Google produces 500 million results when asked ‘Is travel getting more expensive?’. Unsurprisingly, the first 10 results are solely dedicated to the price of flights.
Panicked headlines from global news organisations warn travellers about the rising costs associated with travelling by plane, thanks to increased fuel costs and the subsequent pressure on airline profits.
Back in June this year, Delta Airlines told shareholders that fuel prices had skyrocketed by 50% during the first half of 2018 forcing the airline to lower its profit forecast. Delta Airlines is most certainly not the exception in this challenging situation. Many other carriers, including American Airlines, Air France-KLM and Southwest Airlines, have all issued profit warnings in the first half of this year.
Globally, the International Air Transport Association (IATA), which represents about 280 carriers, is expecting the industry to post profits 12% below the previous forecast of $38.4 billion – proof, should we need it, that when the cost of oil rises, the entire airline industry can be shaken.
One of the difficulties for airlines is knowing how to factor in the increasing fuel costs. Passing the increase onto travellers by raising ticket prices is one of the few options available to them.
The hotel industry’s relationship with pricing tells a different, and at times, more complex story. It’s much more centred around the individual property – everything from its location to its TripAdvisor guest rating is a pricing consideration.
What causes hotel prices to fluctuate?
Although less dramatically reported, of course hotel room rates also go up and down. This has little to do with barrels of crude oil and more so with the fundamentals of supply and demand.
As we all know, supply is how much of a service the market provides and demand is how much of the market wants to pay for it.
While it would be too simplistic to say fluctuations in hotel room rates can be solely down to this theory, it’s a great place for hoteliers to start because economists have long believed the best way to allocate resources – in this case hotel room prices – is to let supply and demand decide.
Beyond your location and online reputation, your hotel’s room pricing will be affected by:
The time of year
Is it peak or off-peak season? If it’s a quiet time you can lower your prices to coax more guests in. If it’s the height of your busy season and hotels locally are becoming booked up, you can afford to charge your guests more. It pays to obsess over long-range weather forecasts too.
Your types of available rooms
Different rooms will require different pricing and this is where you can get creative with your packages and offers. A good channel manager will allow you to sell the same room in different ways across all your connected online channels – for example, a ‘deluxe suite including breakfast & local walking tour’ vs. ‘deluxe suite room only’. The possibilities are endless – almost.
Any major events in the local vicinity
Knowing what’s happening in and around your hotel is crucial to pricing rooms accurately. If you’re a hotel in Melbourne and you know the Australian Open tennis tournament comes to town every January, start looking at your competitors’ prices early. Track the pricing trends and be strategic – you could be winning the business of the world’s biggest sports fans or leaving valuable revenue on the table.
Can you increase your hotel room rates in 2019?
There is little benefit to hoteliers in monitoring these fluctuations while all the time taking no action.
