Your relationship to local competition is as unique as your property itself. Some revenue and property managers work closely with other accommodations in the area to keep tabs on availability, occupancy, and pricing. This cooperation usually involves tight business relationships and a good amount of trust.
More often, however, revenue managers need to perform diligent competitive research and analysis in order to verify their competition’s prices. This work is called rate shopping. But simply knowing and recording your competitors’ room rates is not enough. A revenue manager must synthesize the knowledge she gains from rate shopping as an important factor of her pricing strategy. After all, pricing makes up a large part of a revenue manager’s role—and a property’s long-term revenue success.
From Rate Shopping to Revenue Management
How does a revenue manager transform everything she learns from rate shopping into setting the right prices? First, read our recent post on how to take an active approach to rate shopping. Proactive rate shopping will influence your property’s credibility, guests, revenue, and market influence.
Next, remember that the competition’s pricing is a single, albeit complex, factor in the actual rates you offer guests. You also need to consider how your property’s historic and current data, as well market demand data, should influence pricing.
Here’s a breakdown of three considerations that you need to take into account in addition to rate shopping your competitor’s prices.
Current data: Good revenue managers plan for the future, but live in the here and now. They are sensitive to their property’s current conditions and agile to any unexpected fluctuations. Pay close attention to your property’s current Property Management System (PMS) data to make sure that occupancy rates and demand match the room rates you’ve planned for the coming weeks.
Historic data: Your PMS is integral to the day-to-day operations of your accommodation. The PMS also serves an important role as the keeper of all past reservation, guest, occupancy, and pricing data. Use your PMS as an archive to research the business that your property has already completed.
This information becomes particularly useful when considering seasonality. For instance, you can determine if drops or increases in occupancy rates are typical for a given week and adjust prices accordingly. Conversely, you can look back at historic data to determine if changes in pricing affected occupancy and RevPAR. In the end, historic property data should help you determine how to optimize current prices and maximize RevPAR going forward.
Market demand data: Rate shopping keeps you up-to-date on your competitor’s prices. One can hypothesize the local demand for accommodations based on this research. However, without accurate market demand data, a revenue manager cannot be certain of the health of your market.
Big events such as recessions, natural disasters, and terrorist attacks can hurt your property’s revenue. It’s important, however, to gauge the degree by which your property has been affected in relation to other properties in your market.
In order to do this, you must learn how downswings impact your entire market. Market demand data is tricky. While data on market demand exists, synthesizing and presenting this information is challenging. BookingSuite RateManager uses market demand data as an important factor in the tool’s algorithm. Partners using RateManager receive rate recommendations based on the current demand in their market, and therefore create revenue management strategies that include highly accurate market demand data.
Art and Science
Revenue management software like RateManager helps revenue managers do their jobs better. But there’s also an art to revenue management that only comes through experience and firsthand knowledge of a market. Revenue managers benefit greatly from technology, but pricing and revenue decisions ultimately rely on the brains and intuition of the people using the software.