Hospitality industry pricing: Where is it heading?


There is much debate within hospitality circles on the growing pressures on pricing and the problems revenue managers are having making decisions on when to sell a room, who to sell it to, and for what price it should be sold.

During a recent Executive Roundtable held in Sydney in late 2015, pricing issues emerged as a key theme that was being driven by the use of online travel agents and being compounded by data related issues. Skills shortages and changing skill requirements in the industry were also hot topics.

Online Travel Agents

First, some online travel agents forced hotels to standardise pricing by dictating rates and contract terms, across all channels including rates that appear on the hotelier’s own website. In addition, some online travel agents redistributed a hotel’s inventory to third party providers who then undercut the room rate, without the consent or knowledge of the hotel. This leaves hotels having to explain to their customers why they are not able to offer the cheapest rate on the market to customers directly.

Hoteliers facing this problem should analyse which geographical areas OTA’s are generating business from to determine if the OTA is cannibalising their existing markets, that is markets where they already have a strong presence. Where this is the case, hotels should take corrective action by ceasing to contract with that OTA. However, if the OTA is distributing inventory to new markets, markets they wish to expand into, or numerous thin markets (long tail effect) then they shouldn’t see the conditions as being onerous.

Data related issues

Next, the issue with data is the lack of integration and access to real-time pricing by OTA’s and other distributors, making the management of rate distribution inefficient. Lack of accurate and complete data also makes it more difficult for revenue managers to accurately forecast and match customer demand with pricing decisions.

Data is the key to efficient and effective decision making, so complacency shouldn’t be tolerated as a concerted effort to align business processes with distributors and suppliers is key to creating competitive advantage. Achieving the adoption of real-time data exchange and integrated systems can be achieved through pricing and contracting, industry training and promotion of best practice processes and technology.

Read rest of the article at: eHotelier