Hospitality experts agree that hotels can’t maximize profitability by managing rates alone. When your revenue strategy only focuses on managing price, you can’t deliver optimal results.
Managing only price works well when your inventory is not perishable; however, when it comes to hotel rates, your strategy requires a higher degree of sophistication.
Let’s compare a hotel (with perishable inventory) to an office supply retailer (selling non-perishable goods.) When an office supply store prices a product like staplers, there’s really no consideration for how many staplers are in inventory. There are overhead costs to cover and it is priced accordingly. The price for the first stapler sold is likely the same price for the last stapler sold. If the stapler does not sell today, it can always be sold tomorrow.
Hotel rooms are inherently unique in that you do have to sell each room today – 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 staplers, 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 only pricing need to incorporate?
In addition to an analytically-derived pricing strategy, hotels need to consider the varying products or room types they have. Each guest requires different room features; some guests search for a view, some want a certain bed type and others just need more space.
With unique demand for room types, your revenue strategy needs to support your customers’ buying behavior.
Ideal Pricing delivers that functionality by analytically determining the ideal price, inventory controls and overbooking strategy for each of your different room types.
Many RMS providers claim to do this, but often only provide the ability to manually set rate differentials on each room type. This means you provide all the insightful data…and you still have to set rates yourself.
With revenue managers already responsible for managing so many other rates as it is, they should be able to rely on their revenue management system to automatically and analytically do this component for them.