Pricing strategies - it's time to be dynamic!
Setting up your property’s rate plan for the coming season or year does not have to feel like a hassle if you have a smart pricing strategy. But where to even start when the market looks so unpredictable? We are here to guide you through the most important factors to take into account when setting up your rates.
- Customer segmentation is key
First thing’s first: who are you targeting? It might seem strange to ask, since any type of guest is a valuable guest, however calling out to everyone means you are essentially targeting no one. Think about what customer segment would consider your property the best fit for their travels. Where are these customers coming from? What is their purpose of visit, leisure or business? What demographic, age group are they from? Are they single travelers or couples, or do they travel in groups? What is their likely financial status?
When you have segmented your potential target base and price rooms accordingly, you are already one step ahead in attracting more successful bookings.
- Forecasting is more than just wild guessing
We might not be fortune-tellers who can tell how occupancy rates will look like half a year from now, but there are ways to predict demand and performance. Make strategic decisions based on previous seasons’ data, market trends, monitoring your compset (the group of hotels that are your direct competitors), and identifying important holidays and events.
Other elements to consider include fully booked dates, low and high season changes, refurbishment plans, open and closed periods, already confirmed reservations (a.k.a. OTBs or on the books reservations), and the so called last room value (LVR), which means the potential revenue that you can expect from the last remaining available room.
- The BAR is high! ...or is it low?
The best way to save time on administration and modifying room prices as market demand changes is to link all rate plans and offers together. This is called setting up a BAR, as in, best available rate. It works like magic: you only need to change one plan, and the system will adjust all the rest to it, according to your fine-tuned settings.
- Minimum length of stay is your friend!
A reservation for 3 nights is a lot more valuable than a 1 night stay 3 times. Set up a promotion with a minimum length of stay requirement so you attract guests with higher purchasing power. It also results in a better chance for cross sell (selling additional services during their stay), less administration and housekeeping costs, plus, less booking count also equals a lower cancellation rate.
- Early bird offer: and oldie but goodie
Advance purchase promotions, also known as early bird deals, are offers that are available only for a limited number of days in advance of arrival (this is referred to as the release period). It is typically combined with a strict cancellation policy, like non refundable or only one time modification is allowed. Whatever you may set as your preference, this tool enhances your hotel’s cash flow and helps you predict occupancy more in advance - remember the wizardry of forecasting from earlier?
- Late birds are great too!
Just like early booking deals, promotions very close to the arrival date are also very useful. Still have some rooms left to sell? Someone cancelled last minute? No problem. Offer an attractive discount on still vacant rooms: some revenue is still better than no revenue!
- Discount codes to encourage returning guests
A guest that comes back again is always golden. You can motivate returning guests with discount codes to book directly next time, which is beneficial for everyone. This also generates more online traffic on your own website and booking engine.
- Corporate plans on your booking engine
Use opaque rate plans that business travelers can unlock with a special code on your engine, which is not only super cool, but also saves your reservation team from manual administration.
- Packages are attractive!
Why not combine what you have to offer along with available rooms? When you integrate additional services into your rate plans as a package, you can attract specific customer segments while making these services more visible too!
Picture this: a romantic weekend package to target couples, or a weekday relaxation offer to boost sales for low occupancy dates. You can also upsell by making packages available to higher category rooms only.
See? There are so many tools to help you figure out how to make the most out of your rate planning. And it’s fun too! Having a strategy in pricing helps your sales become more dynamic and literally up to date.