Three thoughts on how to rev up your hotel’s pricing game

Many hotels still manage revenue, pricing and forecasting by relying heavily on spreadsheets and reports. But at a time where internet distribution is at an all-time high – and potential customers are shopping hotel rates directly from their iPads – it’s clear that spreadsheets are no longer enough.

NB This is a viewpoint by Jane Stampe, managing director Americas for IDeaS Revenue Solutions.

Revenue management technology and the market relevant data needed to sustain an optimal revenue strategy can be overwhelming. In fact, most hoteliers today are faced with the problem of figuring out what data they should be incorporating into their revenue strategy and often find themselves relying on revenue management technologies that still struggle to deliver meaningful outputs.

One aspect of the relevant data most hotels look at is their competitive rate shopping tool. Competitive pricing data has become one of the top necessities for developing intelligent pricing strategies.

How are hotels using this technology and its competitive intelligence?

Some hotels choose to play “follow the leader”, causing them to lose out on critical revenue, while others lose out because their technology can’t make the best use out of their market data. A hotel’s ideal pricing is one that can incorporate their competitive market intelligence for a well-balanced and comprehensive pricing strategy.

When it comes to working with your technology and competitive pricing intelligence, here are three questions to help your hotel elevate its ideal strategy:

How is your hotel affected by competitive pricing?

Price is important in determining hotel demand – and serves an essential role in a hotel’s revenue strategy. Specifically, how is your hotel impacted by your competitors’ price points? A competitor’s price can influence your hotel’s demand either directly or indirectly.

For example, changes to a competitor’s price may indicate an intent to steal market share from your hotel, which could directly impact your demand as potential guests shop for the lowest rates.

Or, from the guest perspective, a competitor’s price can influence perceptions of the fair market price. A customer might purchase from you if they expect the competitor price to be higher, but might pass on your hotel if they expect the available rates from competitors to be lower.

In this type of context, competitor price could be an important factor in the guest’s reference price for your hotel.

How much should competitors influence your hotel’s pricing?

While your competitors’ pricing and the competitive position of your hotel is important, your competitors’ pricing strategies are often driven by factors that shouldn’t influence your hotel. If your strategy is to follow the leader, not only are you letting your competitor price your hotel, but you might be following strategies that don’t apply to your hotel’s specific demand-price situation.

Think about a competing hotel that isn’t as attentive to its revenue management practices as you are. If they set prices too low when they don’t need to be, it might sell their entire inventory out too early – losing out on higher-priced bookings later. If that competitor leads your pricing decisions, you end up doing the same thing…sacrificing revenue as a result.

While your demand is affected by competitor pricing, it is also dependent on other factors – time of year, day of week, etc. In the end, revenue managers should still evaluate demand versus available capacity. The presence of competitive pricing information reiterates that demand is affected by price, with the availability of competitive pricing reminding us that relative pricing has an important impact on demand.

How does your revenue management system use competitive data?

Some revenue management systems use competitive pricing, but many do not. And when they do, they often use the information incorrectly by restricting available rate choices rather than analyzing the impact of competitive pricing on demand.

Revenue management systems can analyze data at a level of complexity that revenue managers can’t do themselves. They can help you understand how guests react not only to your pricing but also to how your prices are positioned in the market. Revenue management systems can benefit from competitive price information by estimating the effect of your price on your demand and making adjustments based on your price position relative to your competition.

Today’s advanced technology helps revenue managers stop pushing buttons and spend more time strategizing long-term growth and measuring results.

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NB This is a viewpoint by Jane Stampe, managing director Americas for IDeaS Revenue Solutions. It appears here as part of Tnooz’s sponsored content initiative.

NB2 Image by kjpargeter/Big Stock

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About the Writer :: Sponsored Content

This is the byline under which we publish articles that are part of our sponsored content initiative. Our sponsored content is produced in collaboration with industry partners. The views expressed do not necessarily reflect or represent the views of tnooz, its writers, or partners.

 

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