One of the core objectives of revenue management is price optimisation.
This means creating a fair pricing strategy that attracts customers to your hotel but also makes you a profit. But what exactly is fair pricing? How do you find the right balance between offering an attractive rate and making a profit?
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Let’s take a look at what the concept means and why you need to create a fair pricing strategy in your hotel.
What is fair pricing?
Fair pricing is all about knowing what guests are willing to pay, and adjusting your product, your offer and your pricing strategy so that it meets their expectations. This enables you to offer them a better guest experience than your competitors. And because your guests leave satisfied with the entire guest journey, it boosts loyalty and makes them more likely to convert into repeat customers.
Fair pricing is not about underselling or undercutting the competition. In fact, it’s quite the opposite. It’s about identifying the right balance between business success and customer satisfaction. It’s all about understanding your market and what each segment would be willing to pay for what you have to offer. It’s about being honest about your pricing policies and communicating your values in order to generate trust. Ultimately, it’s about creating a strategy that aligns with market expectations whilst also making you a profit.
Your fair pricing strategy also needs to be fluid. It needs to take into account market supply and demand, time of year, your different segments and your competitors. For example, you need to know when demand is going to be high so that you can charge more but allow for discount pricing when demand is low so that you still fill rooms.
Why do you need a fair pricing strategy in your hotel?
Let’s take a look at two of the biggest benefits of creating a fair pricing strategy in your hotel: improving the guest experience and gaining more revenue.
Improve the guest experience
The experience a guest has at your hotel is hugely important. The aim is to create a positive experience at each touchpoint of their journey with you, before, during and after their stay. The happier they are with your experience, the more likely they are to return and the more likely they are to give you a positive review and recommend your hotel to their friends. And part of this experience relates to what they have had to pay for it.
One of the best ways to improve the guest experience is by making your guests feel that you are giving them good value for their money. It doesn’t matter how good your room quality is or how great your services are – if a guest doesn’t perceive the price that they paid as being fair, then they’re not coming back. And this is precisely what a fair pricing strategy aims to do.
Gain more revenue
Finally, and more importantly in terms of the bottom line of your business, fair pricing helps you boost your total revenue. Perhaps more so than ever in the current social and economic climate. The key is identifying what your target customer perceives as being fair. And this boils down to three key factors: the quality of your hotel, your online reputation, and the rates, quality and reputation of your competitors. So, in order to establish what your customers perceive as being a fair price, you need to gather and analyse all this data.
At Beonprice, we have developed a unique Hotel Quality Index™ (HQI™) that enables you to assess your hotel’s reputation and market positioning in real-time. This enables you to identify what a guest is willing to pay for the quality that you offer. And that way, you can match the expectations of your customers with the price that they are willing to pay, maximising your chances of them perceiving it as fair.
The system uses an advanced algorithm that understands how weight should be given to historical data at any given time, in line with changes in customer behaviour and predicted demand trends. The tool also takes into account the strategies and behaviours of your competitors, providing you with improved fair pricing elasticity and more detailed forecasting abilities. Everything you need to determine what a fair price is so that you can attract more customers and ultimately, gain more revenue.