Neil Corr, IDeaS senior advisor in EMEA, discusses the different ways today’s hotels can achieve optimal price positioning and business mix.
In the volatile world of hospitality, what are some of the typical business scenarios that hoteliers should strongly consider, warrant a re-evaluation of their pricing and make-up of their group vs. transient business?
In reality, testing the viability of where we sit in the market and how much our pricing and business mix contribution is impacting this, should be an ongoing process. However, there are some common business challenges that we see driving the need for review. These include, but are not limited to; managerial, owner or investor pricing pressure, launching of new hotel properties or renovating existing properties, new business, market or competitive dynamics at play and the desire to maximize potential revenue of executive/suite room types. But from a revenue optimization perspective, something we regularly hear at IDeaS is, “we are really struggling to leverage complex multiple data-sets and translate them into strategy!”
We all get that it’s a data-driven world and that more and more, distribution and channel data are driving revenue, but what data gathering and analysis should we be prioritizing?
We often hear “we are a unique hotel,” but when you reframe the conversation into “what about a hotel like mine” – you often find some common denominators in terms of the key pieces of data that will support a coherent pricing and segmentation strategy. Some core data requirements include (again, the list isn’t exhaustive!); RMS, STR Historical Reports, STR Global Market Forecast Reports, Rate Shopping Tool, Reputational Scoring Tool, Demand Intelligence Reporting and Upselling Front Desk Strategy providers. Often, hotels are at the mercy of what’s actually available to them in terms of their own limited data, from PMS or RMS sources, but in more exceptional or emerging locations, this can also limit the availability of market, macro-economic or competitor data. This can cause a challenge when it comes to setting an optimal pricing and business mix strategy, certainly when comparing and benchmarking. It’s fun looking for creative alternatives– but in this case, sometimes good old-fashioned research, mystery shopper calls, or annual tourism reports can be useful to plug the data gaps!
So, what should my overall business objectives be and will an approach like this help me achieve them?
Certainly! Start by prioritizing the goals. In simplistic terms, this could look like:
- Validate your competitive set, create price vs. value quadrants and test your theory on true market share threat competitors.
- Perform some analytical price trend analysis, starting with your retail or BAR pricing – what is the historical performance of both you and your competitors’ rates telling you about demand/elasticity?
- Contextualize your analysis against your benchmarking KPIS. Are you ignoring your MPI, ARI and RGI? Are your competitive sets inconsistent?
- Try benchmarking your business mix vs. your competitors. We know that this is not easy, but if you can acquire some data, wouldn’t it be great to see how your mix of group, transient qualified and unqualified business broadly compares?
- Make some projections and apply to budgets. Don’t waste all this valuable analysis! Work with your operations and finance teams, to simulate scenarios with changes in pricing & business mix and address possible over-dependence on segments.
