This week, Arthur Waller, Senior Product Owner at BookingSuite, contributes this guest post outlining his recommendations for forming an effective pricing strategy for your property.
No matter what, a hotel should be able to sell expensive or inexpensive rooms depending on the demand level. In order to price according to demand, you need a suitable pricing model for your property based on elaborate segmentation and forecasting. In the end, this strategy needs to be implemented with the right revenue management system.
Start with Segmentation
Segmentation and forecasting are crucial pillars of any revenue strategy. In order to form the proper basis for your revenue management strategy, you first need to segment your target customers into highly specific, accurately defined audience groups.
Who stays at your property and when? Can you assign a value to a guest of a certain demographic? For example, do business travelers book more weekday room nights and generate more revenue for your property?
Next, carefully assess the market demand conditions in accordance with the complexity of your property. In order to properly forecast revenue, you must determine whether the market demand for your property is dynamic or static; variable or consistent. For instance, do special local events cause spikes in demand? Have transportation challenges in your city stunted demand? Conversely, does the demand for rooms in your market stay relatively predictable by season?
Now, consider your segmentation and demand in relation the complexity of services offered by your property. Do you offer multiple, diversified services which meet your business’s target audiences and demand?
Set the Right Prices
The careful analysis of segmentation and demand set the stage for your revenue management strategy. However, the bulk of a revenue manager’s attention should be spent on pricing, or the final decision and communication of room rates. Pricing ultimately outlines the potential revenue. Note that you should always consider any relevant restrictions that you need to put on pricing.
Three variations of pricing strategy exist and depend on the aforementioned market demand, as well as the complexity of the property. These strategies can be described as efficient, moderate, and comprehensive.
As a property’s complexity climbs higher on the pyramid (moving towards the comprehensive pricing model), the greater the time and expertise is required of the revenue strategy. On the contrary, properties which fall at the base of the pyramid can take an efficient revenue management model. Properties using efficient revenue models can depend more on automation and straightforward pricing strategies.
Choosing a Revenue Management System
Revenue management software can help properties of all sizes improve revenue performance and strengthen their business. Depending on the pricing strategy which best fits your property, there are a number of revenue management systems to fit your needs.
Today, BookingSuite RateManager is designed to optimally support accommodations with moderate and efficient pricing strategies, as well as the lower end of the comprehensive tier. We are confident that RateManager provides the very best pricing recommendations in the industry.
On the other hand, a property with numerous amenities or a resort (and therefore in need of a comprehensive revenue management strategy) might be better served by an alternative revenue management system. That said, I promise that as our partners’ needs evolve, BookingSuite products will continue to innovate.
Arthur Waller, BookingSuite Senior Product Owner