A hotel with jam-packed guests is not always a profitable venture. Believe it or not, the real trademark of successful hospitality is seen in its revenue. And that was when revenue management (formerly yield management) solution has been created to primarily observe and determine the consumer behaviour in order to sell the product at an optimal price based on the timely observation or simply manage hotel rates that will drive more competitive profits.
Pricing obviously plays a very significant role in any form of business and money-making industry. Charge too much and you’ll watch your customers fly elsewhere. Charge too little and you’re definitely starting to walk away from potential huge profit. Thus, it is imperative to equip your hotel business, especially when it’s a startup, with intelligent pricing strategies that will help increase your market share against competitors. Read on to discover five of the most effective pricing strategies that will lift your small hotel from the ground.
Cost-based Pricing Strategy
Let’s start with simplest approach of pricing strategy. To calculate your cost-based pricing, you need to add up all your fixed costs including admin, utilities, maintenance, wages, advertising, telephone, land/building taxes, insurance, and other investments together with variable costs. The variable costs, on the other hand, may vary depending on the number of your guests per day. These include supplies for food, cleaning, amenities, flower arrangements, printables, and more. Add the total of fixed and variable costs to your desired markup value on each room. The totality will then take you to your target pricing.
Pricing a room based on how customers perceive it is the main idea of this strategy. If potential customers find your hotel nice by just browsing some photos or reading some raving reviews and they’re willing to pay more for the value and benefit that they think they can receive from booking in your hotel, then it won’t matter even if you put a price of 200 bucks instead of a hundred or fifty. All that matters would be the consumer’s demand and the satisfaction that you can assure for them to pay according to perceived price.
Following your competitors and knowing what methods they’re doing is a golden mantra for any business. The hotel industry is apparently growing every day which is why it’s important to know that your hotel is not the only one in town. The goal of the competitor-based strategy is to know the comprehensive pricing strategy of your competitors including the rates that they apply for each room, the amenities they provide, the refundable and non-refundable agreements, and other related aspects.
Now, the goal here is not just to match your pricing with competitors but also to knock them down. How is that possible? Set one room rate at the same price point as your competitors and then set another room at a slightly higher value. This way allows you to get the best of both worlds.
Author Bio: Sarah Contreras holds a Bachelor’s Degree in Communication with expertise in digital marketing and media management. She currently writes for Rate Wise Dublin, a leading revenue management company in Dublin City, providing cloud-based software solutions and management consultancy to hotels and serviced apartments.