5 tips for a successful pricing strategy
 
5 tips for a successful pricing strategy
12 APRIL 2012 8:13 AM

When setting rates, having pricing data on a hotel’s competitive set is crucial. Exhaust the data and ensure the hotel is comparing apples to apples.

REPORT FROM THE U.S.—There are many reports available from various data providers that offer a snapshot of a hotel’s market and lend insight into competitors’ pricing. Experts on a webinar Wednesday suggested poring over those reports with a fine-tooth comb because market-awareness is key to successful pricing strategies.

“You need to have that information to be in the know,” said Caryl Helsel, VP of demand and distribution at TravelClick, on a webinar titled “Best Practices: Managing hotel rates with market aware pricing.” “The tools available for your use can definitely become a competitive advantage.”

Patterson and TravelClick's Director of Field Marketing Lydia Patterson offered five extensive tips for using market data to determine pricing:

1) Ensure the assessment of competitors’ pricing is comprehensive.
There is more to look at than simply what rate your competitive set is charging. Helsel suggested evaluating the outside influences that would affect the market conditions, such as weather, booking lead time and nearby holidays. She also said competitors could have multiple rates and it is important to look at the various rate structures, such as refundable vs. non-refundable and rates for the different room types and different amenities.

Basically, it comes down to comparing apples to apples when adjusting rate based on competitors’ strategies. “Pay close attention to competitors’ descriptions to ensure comparisons are valid,” Helsel said.

2) Apply length-of-stay restrictions and price appropriately.
Many data reports offer insight into how competitors set rates over different lengths of stay. Hotels should pay close attention to their pricing strategies and make sure they are competing on similar levels. For instance, when adjusting rates for length-of-stay requirements, monitor how the competitive set has adjusted their rates.

3) Incorporate historical pricing intelligence.
“History is very important,”
Helsel said, “both long term and short term.”

When looking at historical data, make sure to adjust for any anomalies in that timeframe, Helsel suggested. For example, holidays oftentimes fall on different dates and need to be taken into account when comparing year-over-year data. “Looking at the last five years will give you a better picture and you will have that information in your reports,” Helsel said.

When looking at recent history, such as the past month, pay close attention to factors that might affect pricing, such as lengthening booking windows, economic conditions, weather—anything that could cause data to be different year over year. “Booking windows do change based on type of property and location,” Helsel said.

4) Always consider the price/value equation.
The basics of pricing come down to understanding the value of a hotel and what consumers are willing to pay, and oftentimes that is forgotten in today’s complex pricing model.
Helsel said competing on value is an important part of the overall strategy.

“Do virtual and on-site inspections of the competition,” she suggested. “Look at what they’re doing on the (global distribution systems) and benchmark your competitors’ best practices. You can learn from your competitors.”

Helsel also said hotels need to consider the impact on average daily rate by changing the mix of bookings. Hotels can influence the customers’ perception of value by modifying the rate, so “always keep in mind your price and value relation,” she said. “You never want to overprice your hotel for what it is and have a customer come in and expect 5-star service at a 3.5-star hotel. Also make sure we aren’t cutting price too much in certain markets. Customers can say what’s wrong with that hotel if it’s so far below the others in price?

“Your price and value have to match.”

Some value items to explore when comparing to the competitive set: early check-in or late check-out; free Wi-Fi; gym; guestroom amenities; and refundable vs. non-refundable rooms.

5) Adhere to parity for all channels.
Although rate parity—ensuring rates are the same across various channels—is a common practice that’s been around for some time now,
Helsel said she still talks with hoteliers who don’t understand its importance.

“Parity has a significant impact,” she said. “Ultimately, it leads to where a customer chooses to book. Consumers shop on multiple sites—seven on average, but I’ve seen over 20 in certain markets—and when rates aren’t in parity, demand is driven to the lowest-price channel.

“Rate disparity can negatively affect profit.”

1 Comment

  • Anonymous April 13, 2012 2:43 AM

    If demand is driven to the lowest price channel then is it illegal to lower your brand.com rate in such a way that you are able to a number of rooms that would counter act the defeating effects of OTA commissions. That is, can hotels achieve a profit margin from its least expensive booking channels that outweighs the reduction of OTA bookings? If this will not work then why?

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