Pricing Woes? Make Ideal Pricing Your New Reality
Hotel revenue managers dedicate a big part of their day to managing room rates and driving profits.
NB: This is an article from IDeaS
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 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 hoteliers thoroughly evaluate pricing options to determine what’s best for their business and guests.
Managing Rates Alone Won’t Cut It
When your revenue strategy only focuses on managing price, you can’t deliver optimal results. Hotel rooms are an inherently unique consumer product offering in that you have to sell each room every day or else you’ve lost revenue opportunity. The number of rooms available to sell—and the demand in the market for those rooms—should impact your pricing decisions.
A pricing-only approach works well for selling office supplies, for instance, but to sell hotel rooms and capitalize on revenue opportunities, hotels need an ideal pricing approach that understands the relationship between price, inventory and demand.
So what exactly does a revenue management strategy that goes beyond pricing need to incorporate? In addition to an analytically-derived pricing strategy, hotels need to consider the varying products or room types they have, and proactively adjust strategy as shifts in market demand occur.
To Pricing—and Beyond!
Ideal pricing analytically determines the optimal rate, inventory controls and overbooking strategy for each of your different room types. What’s really exciting about this approach is that it goes so much further than just pricing. It’s also about that other lever in revenue management: inventory control. A true revenue strategy allows revenue managers to flex both price and availability to achieve optimal revenue results. As the name implies, ideal pricing provides the ideal price to your ideal guest at the ideal time.
While revenue managers likely have a hunch on an appropriate price differential between room types, why take the time to guess and risk being wrong? Revenue managers have always had the ability to manually set price differentials, but a sophisticated revenue management system (RMS) will determine those price points for hotels based on demand and not just use rules that key off occupancy shifts. This is exactly what ideal pricing technology delivers.
As an added bonus, these powerful, analytically-derived decisions are automatically pushed out to integrated selling systems and ultimately determine the best business to accept. These decisions are not recommendations that need to be continually reviewed and deployed. Hotels still need to oversee the overall operation, but instead of time spent manually uploading rates, revenue managers get that time back to focus more on strategy.
Today’s powerful RMS technology automatically deploys revenue strategies and helps revenue managers monitor through automated reports and checklists. Think of a revenue manager as the conductor of their revenue operation, and the advanced RMS as their world-class orchestra. An orchestra can play all right on its own, but it’s the job of the conductor to keep the tempo, ensure smooth entries of group members and ultimately create symphonic synchronicity.