are not getting sold, your revenue is going down, and whatnot.

And instead of fixing this, you’re focusing on other factors.

This is exactly what happens when hoteliers fail to notice pricing blunders.

So, before you come up with some “supreme” pricing strategy to win the war, first you need to find out why things aren’t working. Meaning, you must carry out an evaluation of your hotel pricing strategy.

And that’s exactly what I am going to help you with in this article.

Why Do Hotels Need a Pricing Strategy?

What’s important for a hotel to sustain and scale?

Good revenue!

And how can hotels ensure that their revenue is fine and dandy?

By selling more rooms at the right price!

However, not every hotel achieves this. Because either they don’t have the proper knowledge of setting room prices or they don’t simply care. Most of the time, it’s the former one.

If a hotel wants to make a better profit, all while ensuring guest satisfaction, they need to have a proper game plan in terms of pricing.

If I put it simply, a strong pricing strategy is a sure-shot indication towards an increase in ADR, RevPAR, overall revenue, and growth.

What if Your Strategies Aren’t Working Right?

Have you been making mistakes in your hotel pricing strategies? And you are now wondering what could be the worst-case scenario?

Let me tell you what worst can happen.

It will take a serious toll on your revenue.

Every room in a hotel has the potential to bring a good amount of money. All it takes is the right approach and utilising the best of the strategies.

For instance, there’s a concert happening in your locality. People from all around the country are flocking to witness the rock band performing. Furthermore, almost every hotel is getting sold out.

But you still have a few rooms left.

Now, how are you going to price them? Just like how you used to on a daily basis? Or would you increase the price based on demand?

I think you know the answer.

This is just an example to show you the potential of your rooms.

Now, if you think that this strategy is not doing justice to the guests, then you’re wrong. You can always up your experience based on the price you set.

Furthermore, you’re already aware of the expenses of running a hotel. It’s huge. Be business-minded and think of making a profit as well. After all, you have to sustain and scale your hotel business.

How to Identify if Your Pricing Strategies Are Broken?

There are various pricing strategies for hotels, but that doesn’t mean each of them would work. At times, some of the pricing methods turn out to be useless and impact the hotel’s revenue.

In this section, I am listing all those points that would help you determine whether your strategies are working or broken.

Read all of them and see if you have any of them in place in your hotel.

1. Not maintaining rate parity

Rate parity is the practice of maintaining consistent room rates across all the distribution channels of a hotel. Meaning, the price displayed is uniform across all the OTAs, irrespective of the commission a hotel pays to bring bookings. 

It is a prominent element of a hotel’s distribution and pricing strategy. It provides price transparency to potential guests and helps in developing brand trust.

Now, those who are against rate parity, saying it costs business; I want to tell them that there are ways to tackle it. And in one of our blogs, we have explained the A-Z of rate parity. Do give it a read because it is sure to change the way you look at rate parity.

2. Not performing market and compset analysis

Irrespective of the size and type, every hotel needs to know about the current happenings in the market and how its competitors are faring.

What I mean by this is that hotels must perform a compset analysis. That is, looking at hotels in your same area and price range, and evaluating their services against your own products.

A proper compset analysis helps you make informed decisions regarding your room prices and drive more bookings.

So, if you haven’t done any sort of competition analysis so far, then you’re certainly lagging. Because not keeping an eye on your competition is considered to be one of the major mistakes when it comes to hotel pricing strategies.

3. Setting prices that aren’t in line with various segments

One size might fit all but not one price!

The price for corporates, independent travellers, groups, etc. can never be the same. They will always differ from each other; be it in terms of volume, frequency of guests, cancellation ratio, or whatsoever.

Let me give you an example.

Hotel Royale charges $80 for a room to independent travellers. But when it receives group bookings, the price goes down a bit. Why is that the case? Because group travellers book more rooms and they often stay a bit longer.

Further, chances of upselling and cross-selling are also more for hotels.

That is why the rooms are usually sold at a lower price compared to regular bookings.  

I think you can now see where things were going wrong for so long at your hotel. Never mind, let’s check the other points and identify more broken pieces.

4. Focusing on profit and not guests’ experience

To be honest, this should go without saying. Overlooking guests’ experience is one of the mistakes in hotel pricing strategies.

But I know many hotels would not actually take it seriously, that is why I am re-emphasising it.

The first and foremost priority of a hotel is always guests. No matter what, a hotel should always take the extra mile in delivering a fantastic experience to its guests.

Now, talking about the pricing aspect, whatever you charge for a room should always feel low to a guest when they stay with you.

Meaning, your services should be so fantastic that the guests must feel they got a great deal.

I bet, when you start thinking of guest experience and not profit, any price you set, it would automatically become effective.

5. Not analysing and comparing past sales with current sales

Numerous hotels around the world don’t practice this, whatsoever. They feel it is irrelevant and requires a lot of their time.

This shouldn’t be the case, at all.

A hotel needs to analyse its performance of the last few years in terms of revenue.

When you do that, you get a clear picture of how the business has fared so far. If your sales aren’t spiking this year, then you can take a cue from past years’ strategy.

Furthermore, you as a hotelier also need to see if your revenue is meeting the forecasted sales target. If not, then learn why; what are the voids, what went wrong, etc.

6. You have no strategy in place for cancellation

You cannot let anyone take your business for granted. Period.

Cancellations are one of the major elements that impact a hotel’s bottom line in an unwanted manner. Which is why hotels need to consider having a robust cancellation policy in place when working on their pricing strategy.

A well-planned non-refundable cancellation policy can not only help you reduce the loss but also increase your revenue.

For example, you can significantly set low prices for longer stays but with a condition that there’s no refund in case of cancellation. Further, you can also have your own set of rules to maximise both guest satisfaction and your overall bottom line.

7. Not using any sort of upselling and cross-selling

A pricing strategy without upselling and cross-selling is incomplete. Period.

Didn’t get it?

Let me help you understand.

Upselling is about encouraging guests to spend more. And one of the best examples is to offer guests a room upgrade.

Talking about cross-selling, it is about additional purchases. You can offer your guests some additional services along with the room at a price.

Now, take a moment and think if you have these included in your pricing strategy. Yes? No?

8. Loyal guests need a different pricing

Loyalty needs respect. And this goes for loyal guests as well.

If a guest comes to your hotel, again and again, you must ensure that it remains the same. And one of the best ways to do that is by offering special prices to him/her.

When you do so, you drive a sense of appreciation and it results in attracting repeat reservations and earning revenue.

How Can Hotels Fix Broken Strategies?

Now that you have learned how to determine whether your pricing strategies are broken, it’s time to know how to fix them.

The best way to make things work at your hotel and increase revenue is by incorporating revenue management.

Yes, here we are again. Because it is worth it and there’s no denying it.

Be it deploying a revenue management system or opting for a revenue management service, you need to have it in your hotels.

Using hotel revenue management, you can analyse internal data, market supply, customer demand, and more to optimize pricing and inventory. It helps hoteliers in calculating the ideal rates for rooms and maximising the bottom line.

I have written various blogs that show how revenue management can transform your hotel and boost your sales.

I am linking all of them below.

• Revenue Management is the Need of the Hour
• Benefits of Using Revenue Management Software at Your Hotel
• In-house vs Outsourced Hotel Revenue Management
• Challenges Hotel Revenue Management Software Can Solve For You

Read all the blogs whenever you want and make the best decision for your hotel business. I am sure they are going to give you a whole new perspective when it comes to revenue management. 

The post Have You Ever Evaluated Your Hotel Pricing Strategy? appeared first on eZee Absolute.