How to help your independent hotel succeed with a fair price structure

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by NEHA ARYA

To a hotel guest, it may be surprising to see that the same room categories have different rates on different dates, and why even similar hotels have variations in their room rates.

Well, it’s not something that hotels do randomly; it’s a well-thought out strategy. There are several factors that come into play that affect the pricing of a room, and hotel operators need to consider them all before arriving at a fair price structure.

Common factors that influence price structure include special events or holidays, conferences, external factors such as weather, and so on. It all depends on the demand and supply of rooms. This is very similar to how airlines set their seat prices – they may be cheaper if you book in advance, but airfares shoot up as you move closer to the departure date.

Most branded hotels have revenue managers, but smaller hotels might not have the resources to dedicate an additional staff member to manage their revenue. In such scenarios, PMS systems can go a long way in supporting that job. They can track the forecasted room demand to create a fair price structure.

There are two major factors that hoteliers must consider to achieve fair pricing:

  1. The right business mix. Analyse different marketing segments to arrive at an optimum business mix. For example, say OTAs contribute the most to your hotel profitability, followed by corporate bookings and then walk-ins. Your pricing strategy should be aligned with this business mix. Promoting walk-ins over OTAs can be detrimental to your pricing strategy and, in turn, your profitability.
  2. The right rate plan. Understand the different kind of rates out there and decide which is bound to bring in maximum profits. You can dabble with qualified rates (early bird discounts), BAR (no conditions involved), fixed rates, dynamic rates (adjust pricing based on cost, demand and competition) and group rates (corporate or social events). Sometimes hotels that are similar in location and category are priced differently, even though the external factors affecting the hotel’s demand and supply are uniform. This may depend on a value-adds – such as personalized attention to every guest.

Armed with the above data, you can arrive at a fair price structure that lets you:

  • Price with more clarity
  • Maximize business from each segment
  • Plan for the future

Hotels shouldn’t shy away from raising their room rates if they can ensure their guests can have an impeccable stay at their property. Guests don’t always look for the cheapest rates, but they do always seek a great stay experience.

Article by Neha Arya, writer and communications manager at Hotelogix. She is passionate about writing and working for the travel and hospitality industry. Hotelogix is a unique, cloud-based, end-to-end, hospitality technology solution, built to seamlessly manage hotels, resorts, serviced apartments or multi-location hotel chains by providing a single window to manage all hotel operations and bookings (online and offline). Hotelogix is currently used by properties in 100+ countries. To learn more, contact Avinash Udayakumar at avinash.udayakumar@hotelogix.com.

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