Revenue managers dedicate a big part of their day to managing hotel rates and driving profits. They are constantly analyzing data and various influencing factors to find that coveted sweet spot – and a revenue manager’s greatest reward is finding the ideal public pricing that attracts guests and boosts their organization’s bottom line.
However, what makes accomplishing this task so complex is that each hotel property is unique and therefore its revenue strategy must be too. After all, the size of a hotel’s profit margin depends largely on revenue from a great pricing strategy. It’s essential that hoteliers thoroughly evaluate options to determine what’s best for their business and customers.
To get started, hotels should ask themselves these five questions to determine their optimal pricing approach:
1) What do my guests want?
Since guests are often the ones paying the bills, it’s important to consider what type of rates they prefer. Beyond preference, some regions or audiences may be accustomed to a certain process and changing it may result in dissatisfaction or lost clientele.
For example, some guests prefer to know how their cost of stay breaks down by day. In this case, daily pricing or daily continuous pricing strategies would be ideal.
Other guests, however, may prefer the simplicity provided by one rate lasting for their entire stay. In these cases, consider length of stay (LOS) pricing strategies.
2) What strategy best complements my business mix?
To properly optimize revenue, it’s important to select a strategy that fits the hotel’s portfolio of business. The two biggest considerations are the hotel’s business model and the guests’ average length of stay.
For example, a hotel focused on airport transient guests with an average one-night stay will be a better fit for daily pricing strategies.