Efficient hotel pricing strategy is a must-have for today’s hoteliers to increase their overall profitability. Hotel revenue managers should understand various aspects including distribution mix, demand forecast, competition pricing and consumers’ buying trends, etc to manage pricing more effectively to increase hotel profit.
You are able to fill up all your rooms, but still struggling to see profit. This means you are not selling your rooms at the right price to maximize your room revenue. Let’s analyze some of the important components to come up with the right pricing strategy to increase hotel revenue.
This includes understanding your competitors’ pricing strategy. A smart revenue management tool can help you in this. It automatically tracks and lets you know your competitors’ pricing for a specific time period and recommends you the ideal price. Thus, you can make changes in your pricing across all the distribution channels to stay competitive. It helps you ensure that you don’t price your rooms way too high or low compared to your competition.
To maximize your room revenue, you can charge different rates for each night of a guest stay. For this, your PMS should help you with multiple rate types support in a single day. Daily pricing strategy is beneficial when you plan to sell room nights that are far away. Additionally, to make more out of your room nights that are expected to be sold by tomorrow or day after tomorrow, you can implement an hourly pricing strategy.
Get aggregated data on local market demand and understand the occupancy forecast to make changes in your pricing. Moreover, it would help you evaluate your past performance so that you can set up the correct pricing strategy. In short, you must leverage business insights to price your rooms better to achieve improved profitability.
Implement a dynamic pricing strategy
Make sure that you sell your rooms at a higher price when your occupancy is on the higher side. This will help you supplement your business when you go through low demand season. Also, be advised to not to sell your rooms at a higher price when occupancy at your hotel is low. Using a dynamic pricing strategy, you can easily increase your room rate during high seasons and lower your rates during off seasons.
Rework on your pre-negotiated rates with TA and Corporate clients
You must re-look at your pre-negotiated or contracted rates with your travel agents and corporate clients. Because such rates are mostly based on your previous years’ ADR and your ADR does not stay the same. Be more flexible and come up with quarterly or half-yearly contracts (revised pricing) based on the demand and performance of your hotel. Thus, you can increase rates at your discretion.
Consider pricing based on length of stay
You must consider implementing a length of stay based pricing model by looking at your demand, forecast and business on the books etc. Your revenue manager should cautiously modify your room pricing either based on maximum length of stay or minimum length of stay to enhance occupancy and to increase profitability.
Don’t forget your cancellation policy
Look at the cancellation rate at your hotel and try to understand how badly they are impacting your revenue. A well-planned cancellation policy can help you increase your revenue. You may offer a lower rate for the maximum length of stay with a condition of no refund in the event of cancellation. You may adopt a no cancellation policy during peak season business.
Efficient pricing strategy helps you sell the right room to the right guest at the right time and at the right price to maximize your revenue. And to come up with a set of ideal pricing strategy, you must leverage the power of the right kind of technology platform. Yes, you need to adopt a smart cloud-based Hotel PMS that comes integrated with a revenue management tool which can help you with rate management as per your hotel performance.
If you’re interested in similar content that will help you boost your hotel’s revenue, here is a guide on Up-selling your rooms.