Understanding local competitor pricing is a fundamental component of a successful hotel’s revenue strategy. However, the pivotal distinction between an average financial year and an exceptional one lies in the strategic application of this data.
NB: This is an article from Ratemetrics, powered by Aggregate Intelligence, one of our Expert Partners
Subscribe to our weekly newsletter and stay up to date
It is imperative for hotel owners, managers, and revenue managers to transcend merely observing trends and instead interpret the actionable opportunities these insights provide.
For instance, a hotelier may recognize that June through August represents their peak season and adjust pricing upwards accordingly. Conversely, they may decrease rates during the quieter months of October and November. While this approach is rational, it remains overly simplistic and broad.
Significant price increases in a competitive market can inadvertently lead to decreased profitability. A substantial hike in room rates can provoke reactions from both competitors and customers, potentially undermining revenue goals.
Elevating room prices during peak periods may drive customers towards more affordable local alternatives, resulting in a loss of market share to cheaper competitors.
The strategic approach to outmaneuver local competition lies in the nuanced adjustment of pricing strategies. Instead of implementing large, infrequent price increases, the adoption of smaller, more frequent adjustments is recommended. These incremental changes are less likely to attract attention from competitors and customers, yet they can cumulatively enhance profitability significantly over the fiscal year.
To illustrate, consider a 50-room hotel with an average occupancy rate of 50%, translating to 9,125 rooms sold annually.
A minor, unobtrusive price increase of €2 per room can yield an additional €18,250 in revenue annually. When such price adjustments are applied strategically throughout the year, the financial impact can be substantial.
In highly competitive markets, the optimal strategy may be characterized by frequent, incremental price adjustments. This approach ensures sustained profitability and a competitive edge in the market.
And so, the effective use of local competitor pricing data is crucial for maximizing a hotel’s revenue potential. By adopting a refined strategy of small, frequent price adjustments, hotels can achieve significant financial gains while maintaining competitiveness in the market. For hoteliers seeking to excel, the key lies in the meticulous and strategic application of pricing insights.
