Whether you run a high-end hotel, a budget apartment or something in between, sooner or later you’ll need to decide on a pricing strategy.
How much should you charge for your rooms? When should you vary those rates, by how much – and for which guests?
If you want your business to be successful, you’ll need to face these revenue management challenges and find solutions that suit your property. After all, setting the right prices will help you secure more bookings and make more profit.
In this article, we’ll look at some of the most common approaches to pricing, and evaluate their pros and cons.
Five common pricing strategies:
1. Single rate
This is the simplest approach possible, with one rate available for the whole year. It’s easy to implement, but properties that use a single rate miss out on a huge amount of profit every month.
2. Weekend/weekday pricing
This involves a basic split between weekday and weekend prices. Generally, weekend prices would be higher – but if a property caters to business travellers, they may set higher prices during the week. This approach is the starting point for many properties’ pricing strategies.
3. Seasonal pricing
With seasonal prices, you adjust your rates according to the demand at different periods of the year. If you’re in a summer-holiday destination, it makes sense to raise your prices for that period. Conversely, to attract bookers during low season, you’ll usually need to offer lower prices.
4. Budget-driven pricing
Everyone has their own financial targets. But when you focus solely on these without looking at the market, you can often end up selling yourself short – either because you over- or under-price your rooms. Of course, you’ll have to consider your property’s needs and resources – but this information has to work in combination with other factors.
