One of the biggest factors in the success of your property is the pricing strategy you implement. Prices make the difference between sales and no sales, between good deals and bad ones – all of which adds up to a major impact on your bottom line.
If price is so key to sales, how do you decide on the right pricing strategy? We spoke to a number of our partners and saw that they have three main ways of conducting research to set their pricing:
40% monitor online travel agent websites every day
40% monitor their competitors’ websites every week
20% use a rate-shopping tool every week
All of this monitoring takes time and effort. But there’s a simple solution: RateManager. This tool not only does all your monitoring work for you, but it also gives you pricing recommendations based on market demand and your competition’s rates.
But there’s more. Wasting time isn’t the only downside of constantly monitoring your competitors’ prices – you can also end up following their lead when you shouldn’t.
Just take a look what happened to Jaume, a Revenue Manager at a 4-star hotel in Barcelona.
Here, you can see the price for his standard double room 100 days leading up to the check-in date. The closer to the check-in date, the higher the prices rise until, at the last minute, prices drop significantly. This may seem odd until you look at what Jaume’s competitors are doing.
When you put their graphs side-by-side you can see that a pattern is occurring. Knowing that hoteliers keep a close eye on their competitors’ prices, it’s hard not to wonder if it had any influence on this sudden drop. For example, if the price of one hotel drops, their competitors then drop, then that hotel’s competitors drop, and so on until the entire market is showing this artificially reduced price.
Jaume may be based in Barcelona, but this is not a behaviour that is unique to his property or even to his city or country’s market – it happens everywhere. According to our global data for 3- and 4-star properties, 50% of price changes happen within 30 days of check-in and 20% within 7 days.
Just because this behaviour is widespread, it doesn’t mean that it’s right. During this same time that prices are dropping, properties are actually getting their highest pick-up in reservations.
But what if we all approached pricing a bit more rationally? The graph would probably look a little something like this:
Since the number of reservations increases the closer you get to check-in date, the best thing to do is match your pricing to market behaviour, not competitor behaviour. This is where RateManager can help you outsmart your competition.
Our pricing recommendations are both higher and more stable as they are not strictly based on competitors’ data. They also take into account market demand, property objectives (which can be very different than the competition), historical performance and more. Having this holistic view of your property and the market it’s in means that you’re able to develop a smarter pricing strategy that helps your business grow.
If that wasn’t appealing enough, you may be interested in knowing that only 12% of our partners currently use a Revenue Management tool. This means when it comes to making smart pricing decisions, you’ll be ahead of the curve.