2022 is a difficult year to predict. What’s new? 2021 was difficult to predict. And I don’t think many people got 2020 right. So how should you approach your pricing?
NB: This is an article from RoomPriceGenie
At RoomPriceGenie we love data. It enables better decision-making, and it helps us to understand and react to changes in the situation. We feel very lucky to have been given access to the data of our wonderful PMS partner, RoomRaccoon, and this gave us the idea of writing an article using RoomRaccoon’s data but from RoomPriceGenie’s pricing perspective.
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Watch your competitors:
- In general, it is very good to be aware of all your competition, both nearby and with similar markets further away. If you are a long way out of line, without good reason, then you will probably make a lot less revenue than you could.
- It is important for two reasons. First, your relative pricing is important if you want to get your fair share of business at the best price.
- Second, no one really knows what is going to happen this year but by combining the views of various competitors you are taking their best guess for what will happen.
- But be warned: in a low-demand situation, be careful of a race-to-the-bottom. Keep a strong minimum price in place, low enough to not price you out of the business, but not so low that you don’t make good margins.
- In a high-demand situation, you may also want to keep your prices up higher than the market. But how do you know early if it is a high-demand situation?
Watch your data:
- As mentioned before, data is your early warning system. You need to see early if you are filling up or not and make sure that you are priced appropriately relatively to your competition.
- Keep an eye on sudden changes – either in bookings or in cancellations. These can be either getting faster or slower and you should be aware of these.
- No one wants to be in the situation where you’ve sold most of your rooms 3 months early for too low a price and watching all the other hotels charging 50% more than you did. Don’t be that person!
- But data isn’t everything, you also need to…
Add your judgment:
- Watch for travel restrictions both for guests who visit your country and for guests that will holiday abroad if they can but will come to you if they can’t.
- Talk to people locally about what they are seeing.
- Charge a little more if you think you can and a little less if you think that everyone is being a bit optimistic.
What data from the last year can tell us…
So what can we learn from the RoomRaccoon data? As I mentioned before, it has been very exciting to see it.
RoomRaccoon have 95% independent hotels that mainly focus on leisure, and in this case, mostly local leisure. They have over 1500 properties in 10 countries. You can also see from the charts below that they have an ADR (average daily rate) of around €100 on average over the year.
Occupancy and RevPAR
Let’s look at RevPAR (revenue per available room) and occupancy for the last 13 months:
Because of travel restrictions last summer, this means that they did particularly well. Compared to September 2020, the occupancy and RevPAR went up by about 20% in September 2021.
- The more the travel restrictions and the higher the reluctance to go abroad, the stronger your local market will be. Look out for these.
The RevPar went from a low of €7 in November 2020 to a high of €95 in August 2021, with an average of €35. Occupancy had a low of 13% and a high of 72%, with an average of 36%.
If we reverse out ADR from these numbers (which is not exact as they were on different days, but it gives an idea) we get a low of around €54 and a high of €132.
One thing to point out at this stage is that the success was not evenly distributed amongst properties. The leisure properties at the seaside or in the countryside would have done a lot better than the ones in the city. They may be having mid-90% occupancy in the summer peak season, while the city hotels may have been in the 30-40% range.
And bearing this in mind, from a pricing point of view, I would argue that the ADRs in summer were not as high as they could have been, especially in August.
Many of the hoteliers reading this will probably agree that they filled up too early last summer, because they were caught a little unaware by the high demand. Also, there may have been a reluctance to put prices up above what they consider to be ‘fair’ prices, even though the demand was there.
- The hotels that raised their prices early did a lot better than those that waited, and I think this is the key lesson for this year.
Another interesting finding, looking at the data, is that the weekends for leisure hotels between April and October are considerably busier than the weekends. Hoteliers should look at their weekend pricing in this period and see if they can raise prices a little on these dates.
- Weekends between spring and autumn are very strong for leisure, with many hotels almost full. Consider raising prices for weekends in this period.
41% of reservations in RoomRaccon come from a single OTA. I imagine you can guess which one that was. Clue: they are also a great Dutch company.
Reliance on one channel isn’t great but also sometimes it is difficult to see any alternative. We would recommend making sure that once you get the customers once through an OTA they book next time directly. Give them a members discount and try to get them on your mailing list.
More exciting is that 15% of all reservations YTD are direct booking engines. This is something to improve on by making your website a place that people want to book.
Length of Stay
The average night per stay YTD is 2.7 nights. You can encourage longer lengths of stays by using minimum stays in higher demand periods. But do bear in mind that this reduces demand so it is best to use them for nights that are going to be full anyway, and you don’t want to charge more money. It’s a nicer way to make more revenue if you can use them to fill up nights that would have not been full otherwise (shoulder nights).
If you are not already making the most of your pricing then you will probably miss out on revenue in 2022.